BRIO GOLD INC.
TECHNICAL REPORT ON THE RIACHO DOS MACHADOS GOLD MINE, MINAS GERAIS, BRAZIL
NI 43-101 Report
Qualified Persons: Kathleen Ann Altman, Ph.D., P.E. Stuart E. Collins, P.E. Mark B. Mathisen, C.P.G.
December 16, 2015
RPA Inc. 55 University Ave. Suite 501 I Toronto, ON, Canada M5J 2H7 IT + 1 (416) 947 0907 www.rpacan.com
Report Control Form
Document Title Technical Report on the Riacho Dos Machados Gold Mine, Minas Gerais, Brazil
Client Name & Address Brio Gold Inc. 4500 Cherry Creek Suite 1040
Denver, CO 80246 USA
Document Reference Status & FINAL Project #2555 Issue No. Version
Issue Date December 16, 2015
Lead Author Kathleen Ann Altman (Signed) Stuart E. Collins (Signed) Mark B. Mathisen (Signed)
Peer Reviewer Wayne Valliant (Signed)
Project Manager Approval Stuart E. Collins (Signed)
Project Director Approval Richard J. Lambert (Signed)
Report Distribution Name No. of Copies Client
RPA Filing 1 (project box)
Roscoe Postle (USA) Ltd. Suite 505, 143 Union Boulevard Lakewood, CO, USA 80228 Tel: 1 303 330 0950 Fax: 1 303 330 0949 [email protected]
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TABLE OF CONTENTS
PAGE
1 SUMMARY ...... 1-1 Executive Summary ...... 1-1 Economic Analysis ...... 1-8 Technical Summary ...... 1-13 2 INTRODUCTION ...... 2-1 3 RELIANCE ON OTHER EXPERTS ...... 3-1 4 PROPERTY DESCRIPTION AND LOCATION ...... 4-1 Land Tenure ...... 4-1 Royalties ...... 4-2 5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ...... 5-1 Accessibility ...... 5-1 Climate ...... 5-1 Local Resources ...... 5-2 Infrastructure ...... 5-2 Physiography ...... 5-3 6 HISTORY ...... 6-1 Prior Ownership ...... 6-1 Exploration and Development History ...... 6-1 Historical Resource Estimates ...... 6-1 Past Production ...... 6-2 7 GEOLOGICAL SETTING AND MINERALIZATION ...... 7-1 Regional Geology ...... 7-1 Local Geology ...... 7-5 Property Geology ...... 7-7 Mineralization ...... 7-11 8 DEPOSIT TYPES ...... 8-1 9 EXPLORATION ...... 9-1 Exploration Potential ...... 9-2 10 DRILLING ...... 10-1 CVRD Drilling 1988-1995 ...... 10-1 MRDM Drilling...... 10-2 MRDM Grade Control Drilling ...... 10-3 Sampling Method and Approach ...... 10-4 11 SAMPLE PREPARATION, ANALYSES AND SECURITY ...... 11-1 Sample Preparation and Analysis ...... 11-1 Quality Assurance/Quality Control ...... 11-2
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12 DATA VERIFICATION ...... 12-1 Verification of CVRD Data ...... 12-1 Verification of Mineral Resource Estimation Database ...... 12-1 Independent Samples ...... 12-1 13 MINERAL PROCESSING AND METALLURGICAL TESTING ...... 13-1 Current Operation ...... 13-1 Metallurgical Testing ...... 13-1 Production Data ...... 13-3 14 MINERAL RESOURCE ESTIMATE ...... 14-1 Resource Database ...... 14-2 Geological Interpretation and Mineralization Wireframes ...... 14-4 Exploratory Data Analysis ...... 14-7 Grade Capping and Compositing ...... 14-8 Bulk Density ...... 14-10 Variography Analysis ...... 14-11 Block Model Construction ...... 14-13 Grade Interpolation ...... 14-16 Classification ...... 14-16 Cut-off Grade and Preliminary Open Pit Shell ...... 14-17 15 MINERAL RESERVE ESTIMATE ...... 15-1 Summary ...... 15-1 Density, Dilution, and selective mining unit ...... 15-2 Cut-off Grade ...... 15-3 Pit Optimization ...... 15-3 16 MINING METHODS ...... 16-1 Mine Design ...... 16-4 Geomechanics ...... 16-8 LOM Production Schedule ...... 16-11 Mine Equipment and Mining contractor ...... 16-16 17 RECOVERY METHODS ...... 17-1 18 PROJECT INFRASTRUCTURE ...... 18-1 Power ...... 18-1 Water Balance ...... 18-1 Tailings Storage Facility ...... 18-3 19 MARKET STUDIES AND CONTRACTS ...... 19-1 Contracts ...... 19-1 20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ...... 20-1 Environmental Studies ...... 20-1 Environmental Permitting History and Current Situation ...... 20-1 Other Environmental Issues ...... 20-3 Acid Rock Drainage and Environmental Contamination/Liabilities...... 20-4 Environmental and Social Management System ...... 20-5
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Social Aspects ...... 20-5 Health and Safety Issues ...... 20-5 Mine Closure and Reclamation ...... 20-6 21 CAPITAL AND OPERATING COSTS ...... 21-1 Capital Costs ...... 21-1 Operating Costs ...... 21-8 22 ECONOMIC ANALYSIS...... 22-1 RPA Comments ...... 22-5 23 ADJACENT PROPERTIES ...... 23-1 24 OTHER RELEVANT DATA AND INFORMATION ...... 24-1 25 INTERPRETATION AND CONCLUSIONS ...... 25-1 26 RECOMMENDATIONS...... 26-1 27 REFERENCES ...... 27-1 28 DATE AND SIGNATURE PAGE ...... 28-1 29 CERTIFICATE OF QUALIFIED PERSONS ...... 29-1
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LIST OF TABLES
PAGE Table 1-1 Summary of Mineral Resource Estimate – Sept. 30, 2015 ...... 1-2 Table 1-2 Summary of Mineral Reserves – September 30, 2015 ...... 1-2 Table 1-3 Cash Flow Summary...... 1-10 Table 1-4 Sensitivity Analysis ...... 1-12 Table 1-5 LOM Capital Costs (2016-2022) ...... 1-20 Table 1-6 Summary of LOM Operating Costs ...... 1-21 Table 6-1 Historical Production Summary - CVRD ...... 6-2 Table 6-2 2014-2015 Production - Carpathian ...... 6-3 Table 10-1 Drilling Summary ...... 10-1 Table 11-1 Quality Assurance/Quality Control Samples Insertion Rate ...... 11-3 Table 13-1 Size Recovery Data ...... 13-2 Table 14-1 Summary of Mineral Resource Estimate – September 30, 2015 ...... 14-1 Table 14-2 Summary of MRDM Drill Hole Database – September 2015 ...... 14-3 Table 14-3 RESDEF versus GC Statistics ...... 14-7 Table 14-4 Descriptive Statistics of Gold Assays ...... 14-8 Table 14-5 Cube Summary Statistics With and Without Top Cuts by Estimation Domain 14-9 Table 14-6 Bulk Density Values by Rock Type ...... 14-11 Table 14-7 Comparison of Block and Composite Gold Grades ...... 14-14 Table 14-8 Pit Shell Optimization Factors as of July 11, 2015 ...... 14-18 Table 15-1 Mineral Reserves – September 30, 2015 ...... 15-1 Table 15-2 Pit Optimization Results (Pre-final Design) ...... 15-4 Table 15-3 Pit Optimization Cost and Recovery Inputs ...... 15-5 Table 16-1 Recommended Slope Design Parameters ...... 16-8 Table 16-2 Summary of Phase Designs – Quantities and Targets ...... 16-12 Table 16-3 LOM Mining Schedule ...... 16-14 Table 16-4 2015 LOM Processing Schedule ...... 16-15 Table 16-5 Major Mining Equipment Estimate, November 2014...... 16-16 Table 18-1 Water Well Conditions of Water Intake...... 18-2 Table 18-2 Future, Required Make-up Water Sources Summary ...... 18-3 Table 21-1 Summary of Total Capital Costs ...... 21-2 Table 21-2 LOM Capex Summary by Year ...... 21-7 Table 21-3 Summary of MRDM LOM Operating Costs ...... 21-8 Table 21-4 Summary of MRDM 2014-2015 Actual Operating Costs ...... 21-10 Table 21-5 Summary of MRDM 2015 Manpower Levels – September 2015 ...... 21-12 Table 22-1 Cash Flow Summary ...... 22-3 Table 22-2 Sensitivity Analysis ...... 22-5
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LIST OF FIGURES
PAGE Figure 1-1 MRDM Sensitivity Analysis ...... 1-12 Figure 4-1 Location Map ...... 4-4 Figure 4-2 Mining Concessions ...... 4-5 Figure 7-1 Regional Geology ...... 7-4 Figure 7-2 Local Geology...... 7-6 Figure 7-3 Property Geology ...... 7-9 Figure 7-4 10600N Geological Cross Section ...... 7-10 Figure 9-1 Exploration Targets ...... 9-3 Figure 12-1 Comparison of CVRD vs. Carpathian Assays ...... 12-2 Figure 13-1 Mill Monthly Production ...... 13-3 Figure 13-2 Gold Feed Grade vs. Gold Recovery ...... 13-4 Figure 13-3 Estimated Gold Feed compared to Adjusted Gold Feed ...... 13-5 Figure 13-4 Size Recovery Data ...... 13-6 Figure 14-1 Mineralized Domains ...... 14-5 Figure 14-2 Oxidized and Fresh Rock Boundaries ...... 14-6 Figure 14-3 Variogram Models ...... 14-12 Figure 14-4 MRDM Domain 1000 NW-SE Cross Section with Composite Values ...... 14-15 Figure 16-1 Site Layout ...... 16-3 Figure 16-2 Ultimate Pit with Environmental Mining Limit ...... 16-6 Figure 16-3 Open Pit and Waste Dump, September 2015 Topography ...... 16-7 Figure 16-4 West Pit Wall Slope (February 2015) ...... 16-10 Figure 17-1 Crushing Circuit Flowsheet ...... 17-2 Figure 17-2 Grinding Circuit Flowsheet ...... 17-5 Figure 17-3 Carbon-In-Leach Circuit Flowsheet ...... 17-6 Figure 21-1 LOM MRDM Capital Cost Projected Expenditures ...... 21-7 Figure 21-2 MRDM Actual 2014 and 2015 Unit Costs ...... 21-11 Figure 21-3 2014 and 2015 MRDM Mill Production...... 21-11 Figure 22-1 MRDM Sensitivity Analysis ...... 22-4
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1 SUMMARY
EXECUTIVE SUMMARY
Roscoe Postle Associates Inc. (RPA) was retained by Brio Gold Inc. (Brio) to prepare an independent Technical Report on Carpathian Gold Inc.’s (Carpathian) Mineração Riacho dos Machados (MRDM) gold mine (the Mine), located in the northern part of the Minas Gerais State, Brazil. The purpose of this report is to support the acquisition of the Mine by Brio. This Technical Report conforms to NI 43-101 Standards of Disclosure for Mineral Projects. RPA has visited the Mine several times, most recently from October 26 to 29, 2015.
Brio is a wholly-owned subsidiary of Yamana Gold Inc. (Yamana), a publicly traded gold company with operating gold mines and development projects in Brazil, Chile, Mexico, Argentina, and Canada. On December 14, 2014, it was announced that Brio was formed to hold the Pilar operations, Santa Luz, and Fazenda Brasileiro gold mines, as well as some related exploration concessions, all of which were held as non-core assets within Yamana, and located in Brazil.
Carpathian is an exploration and development company, whose primary business interest is the Mine and the Rovina Valley Au-Cu project in Romania. Carpathian acquired the Mine in 2008 and began production in 2014. The Rovina project is not part of the Brio transfer of assets into a public company.
The Mine is a conventional open pit and carbon-in-leach (CIL) operation, which is scheduled to process up to three million tonnes annually over a mine life of seven years. Potential underground production could extend the mine life.
Table 1-1 summarizes the Mineral Resources, exclusive of Mineral Reserves, for the Mine as of September 30, 2015. Table 1-2 summarizes the Mineral Reserves for the Mine as of September 30, 2015.
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TABLE 1-1 SUMMARY OF MINERAL RESOURCE ESTIMATE – SEPT. 30, 2015 Brio Gold Inc. – Riacho dos Machados Mine
Tonnage Au Grade Au Ounces Category (000 t) (g/t) (000 oz) Open Pit Resources
Measured 62 0.81 2 Indicated 6,864 0.84 186 Measured + Indicated 6,926 0.84 188 Inferred 3,306 1.12 119 Underground Resources
Indicated 43 1.54 2 Inferred 5,252 1.76 297
Total Measured + Indicated 6,969 0.847 190 Total Inferred 8,558 1.513 416
Notes: 1. CIM Definition Standards (2014) were followed for Mineral Resources. 2. Mineral Resources are exclusive of Mineral Reserves. 3. Underground Mineral Resources are reported at a cut-off grade of 1.0 g/t Au. 4. Open Pit Mineral Resources are reported at a cut-off grade of 0.35 g/t Au. 5. Mineral Resources are estimated using a short-term gold price of US$1,500/oz and constrained by a pit shell. 6. Totals may not add due to rounding.
TABLE 1-2 SUMMARY OF MINERAL RESERVES – SEPTEMBER 30, 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
Tonnage Au Grade Au Ounces Category (000 t) (g/t) (000 oz) Proven
Open Pit 15 0.90 0.4 Stockpile 1,234 0.73 29 Total 1,249 0.74 30 Probable
Open Pit 17,619 1.20 682 Stockpile 0 0
Total 17,619 1.20 682
Proven + Probable
Open Pit 17,634 1.20 682 Stockpile 1,234 0.73 29 MRDM Total 18,869 1.17 711
Notes: 1. CIM Definition Standards (2014) were followed for Mineral Resources. 2. Mineral Reserves were generated by Cube Consulting Pty Ltd and adjusted by RPA to reflect the September 30, 2015 mining surface. 3. Mineral Reserves are quoted at cut-off grades of 0.3 g/t Au for oxide, 0.4 g/t Au for transition, and 0.4 g/t for fresh rock. 4. Mineral Reserves are reported using a long-term gold price of US$1,250/oz. 5. Process recovery of 90%. 6. The numbers may not add due to rounding.
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CONCLUSIONS Based upon a preliminary review of the MRDM gold mine documentation and discussions with Carpathian personnel, RPA has the following conclusions and observations:
GENERAL • The supporting data used for the different project studies, and presented to RPA during the site visit, were well organized, and prepared in a professional manner.
• Companhia Vale do Rio Doce (CVRD) (Vale) previously mined the Mine, having recovered approximately 155,000 oz of gold. Carpathian has recovered approximately 76,000 oz of gold between March 2014 and June 2015.
GEOLOGY AND MINERAL RESOURCES • Cube Consulting Pty Ltd (Cube) of Perth, Australia, prepared a Mineral Resource estimate for Carpathian in December 2014. RPA has reviewed the Cube Mineral Resources and is of the opinion that the parameters, assumptions, and methodology used for Mineral Resource estimation are appropriate for the style of mineralization. The estimate has been validated by the reconciliation reports.
• Mineral Resources were prepared in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated May 10, 2014 (CIM definitions).
• Work completed to date by the geological staff is appropriate.
• The geological model employed by Carpathian geologists is reasonably well understood and is well supported by field observations in both outcrop and drill intersections. Carpathian benefits from having hired an experienced Exploration Manager, the individual responsible for the district geology and exploration during discovery and initial production by Vale.
• Interpretations of the geology and the 3D wireframes of the estimation domains derived from these interpretations are reasonable.
• Sampling and assaying have been carried out following standard industry quality assurance/quality control (QA/QC) practices. These practices include, but are not limited to, sampling, assaying, chain of custody of the samples, sample storage, use of third-party laboratories, standards, blanks, and duplicates.
• The resource model has been prepared using appropriate methodology and assumptions. These parameters include: o Treatment of high assays o Compositing length o Search parameters o Bulk density o Cut-off grade o Classification
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• The block model has been validated using a reasonable level of rigor consistent with common industry practice.
• Definition drilling will likely result in the upgrading of Inferred Mineral Resources to the Indicated category in the structural tend, both down-dip and laterally along strike to the north and south directions. Down-dip underground potential has only been drilled to a limited extent and requires further drilling.
• Significant exploration potential exists laterally along strike both north and south from the existing MRDM pit, although this area is currently outside the permitted mining boundary. Exploration potential at the Mine, and in the surrounding property, is expected to be relatively high.
• Condemnation drilling has been completed for the tailings dam pad, waste dumps, and process plant.
MINING AND MINERAL RESERVES • The economic assumptions and methodology used for estimation of the Mineral Reserves are appropriate.
• Proven and Probable Mineral Reserves for the Mine, as of September 30, 2015, total 18.87 million tonnes grading 1.17 g/t Au, containing 711,000 oz of gold.
• The Mine is a conventional open pit operation, composed of three meter operating benches in ore and six meter high operating benches in waste.
• Mining rate is approximately 55,000 tonnes per day (tpd) ore and waste, including ore production of 7,000 tpd (2.55 Mtpa).
• All Carpathian systems (safety, geological control, mining, processing, administration, and environmental) have been implemented for mining at the MRDM pit, and they are operating efficiently.
• Mineral Reserves are restricted to the MRDM pit, composed of north, central, and south areas.
• Mining of the MRDM pit began in 2012 with limited pre-stripping of the open pit. Mill production started March 2014, and the mine/mill has been operating since March 2014. Current estimated mine life is approximately seven years.
• Mining is performed by Carpathian personnel, and a mining contractor is also employed. The mining contractor is primarily used to strip waste.
• Dewatering and slope stability represent the greatest risks to the mining area, however, in RPA’s opinion, there does not appear to be reason for concern at this time.
METALLURGICAL TESTING AND PROCESSING • Since the start of operations in March 2014, MRDM has progressively completed construction and improvement projects to increase the efficiency of the operation,
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however, a lack of capital has limited the work that was accomplished. Two primary capital projects remain that severely impact the ability to operate the plant under design conditions. They are: o Insufficient available power, which limits the operation of the ball mill. This impacts the achievable grind size and/or the realistic mill throughput. o Insufficient water supply which limits the time the plant can be operated.
• The metallurgical testing that was conducted before the gold mine was designed and built indicated: o Gold recovery is sensitive to particle size; the target grind size was P80 of 54 µm to achieve a gold recovery between 88% and 92% at a retention time of 24 hours. At the current grind size (i.e., P80 approximately equal to 65 µm), the gold recovery is reduced to approximately 87%. o The Bond work index of the samples ranged from 16.5 kWh/t to 18.5 kWh/t.
• Current production statistics indicate that the process flow sheet is adequate and suitable for processing the MRDM ore types.
• Further optimization of the circuit is expected to improve production throughput and recovery once the operation can be run at steady state.
INFRASTRUCTURE • Electricity is currently supplied at the Mine by eight diesel-powered generators, with two more generators to be leased, and estimated to be on site by December 2015. These additional generators should allow the plant to operate at or near full capacity. Neither the benefit nor costs have been included in the economic evaluation presented in this Technical Report. For the long term, MRDM is planning to tap into the Brazilian national electric grid operated by CEMIG with plans to be on line in 2018. Grid power will greatly reduce operating costs and allow the processing plant to be operated under design conditions.
• The Mine is susceptible to drought. For full production, MRDM requires approximately 1.2 million m3 per year of make-up water. Insufficient rainfall has impacted mill production in 2015. Recommendations from Knight Piésold Pty Ltd consultants in August 2015 are to improve harvesting of precipitation that enters the Mine area, build an additional raw water supply dam, and/or harvest water from external sources. All of these options are being investigated by MRDM and are subject to the necessary permit approvals. Currently, MRDM is in the process of permitting an additional water storage facility.
• The majority of the workers who reside in small towns within 20 km of the site are transported to the Mine by commercially operated buses. MRDM provides subsidies for transportation in accordance with the law that governs the “Vale-Transporte”, whose monthly costs cannot exceed 6% of the worker’s salary.
• The Mine is located in an easily accessible location in Minas Gerais in Brazil at elevations that range from approximately 770 MASL to 900 MASL. The driving distance to the Mine from Belo Horizonte is 560 km, which takes between nine and 11 hours on the existing roads. The nearest commercial airport is located in Montes Claros approximately 170 km from the mine site.
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• The nearest major hospital is in Montes Claros (170 km away), however, Riachos dos Machados (15 km away) has a health clinic. The medical staff is provided by a contractor. It includes two nurses located on site and one doctor, who works four hours per day and is on call during his offsite hours.
ENVIRONMENTAL, SOCIAL, AND PERMITTING CONSIDERATIONS • The Mine is a conventional CIL operation that has proposed/incorporated environmental mitigation into daily operations (i.e., water mitigation, concurrent reclamation/closure design).
• No outstanding technical issues were identified for environment and permitting, however, the mining operational boundary does not allow mining into the down-dip and along strike continuity of the mineralization. The application for the expansion of the Mine operations is expected to reflect this project need. The application for this expansion was submitted to environmental authorities in July 2015 and is undergoing agency review.
• Historic acid rock drainage issues and high concentrations of arsenic in ground and surface water need to be closely monitored to prevent offsite contamination of water resources. A comprehensive hydrogeological study has been requested by the Public Ministry and SUPRAM to assess the nature and extent of arsenic, lead, and other metals in ground and surface water. Based on the results of the studies, additional mitigating measures will be developed and implemented, if deemed necessary. The first monitoring campaign was conducted in June to July 2015. Mitigation of acid rock drainage has begun on the construction of the waste rock storage facility.
• Acid rock drainage (ARD) and offsite runoff are environmental issues that can be managed through good industry practices.
• MRDM has the necessary in-country permits and licenses to operate in compliance with Brazilian regulations. Additional permits will be obtained, as needed, to accommodate the future Mine operations.
ECONOMIC ANALYSIS • The Mine is currently an active mining and processing operation, however, there are a number of areas that remain to be completed. These include an additional tailings disposal facilities, a water reclaim system from the tailings dam, and a power line. Capital cost allocations have been made in the financial analysis for the items that are required.
• The economic analysis assumes an average recovery over the life of the mine. Since the proportions of oxide, transition, and fresh or sulfide ore change over time, using an average recovery may not produce an accurate short-term estimation of the cash flow, however, this averages out over the mine life.
• The Life of Mine (LOM) mining and processing schedules do not include Inferred Resources. No Inferred Resources were included in the processing plan as this procedure is standard engineering practice. If Brio can convert the Inferred Resources to Mineral Reserves, then this act could increase the mine life.
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• The most recent cost estimate was completed using 2013 US dollar costs. These costs have been updated to reflect the current plan for the Mine and current prices. The majority of the capital and operating cost estimates were completed in Brazilian Reais. RPA has converted the MRDM estimates with a 4.0 to 1 (R$:US$) exchange ratio.
RECOMMENDATIONS RPA makes the following recommendations: • Carry out additional drilling to upgrade Inferred Mineral Resources at the Mine, as time and budget permits.
• Conduct drilling and interpretive work along strike both north and south of the deposit to increase the Mineral Resource estimate for the Mine, as time and budget permits.
• Evaluate the modification of the grade control drilling to merge into a comprehensive program for grade control and blasting. Additionally, the blasthole design should be evaluated for blasting efficiency.
• Evaluate the use of MRDM’s larger trucks for waste mining instead of the smaller units employed by the mining contractor.
• Evaluate the lease/purchase of either small hydraulic shovels or front-end loaders for the loading of waste, as compared to the existing fleet of track excavators.
• Evaluate the impact of the grind size that can be achieved versus recovery and plant throughput to maximize the cash flow.
• Evaluate the changes in recovery based on ore types and head grades in order to provide more detailed information for the economic analysis and improve the accuracy.
• Complete installation of the grid power supply, which is scheduled to be on line in 2018, in order to reduce costs and allow the processing plant to operate as designed.
• Develop a comprehensive and over-arching Permit Register to consolidate information related to required operational permits, agreements, and other applicable requirements. This information is currently tracked in multiple tables. The Permit Register should be part of an integrated environmental and social management system. • Provide more detail in the environmental operating budget, such as costs for installation of a groundwater monitoring network, costs for contracted environmental monitoring, etc.
• Fully evaluate and update the water balance in order to confirm the availability of water to meet the needs of the Mine, understand the requirements for water storage, and to build the water storage facilities that are required to supply an adequate source of fresh water.
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• Re-evaluate the mining cost, focusing on contractor costs, powder factor, maintenance, and rebuild and replacement costs, slope stability/control, and manpower.
• Re-evaluate and adjust general and administrative (G&A) costs to account for replacement of electric power by CEMIG, haulage, site maintenance, water pumping costs, and expatriate labor costs.
• Update the capital and operating cost estimates to reflect the current equipment selection, and the intended operating plan.
ECONOMIC ANALYSIS
An after-tax Cash Flow Projection has been generated from the LOM production schedule and capital and operating cost estimates, and is summarized in Table 1-3. A summary of the key criteria is provided below.
ECONOMIC CRITERIA REVENUE • Approximately 55,000 tpd (19.3 Mtpa) total material (ore and waste) from open pit and stockpiles, including ore production of 7,500 tpd (2.55 Mtpa).
• Mill recovery by zone, as indicated by test work, averaging 90% over LOM.
• Reduction in ounces for gold entrained in mill circuit.
• Gold at refinery 99.965% payable.
• Exchange rate US$1.00 = R$4.00.
• Metal price: US$1,200/oz gold.
• Net Smelter Return includes doré refining, transport, and insurance costs.
• Revenue is recognized as a mid-year value.
COSTS • No pre-production period, as the Mine has been operating since March 2014.
• Mine life: seven years (2016 to 2022).
• LOM mine and process production plans as summarized in Tables 16-3 and 16-4.
• Mine life and closure capital (2016 to 2027) totals US$60 million, which includes US$5.3 million for closure and reclamation.
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• Average operating cost over the mine life is US$24.21/t milled.
• Costs are recognized on a mid-year basis.
• Average All-In Sustaining Cost (AISC) of US$783 is projected over the LOM.
TAXATION AND ROYALTIES • A royalty of 2.0% was applied to the gross revenue. RPA relied on Brio for the taxes applied to the Mine.
The cash flow is based on the assumption that the majority of the reparation work to the plant will commence immediately, as well as the construction of the power transmission line.
CASH FLOW ANALYSIS Considering the Mine on a stand-alone basis, the undiscounted pre-tax cash flow totals US$213.9 million over the mine life, and simple payback occurs approximately within the first year of full production.
The average annual AISC is US$783/oz of gold, according to the World Gold Council definition. The mine life capital cost, which includes unfinished or new capital projects, is US$69/oz gold, for an all in cost (AIC) of US$852/oz gold. Average annual gold production during mine operation (2016 to 2022) is approximately 88,000 oz.
The after-tax Net Present Value (NPV) at a 5% discount rate is US$170 million with an IRR of 341%.
A summary of the cash flow analysis is presented in Table 1-3.
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TABLE 1-3 CASH FLOW SUMMARY Brio Gold Inc. – Riacho dos Machados Gold Mine
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 INPUTS UNITS TOTAL Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 MINING Open Pit #2 Medium Case - 1.4 Mtpa in 2016, 2.5 Mtpa 2017, 3.0 Mtpa 2018 Operating Days 350 days 2,450 350 350 350 350 350 350 350 Tonnes milled per day tonnes / day 7,480 4,000 7,286 8,571 8,571 8,571 8,571 6,789 Tonnes moved per day tonnes / day 55,028 35,217 41,571 54,286 74,774 80,506 84,111 14,728
Mine Production '000 tonnes 17,054 1,400 2,550 3,000 3,177 3,177 1,439 2,311 Au g/t 1.20 1.19 1.13 1.20 1.33 1.16 1.14 1.21
Waste '000 tonnes 117,764 10,926 12,000 16,000 22,994 25,000 28,000 2,844 Total Moved '000 tonnes 134,818 12,326 14,550 19,000 26,171 28,177 29,439 5,155 Stripping Ratio w:o 6.91 7.80 4.71 5.33 7.24 7.87 19.46 1.23 Rehandle Tonnage '000 tonnes 2,684 670 388 - - - 1,561 65
PROCESSING Mill Feed '000 tonnes 18,326 1,400 2,550 3,000 3,000 3,000 3,000 2,376 Au g/t 1.16 1.25 1.15 1.19 1.38 1.19 0.84 1.19
Contained Au oz 685,860 56,251 94,166 115,112 133,266 114,738 81,055 91,271 Recovery Au 90% % 90% 87.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0%
Total Recovered Au oz 615,586 48,939 84,750 103,601 119,939 103,265 72,950 82,144
REVENUE Metal Prices Input Units Au US$1,200 /oz Au US$/oz Au $1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 Au Payable Percentage 99.965% US$ '000 100% 100% 100% 100% 100% 100% 100% 100%
Au Gross Revenue US$ '000 $ 738,445 $ 58,706 $ 101,664 $ 124,277 $ 143,877 $ 123,874 $ 87,509 $ 98,538
Total Gross Revenue US$ '000 $ 738,445 $ 58,706 $ 101,664 $ 124,277 $ 143,877 $ 123,874 $ 87,509 $ 98,538
Refining cost Au US$10.00 /oz Au US$ '000 $6,156 $ 489 $ 847 $ 1,036 $ 1,199 $ 1,033 $ 729 $ 821
Total Charges US$ '000 $6,156 $ 489 $ 847 $ 1,036 $ 1,199 $ 1,033 $ 729 $ 821
Royalty NSR 2.0% US$ '000 $14,646 $ 1,164 $ 2,016 $ 2,465 $ 2,854 $ 2,457 $ 1,736 $ 1,954
Net Revenue US$ '000 $ 717,644 $ 57,052 $ 98,800 $ 120,776 $ 139,824 $ 120,385 $ 85,044 $ 95,762 Unit NSR US$/t milled $39.16 $ 40.75 $ 38.75 $ 40.26 $ 46.61 $ 40.13 $ 28.35 $ 40.30
OPERATING COST Mining (Open Pit) US$/t moved $ 1.62 $ 1.93 $ 1.73 $ 1.62 $ 1.55 $ 1.54 $ 1.61 $ 1.54 $ - Mining (Open Pit) US$/t milled $11.94 $ 16.99 $ 9.85 $ 10.24 $ 13.54 $ 14.46 $ 15.75 $ 3.35 $ - Processing US$/t milled $ 9.77 $ 13.75 $ 12.83 $ 8.79 $ 8.79 $ 8.79 $ 8.79 $ 9.08 $ - G&A US$/t milled $ 2.44 $ 4.79 $ 2.44 $ 2.14 $ 2.14 $ 2.14 $ 2.14 $ 2.58 $ - Rehandle US$/t moved $ 0.45 $ 0.37 $ 0.32 $ 0.30 $ 0.34 $ 0.33 $ 0.48 $ 1.30 $ - Total Unit Operating Cost US$/t milled $24.21 $ 35.70 $ 25.17 $ 21.17 $ 24.46 $ 25.38 $ 26.93 $ 15.04 $ - Mining (Open Pit) US$ '000 $ 218,831 $ 23,786 $ 25,126 $ 30,724 $ 40,606 $ 43,370 $ 47,260 $ 7,958 $ - Processing US$ '000 $ 178,957 $ 19,245 $ 32,711 $ 26,358 $ 26,358 $ 26,358 $ 26,358 $ 21,569 $ - G&A US$ '000 $44,715 $ 6,699 $ 6,215 $ 6,416 $ 6,416 $ 6,416 $ 6,416 $ 6,138 $ - Rehandle US$ '000 $1,211 $ 250 $ 123 -$ -$ -$ $ 753 $ 85 $ - Total Operating Cost US$ '000 $ 443,713 $ 49,981 $ 64,176 $ 63,498 $ 73,379 $ 76,144 $ 80,786 $ 35,750 $ - Operating Cashflow US$ '000 $ 273,930 $ 7,071 $ 34,625 $ 57,279 $ 66,445 $ 44,241 $ 4,258 $ 60,012 $ -
CAPITAL COST Direct Cost Critical Capital Projects US$ '000 $17,265 $ 7,932 $ 5,212 $ 824 $ 824 $ 824 $ 824 $ 824 $ - -$ -$ -$ -$ Secondary Capital Projects US$ '000 $16,185 $ 3,357 $ 588 $ 3,681 $ 2,853 $ 2,853 $ 2,853 -$ $ - -$ -$ -$ -$ Total Direct Cost US$ '000 $ 33,450 $ 11,289 $ 5,800 $ 4,505 $ 3,677 $ 3,677 $ 3,677 $ 824 $ - -$ -$ -$ -$
Other Costs EPCM / Owners / Indirect Cost 5% US$ '000 $1,672 $ 564 $ 290 $ 225 $ 184 $ 184 $ 184 $ 41 $ - Subtotal Costs US$ '000 $ 35,122 $ 11,854 $ 6,090 $ 4,730 $ 3,861 $ 3,861 $ 3,861 $ 865 $ - -$ -$ -$ -$
Contingency 15% US$ '000 $7,608 $ 1,883 $ 1,093 $ 1,033 $ 801 $ 775 $ 738 $ 310 $ 561 $ 374 $ 13 $ 13 $ 13 Capital Cost US$ '000 $ 42,730 $ 13,737 $ 7,183 $ 5,762 $ 4,662 $ 4,637 $ 4,599 $ 1,175 $ 561 $ 374 $ 13 $ 13 $ 13
Sustaining US$ '000 $ 12,013 $ 1,265 $ 1,487 $ 2,379 $ 1,662 $ 1,492 $ 1,242 $ 1,242 $ 1,242 -$ -$ -$ -$ Exploration US$ '000 $ - Working Capital (Not Applied) US$ '000 $ - Reclamation and Closure US$ '000 $5,255 $ - -$ -$ -$ -$ -$ -$ $ 2,496 $ 2,496 $ 88 $ 88 $ 88 Total Capital Cost US$ '000 $ 59,997 $ 15,002 $ 8,670 $ 8,141 $ 6,324 $ 6,129 $ 5,841 $ 2,418 $ 4,300 $ 2,871 $ 101 $ 101 $ 101
CASH FLOW Net Pre-Tax Cashflow US$ '000 $ 213,933 $ (7,931) $ 25,955 $ 49,137 $ 60,121 $ 38,112 $ (1,584) $ 57,594 $ (4,300) $ (2,871) $ (101) $(101) $ (101) Cumulative Pre-Tax Cashflow US$ '000 $ (7,931) $ 18,024 $ 67,161 $ 127,282 $ 165,394 $ 163,810 $ 221,405 $ 217,105 $ 214,235 $ 214,134 $ 214,033 $ 213,933
Operating Cost US$/oz $ 721 All-In Sustaining Cost US$/oz $ 783 $ 1,081 $ 809 $ 670 $ 659 $ 786 $ 1,158 $ 484 $ - -$ -$ -$ -$ All-In Cost US$/oz $ 852 Capital Cost US$/oz $ 69 Date for NPV, IRR (Mid-Year Convention) 15/02/2016 30/06/2016 30/06/2017 30/06/2018 30/06/2019 30/06/2020 30/06/2021 30/06/2022 30/06/2023 30/06/2024 30/06/2025 30/06/2026 30/06/2027 PROJECT ECONOMICS Pre-tax NPV at 5.0% discounting 5% US$ '000 $ 181,191 Pre-tax NPV at 8.0% discounting 8% US$ '000 $ 164,973 Pre-tax NPV at 10.0% discounting 10% US$ '000 $ 155,326 Pre-tax IRR % 390%
After-Tax NPV at 5.0% discounting 5% US$ '000 $ 170,342 After-Tax NPV at 8.0% discounting 8% US$ '000 $ 154,748 After-tax NPV at 10.0% discounting 10% US$ '000 $ 145,480 After-tax IRR 341%
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CASH FLOW PROJECT AND ACTUAL REQUIREMENTS RPA has completed a cash flow analysis of the following scope: • All revenues and costs were evaluated on a mid-year convention.
• Plant reparation work.
• Expansion scope is up to 3.28 Mtpa (9,000 tpd), however, the cash flow was limited to 3.0 Mtpa.
• LOM recovery is expected to reach 90%, based on current production data.
• Scope that could be achieved by the use of rentals for the mining fleet, and the use of a mining contractor.
• Assumption that a new power line will be installed within the next two years.
• Tailings dam raises estimated to a minimum elevation of 840 m RL. Final designs for this dam have yet to be completed.
• Sustaining capital for 2016 and 2017 has been detailed by MRDM, and reviewed by RPA.
SENSITIVITY ANALYSIS Project risks can be identified in both economic and non-economic terms. Key economic risks were examined by running cash flow sensitivities: • Gold price • Head grade • Operating costs • Capital costs • Recovery • Exchange Rate
NPV sensitivity over the base case has been calculated for -20% to +20% variations. The sensitivities are shown in Figure 1-1 and Table 1-4.
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FIGURE 1-1 AFTER-TAX SENSITIVITY ANALYSIS
Note: 1. Sensitivity analyses may overlap.
TABLE 1-4 SENSITIVITY ANALYSIS Brio Gold Inc. – Riacho dos Machados Gold Mine
Parameter Units -20% -10% -5% Base 5% 10% 20% Variables Gold Price US$/oz 960 1,080 - 1,200 - 1,320 1,440 Head Grade - Au g/t 0.93 1.05 - 1.16 - 1.28 1.40 Operating Cost US$ millions 355 $399 - 444 - 488 532 Capital Cost US$ millions 48.00 54.00 - 60.00 - 66.00 72.00 Exchange Rate Ratio 3.20 3.60 - 4.00 - 4.40 4.80 Recovery % - 81 85 90 95 100 -
After-tax Units -20% -10% -5% Base 5% 10% 20% Gold Price US$ millions 56 116 - 170 - 224 277 Head Grade - Au US$ millions 57 116 - 170 - 224 276 Operating Cost US$ millions 238 204 - 170 - 136 102 Capital Cost US$ millions 181 176 - 170 - 165 160 Exchange Rate US$ millions 57 116 - 170 - 224 276 Recovery US$ millions - 116 143 170 197 223 -
Note: 1. Recovery adjusted at -10%, -5%, 0%, 5%, and 10% increments.
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TECHNICAL SUMMARY
PROPERTY DESCRIPTION AND LOCATION The Mine is situated in the northern part of Minas Gerais, Brazil. The mine site is 145 km by road northeast of the city of Montes Claro (population 400,000), and 15 km from the nearest town Riacho dos Machados (population 10,000). The center of the current open pit has geographic coordinates of 16°03’40” South Latitude and 43°08’16” West Longitude with an approximate elevation of 895 MASL.
The Mine includes an active open pit mine. Carpathian is the manager and operator of the Mine. Mineral Resources are held on Federal mining concessions with mineral rights controlled by MRDM. Surface rights are also controlled by MRDM.
LAND TENURE The property consists of 14 tenements and two mining concessions with a total area of approximately 24,072 ha. The tenements form a mostly contiguous block extending north and south of the central-positioned mining concession. Mineral tenure for the Mine is held under the name of MRDM, a wholly-owned subsidiary of Carpathian, incorporated under the laws of Brazil and registered with the Federal Taxpayer’s Roll under No. 08.832.667/001-62. The property was initially staked under the name of Ouro Fino Gold Mine on March 30, 2001 (File #16,835) and was subsequently registered in the name of Carpathian.
Surface rights for the Mine were owned by individuals and entities in Minas Gerais and have been purchased by MRDM. It is reported that there are no reservations, restrictions, rights- of-way, or easements on the Mine to any third party. The Federal agency of Departamento Nacional de Produção Mineral (DNPM) is responsible for administering mineral rights required; to grant a mining concession to any entity that discovers a new mineable deposit. Surface rights owned by MRDM are sufficient for mine waste stockpiles, heap leach pads, and processing plant sites.
HISTORY CVRD discovered the MRDM deposit in early 1986. CVRD operated the property as an open pit gold mine until closure in 1997. Most site facilities were removed or reclaimed after cessation of mining activities in the late 1990s, except for the power and water supply systems. The Mine remained idle from 1997 until October 2008, when Carpathian acquired
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www.rpacan.com the mineral rights of the Mine and started prospecting and exploration. Carpathian re- established the mining and process facilities in 2012 to 2014. Mining and processing of the open pit ores started in March 2014. As of June 2015, Carpathian has sold approximately 76,000 oz of gold.
GEOLOGY AND MINERALIZATION The Riacho Dos Machados gold deposit occurs in the north-south trending Araçuaí Fold- Thrust Belt along the eastern margin of the São Francisco Craton, a major Archean-age basement block which underlies more than one million square kilometers in eastern Brazil. The Araçuaí Fold Belt is 15 km to 45 km wide and consists of a series of metavolcanic- metasedimentary rocks of late Archean to late Proterozoic age, which were deposited in a broad intracontinental to oceanic rift-type basin that existed between the São Francisco Craton and the Congo Craton (now part of Africa).
The mineralization has a typical amphibolite facies mineral association which is progressively altered to greenschist facies assemblage. The principal host for the gold mineralization is the quartz-muscovite schist of the Riacho dos Machados Group. The mineralization occurs in a belt of hydrothermally-altered rock developed along a district-scale shear zone that extends almost 30 km along a N20°E strike direction and dips 40° to 45° east.
Mineralization occurs in the hydrothermal/shear zone and gold grades are closely related to the sulfide content, especially arsenopyrite. Gold occurs as microscopic native-gold grains - typically, finer than 400 mesh (37 microns) - at contacts between recrystallized quartz grains, muscovite grains and as inclusions in arsenopyrite, and less commonly in pyrrhotite, quartz- veinlets, tourmaline, and pyrite.
EXPLORATION STATUS The surface exploration targets drilled to date have returned narrow or discontinuous zones of mineralization. There are no high priority targets defined by drilling to date that present prospective satellite pits to the current operation. There is, however, a clear 14 km trend of mineralization that has not been comprehensively drill tested and, in RPA’s opinion, there is still moderate to good potential to discover additional mineralization.
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MRDM commenced exploration in 2008 and continued work until 2012. This work further explored the primary targets developed by CVRD exploration drilling and also served to validate the CVRD historical data. Since acquisition in 2008, Carpathian exploration activities up to present day have included, but are not limited to, resampling of CVRD drill core, surface trenching, soil geochemistry, mapping, and exploration drilling.
Historic and present owners have drilled a total of 798 drill holes collecting over 85,000 m of drill core and chip samples.
MRDM has defined and explored a number of prospects in the region, with emphasis on exploring the 30 km district-scale shear with a N20°E strike direction and a 40° to 45° east dip. The Passagem Nova target area ten kilometers east of the Mine is the most promising of the exploration areas. Mineralization is characterized by injections of quartz sulfide veinlets and veinlet stockworks associated with kaolinite. The mineralization is in metavolcanic rocks adjacent to a dioritic intrusive body. Country rocks surrounding the intrusive are intensely propylitized and contain tourmaline, hematite, and quartz sulfide veinlets with gold and copper mineralization.
MINERAL RESOURCES RPA reviewed the MRDM Mineral Resource estimate prepared by Cube Consulting Pty Ltd (Cube) for Carpathian in December 2014, and RPA updated it to an effective date of September 30, 2015 (see Table 1-1) to account for depletion. The validated models and estimates were reviewed by RPA and found acceptable. In general, RPA is of the opinion that values and compilations of gold grades were accurately recorded and calculated. The Mineral Resources are a combination of open pit and projected underground operations. Measured and Indicated Mineral Resources, exclusive of Mineral Reserves, were estimated to total 6.97 million tonnes at an average grade of 0.85 g/t Au, which equates to 190,000 oz of gold. An additional Inferred Mineral Resource was estimated and includes approximately 8.56 million tonnes at an average grade of 1.51 g/t Au, which equates to approximately 416,000 oz of gold.
The Mineral Resources were constrained using a Whittle pit optimization based on a gold price of $1,500/oz. A cut-off grade of 0.35 g/t Au was applied to the open pit Mineral Resource and a cut-off grade of 1.0 g/t Au was applied to the underground Mineral
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Resource. The MRDM Mineral Resources have been depleted for production to September 30, 2015 and do not include Mineral Reserves.
Cube estimated the December 2014 Mineral Resources using drill hole information available to October 2014. Lithology, alteration, and mineralization domains were constructed over the deposit using gold grade thresholds in combination with lithology, alteration, and structural information. Variography and basic statistics were used to inform interpolation plans, which used Multiple Indicator Kriging (MIK) to estimate gold values from uncapped gold composites within discrete block models in a series of interpolation passes. Density was averaged from on-site samples and applied to lithology and weathering domains for the deposit. Blocks were classified based on interpolation pass and kriging variance.
The Mineral Resources are classified primarily as Indicated or Inferred Mineral Resources with little remaining Measured Resources available.
MINERAL RESERVES The Mineral Reserves were prepared by Cube in December 2014, and were independently audited and depleted by RPA to reflect the Mineral Reserves as of September 30, 2015.
The Proven and Probable Mineral Reserve estimate as of September 30, 2015 is 18.87 million tonnes grading 1.17 g/t Au containing approximately 711,000 oz of Au (see Table 1- 2). These Mineral Reserves are a combination of the open pit and the stockpiles. The Mineral Reserves are generated based upon the mine designs applied to the Mineral Resource model.
MINING METHOD Mining of the single open pit is by conventional open pit mining methods: drilling, blasting, loading, and hauling. The type and size of equipment that has been selected is appropriate. Excavator and truck production rates are acceptable at 1,000 tonnes per hour (tph) and 125 tph, respectively. A Standard of Care was used to develop the mine plan for the MRDM gold mine. A first principle approach was applied that shows a build-up of equipment hours, which in turn, is applied against hourly operating costs. It should be noted that most of the hauls are uphill, which is a challenge for equipment productivity determination. The distance
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www.rpacan.com from the pit bottom to the run-of-mine (ROM) stockpile, which is located ahead of the crusher, is approximately 2,000 m.
Dinex Engenharia Mineral ltda (Dinex), which replaced Afonso in December 2014 as the mine contractor, is employed by MRDM to assist with mining of the open pit. Dinex’s primary task is to mine waste, while MRDM mines the ore. The Dinex contract period is for three years from 2015 to 2017. RPA recommends that MRDM evaluate using MRDM’s larger trucks for mining waste, and that MRDM employ Dinex for mining ore.
Haul distances to the waste dumps and ROM ore stockpile crusher area are moderate (approximately 1.5 km to 2.0 km in the first two years). MRDM consultants and MRDM personnel are evaluating alternate waste dump locations. If acceptable alternative dump locations are identified, the mining permit will require amendment.
The strip ratio for the deposit is relatively high at approximately 6.9 to 1 (waste:ore). The mined tonnage is proposed to be at a constant rate throughout the mine life. The Mine does not require any pre-stripping.
Total daily ore and waste material movement is estimated to be approximately 55,000 tpd, and direct ore haulage is estimated to be 7,000 tpd (2.55 Mtpa), which can be expanded to 9,000 tpd (3.28 Mtpa).
Weather and altitude should not impact productivities, however, severe rainfall can occur and drought can impact the water supply, as MRDM relies on make-up water from the tailings dam.
MINERAL PROCESSING The processing plant was designed to process 7,000 tpd (i.e., 2.55 Mtpa), with the potential to expand to 9,000 tpd (3.28 Mtpa) with some modifications, using three-stage crushing, ball mill grinding, CIL, sulfur dioxide-air cyanide detoxification, and a gold adsorption, desorption, and recovery (ADR) plant. The cash flow in this Technical Report limited the maximum yearly production to a slightly conservative value of 3.00 Mtpa.
Metallurgical data indicated that the gold recovery would be approximately 90% at a target grind size of P80 passing 54 µm. Current plant production has, at times, been limited due to
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www.rpacan.com insufficient power and water. For the nine months in 2014, production was 1.4 Mt at an average recovery of 86.7%. The 2015 production through September was 814,000 t at an average recovery of 85.4%. It is anticipated that with the implementation of the water dam in 2017, and the power line in 2018, target recoveries and full capacity should be achieved in 2018.
MRDM has been progressively improving the plant operations and efficiency since the start- up in March 2014. RPA has noted significant improvements with each site visit from November 2014 through October 2015.
EXISTING INFRASTRUCTURE All of the necessary infrastructure for the operation is built, which includes but is not limited to, an open pit mine, processing plant, laboratory, refinery, safety and security buildings, cafeteria, core storage, maintenance facilities, diesel-generated electrical generation plant, tailings dam, and water wells. MRDM is located in an easily accessible area with the infrastructure needed to conduct operations, although, improvements to the power and water supplies are required to operate the plant at design capacity. Power is supplied from generator sets located on the existing mine.
MARKET STUDIES The principal commodity from the MRDM operation is gold, which is freely traded, at prices that are widely known, so that prospects for sale of any production are virtually assured. RPA used a gold price of US$1,200/oz for the Base Case cash flow.
ENVIRONMENTAL, PERMITTING, AND SOCIAL CONSIDERATIONS The Mine is located in a remote and dry location in the northern portion of the State of Minas Gerais. Vegetation and faunal compositions are consistent with populations found in a broad geographic range. The Mine area does not represent critical habitat for any biodiversity resources. The general area of the mine was previously disturbed by CVRD (Vale), which operated the mine from 1989 to 1997. Due to the previous mining activities and environmental liabilities, MRDM has conducted supplementary studies to assess groundwater, surface water, and soil quality prior to the start of operations. As part of conditions of the environmental license and signed agreement with the Public Ministry, MRDM will conduct environmental monitoring programs of surface water, groundwater, soil,
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www.rpacan.com fauna, and flora to closely monitor potential changes in quality of these resources. MRDM has ongoing reclamation programs and also has set-aside areas for biodiversity conservation.
MRDM holds the required permits and authorizations to operate in compliance with Brazilian regulations. MRDM signed an agreement with the Public Ministry that includes provisions for external audits of the Mine and provides funds for environmental and social programs to be developed in coordination with local communities.
The Mine currently operates under conditions of the following permits and licenses: • Operation License (Parecer Único No. 0390682/2015 SIAM) – Valid until June 8, 2019
• Agreement with the Public Ministry (MPMG-0522.11.000.018-2)
• Groundwater well permits (COPAM No. 17991 through 17998)
• Authorization for the construction of the tailings storage facility (Portaria No. 03842/2011)
• Authorization for dewatering of the pit (Portaria No. 00935/2012)
• Authorization for an impoundment of the Ribeirao Piranga for an area of 0.29 ha
• Authorization for onsite storage and handling of 90 m3 of fuel
MRDM plans to operate in compliance with requirements of the above listed permits and authorizations. The company will also comply with other applicable regulations, such as physical integrity and stability of large structures (e.g., tailings dam, pit, waste rock piles, and stockpiles) that must be reported to DNPM; and occupational health and safety performance indicators and plans that must be submitted to the Ministry of Labor and Employment. MRDM will apply for permits for future expansions or changes in project design, as required by Brazilian regulations.
CAPITAL AND OPERATING COST ESTIMATES Initial capital cost to construct the mine and mill was estimated to be approximately US$171 million. Total LOM capital (2016 to 2022) remaining is estimated to be US$60 million over a seven-year mine life, which includes closure and reclamation of approximately US$5.3 million (Table 1-5).
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Direct capital costs going forward for the Mine are reasonable. The primary factor that will impact the capital costs will be the productivity of the labor during construction. Contingency of 15% is included in the current capital cost estimates.
TABLE 1-5 LOM CAPITAL COSTS (2016-2022) Brio Gold Inc. – Riacho dos Machados Gold Mine
Capital Costs Capital Cost Area (US$ 000) Direct Cost
Critical Capital Projects 17,265 Secondary Capital Projects 16,185 Total Direct Cost 33,450
Other Costs EPCM / Owners / Indirect Cost 1,672 Subtotal Costs 35,122
Contingency 7,608 Initial Capital Cost 42,730
Sustaining 12,013 Exploration - Working Capital (Not Applied) - Reclamation and Closure 5,255 Total Capital Cost 59,997
Note: 1. R$4.0:US$1 exchange rate. 2. Critical capital items include the water storage dam, power line, and critical spares.
Mine planning, costing, and budgeting are acceptable to RPA. Mine operating costs will increase as the pit is deepened and as the waste dump expands due to longer hauls. Operating cost can also increase if the labor levels or operating supplies (diesel, tires, and ground engaging tools) increase.
LOM mining costs are reported to be US$1.62/t of total material, which is normal. Blasting costs may be slightly higher in the fresh rock due to an increase in the powder factor. The projected fresh rock powder factors for ore and waste are estimated at 0.223 kg/t and 0.288 kg/t, respectively. MRDM is optimizing the blasting procedures.
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Unit operating costs for this operation have been high due to economies of scale related to a reduction in the amount of ore that was processed. MRDM had planned on the majority of its water to be supplied from precipitation reporting to the tailing impoundment area. The Mine, however, has recently been impacted by a period of drought.
Table 1-6 summarizes LOM operating costs for the Project.
TABLE 1-6 SUMMARY OF LOM OPERATING COSTS Brio Gold Inc. – Riacho dos Machados Gold Mine
LOM Mining Area Units 2016 2017 2018 2019 2020 2021 2022 Avg. Mining US$/t moved 1.62 1.93 1.73 1.62 1.55 1.54 1.61 1.54 Mining US$/t ore milled 11.94 16.99 9.85 10.24 13.54 14.46 15.75 3.35 Processing US$/t ore milled 9.77 13.75 12.83 8.79 8.79 8.79 8.79 9.08 G&A US$/t ore milled 2.44 4.79 2.44 2.14 2.14 2.14 2.14 2.58 Re-handle US$/t moved 0.45 0.37 0.32 0.30 0.34 0.33 0.48 1.30 Total US$/t ore milled 24.21 35.70 25.17 21.17 24.46 25.38 26.93 15.04
Note: 1. R$4.0:US$1 exchange rate.
Manpower requirements for mining are considered to be reasonable for this size, location, and type of operation at MRDM.
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2 INTRODUCTION
Roscoe Postle Associates Inc. (RPA) was retained by Brio Gold Inc. (Brio) to prepare an independent Technical Report on the Carpathian Gold Inc. (Carpathian) Riacho dos Machados gold mine (the Mine), located in Minas Gerais State, Brazil. Mineracão Riachos Dos Machados (MRDM) is a wholly-owned subsidiary of Carpathian. The purpose of this report is to support the acquisition of the Mine by Brio. This Technical Report conforms to NI 43-101 Standards of Disclosure for Mineral Projects.
Brio is a wholly-owned subsidiary of Yamana Gold Inc. (Yamana), a publicly-traded gold company with operating gold mines and development projects in Brazil, Chile, Mexico, Argentina, and Canada. On December 14, 2014, it was announced that Brio was formed to hold the Pilar operations, Santa Luz, and Fazenda Brasileiro gold mines, as well as some related exploration concessions, all of which were held as non-core assets within Yamana, and located in Brazil.
Carpathian is an exploration and development company, whose primary business interest is the Mine and the Rovina Valley Au-Cu project in Romania. The Rovina project is not part of the Brio transfer of assets into a public company.
A Preliminary Economic Assessment of the Mine was completed by NCL Brasil Ltda (NCL) in September 2009, followed by a Mineral Resource update by NCL in September 2010. In November 2011, a Mineral Resource estimate and Feasibility Study (the 2011 FS) on the Mine was completed by a consortium of Tecnomin Projetos e Consultoria Ltda. (Technomin) as lead and included NCL, Golder Associates Brasil Consultoria e Projetos Ltda. (Golder), YKS Servicos Ltda, M2 Environmental and Consulting Services Ltd., Lawrence Consulting Ltd., and John A. Wells Metallurgical Consultant. Mining and processing of the open pit ores started in March 2014. As of June 2015, Carpathian has sold approximately 76,000 oz of gold.
SOURCES OF INFORMATION Site visits were carried out by RPA personnel November 4 to 6, 2014; February 23 to 28, 2015; and October 26 to 29, 2015.
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Discussions were held with: • Vitor Hugo de Souza Belo, COO Carpathian • Andreia de Lourdes Nunes, General Manager, Carpathian • Marcos Paulo Dias Gomes, Manager of Engineering and Construction, Carpathian • José Tadeu Leite Rodrigues, Exploration Director, Carpathian • José Ivanildo Lima, Processing Plant Manager, Carpathian • Gustavo Fontes Lopes, Manager of Mine, Carpathian • Lúcia Marina Salles, Manager of Finance and Accounting, Carpathian • Carla Fernandes Moura, Executive Administrator and Attorney, Carpathian • Beau Nicholls, Director NED and Drilling Resource consultant, Perth, Australia • Eric Mader, Principal Mining Engineer, Cube Consulting Pty Ltd • Luis Moreno, Corporate Finance, FTI Consulting, Sao Paulo, Brazil • Pedro Henrique T. Santos, Senior Consultant, FTI Consulting, Sao Paulo, Brazil • Marco Antônio Fernandez P. Silva – Environmental Manager, Carpathian • Valéria Marcondes – Institutional and Community Relations - Consultant • Plínio Marques Cardoso – Occupational Health and Safety Manager, Carpathian • Dr. Délio Coelho Junior – Occupational Health and Safety Physician, Carpathian
RPA PERSONNEL The following RPA personnel assisted in the preparation of this report: • Stuart E. Collins, P.E., Principal Mining Engineer, is responsible for the overall preparation of this report as well as Sections 2 to 6, 15, 16, 19, 20, and 22 and contributed to Sections 1, 21, 23, 24, 25, and 26. Mr. Collins visited the MRDM site in November 2014, February 2015, and October 2015.
• Kathleen Ann Altman, Ph.D., P.E., Principal Metallurgist and Director of Metallurgy and Mineral Processing, is responsible for Sections 13, 17, and 18 of this report and contributed to Sections 1, 21, 22, 25, and 26. Dr. Altman visited the MRDM site in November 2014.
• Mark B. Mathisen, C.P.G., Senior Geologist, is responsible for Sections 7 to 12 and 14 of this report and contributed to Sections 1, 25, and 26. Mr. Mathisen visited the MRDM site in October 2015.
The documentation reviewed, and other sources of information, are listed at the end of this report in Section 27 References.
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LIST OF CONTRIBUTORS The following list of engineering firms, scientists, environmental consultants, and contractors have been used by MRDM to develop the estimates and plans for the Mine.
• G&T Metallurgical Services • Tecnomin Projetos e • John A. Wells Ltd Consultori Ltda Metallurgical Consultant • Golder Associates Brasil • Cube Consulting Pty Ltd. • B&K Exploration Associates Consultoria e Projetos Ltda • YKS Servicos Ltda • Xstract Mining Consulting • MultiGeo Consulting Group Pty Ltd. • NCL do Brasil Ltda • M2 Environmental • Knight Piésold Pty Ltd. Consulting Services Ltd. • SGS-Geosol Laboratorio • Lawrence Consulting Ltd. Metalurgico
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LIST OF ABBREVIATIONS Units of measurement used in this report conform to the metric system. All currency in this report is US dollars (US$) unless otherwise noted. a annum kWh kilowatt-hour A ampere L liter bbl barrels lb pound btu British thermal units L/s liters per second °C degree Celsius m meter C$ Canadian dollars M mega (million); molar cal calorie m2 square meter cfm cubic feet per minute m3 cubic meter cm centimeter µ micron cm2 square centimeter MASL meters above sea level d day µg microgram dia diameter m3/h cubic meters per hour dmt dry metric tonne mi mile dwt dead-weight ton min minute °F degree Fahrenheit µm micrometer ft foot mm millimeter ft2 square foot mph miles per hour ft3 cubic foot MVA megavolt-amperes ft/s foot per second MW megawatt g gram MWh megawatt-hour G giga (billion) oz Troy ounce (31.1035g) gal Imperial gallon oz/st, opt ounce per short ton g/L gram per liter ppb part per billion gpm Imperial gallons per minute ppm part per million g/t gram per tonne psia pound per square inch absolute gr/ft3 grain per cubic foot psig pound per square inch gauge gr/m3 grain per cubic meter RL relative elevation ha hectare s second hp horsepower st short ton hr hour stpa short ton per year Hz hertz stpd short ton per day in inch t metric tonne in2 square inch tpa metric tonne per year J joule tpd metric tonne per day k kilo (thousand) US$ United States dollar kcal kilocalorie USg United States gallon kg kilogram USgpm US gallon per minute km kilometer V volt km2 square kilometer W watt km/h kilometer per hour wmt wet metric tonne kPa kilopascal wt% weight percent kVA kilovolt-amperes yd3 cubic yard kW kilowatt yr year
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3 RELIANCE ON OTHER EXPERTS
This report has been prepared by Roscoe Postle Associates Inc. (RPA) for Brio Gold Inc. (Brio). The information, conclusions, opinions, and estimates contained herein are based on: • Information available to RPA at the time of preparation of this report,
• Assumptions, conditions, and qualifications as set forth in this report, and
• Data, reports, and other information supplied by Carpathian Gold Inc. (Carpathian), Brio, and other third party sources.
For the purpose of this report, RPA has relied on ownership information provided by Carpathian and Brio. RPA has not researched property title or mineral rights for the Mine and expresses no opinion as to the ownership status of the property.
RPA has relied on Brio for guidance on applicable taxes, royalties, and other government levies or interests, applicable to revenue or income from the Mine.
Except for the purposes legislated under provincial securities laws, any use of this report by any third party is at that party’s sole risk.
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4 PROPERTY DESCRIPTION AND LOCATION
The Mine is situated in the northern part of Minas Gerais, Brazil. The mine site is 145 km by road northeast of the city of Montes Claro (population 400,000), and 25 km from the nearest town, Riacho dos Machados (population approximately 10,000). The center of the current open pit has geographic coordinates of 16°03’40” South Latitude and 43°08’16” West Longitude, with an approximate elevation of 895 MASL. The site location is shown in Figure 4-1.
LAND TENURE
The property consists of 14 tenements and two mining concessions with a total area of approximately 24,072 ha, as shown in Figure 4-2. The tenements form a mostly contiguous block extending north and south of the central-positioned mining concession. Mineral tenure for the Mine is held under the name of MRDM, a wholly-owned subsidiary of Carpathian, incorporated under the laws of Brazil and registered with the Federal Taxpayer’s Roll under No. 08.832.667/001-62. The property was initially staked under the name of Ouro Fino Gold Mine on March 30, 2001 (File #16,835) and was subsequently registered in the name of Carpathian.
Surface rights for the Mine were owned by individuals and entities in Minas Gerais and have been purchased by MRDM. It is reported that there are no reservations, restrictions, rights- of-way, or easements on the Mine to any third party. The Brazilian government, through the Departamento Nacional de Produção Mineral (DNPM – National Department of Mineral Production) is authorized to grant the rights for a mining concession to any entity that discovers a new mineable deposit.
There are no expiration dates on the mining concession held by Carpathian, provided the company meets expenditure and environmental requirements and pays a required annual mining fee. The expenditure and environmental requirements have been met and Carpathian is current with all requirements to hold the mining tenements in good standing. Table 4-1 provides a summary of the mining property tenements. RPA understands that separate title work and legal investigations are occurring concurrent with the RPA report. The results of this title work will update and supersede the information in Table 4-1.
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TABLE 4-1 MINING PROPERTY TENEMENTS Brio Gold Inc. – Riacho dos Machados Gold Mine
Issue DNPM No Title Hectares Date Expiration Date Comments 831005/1982 Mining Concession 1,000.00 18-Mar-92 Unlimited Plan for Economic Use approved 833479/2006 Exploration License 1,963.10 24-May-11 24-May-14 Exploration final report submitted (Positive) 833480/2006 Mining Concession 1,230.63 31-Jul-14 Plan for Economic Use approved
834015/2006 Exploration License 1,921.76 24-May-11 24-May-14 Exploration final report submitted (Positive) 834016/2006 Exploration License 1,988.40 24-May-11 24-May-14 Exploration final report submitted (Positive) 834017/2006 Exploration License 785.00 24-May-11 24-May-14 Exploration final report submitted (Positive) 834018/2006 Exploration License 1,981.86 24-May-11 24-May-14 Exploration final report submitted (Positive) 834020/2006 Exploration License 1,998.50 24-May-11 25-May-14 Exploration final report submitted (Positive) 834021/2006 Exploration License 1,994.00 24-May-11 26-May-14 Exploration final report submitted (Positive) 831869/2008 Exploration License 116.72 21-Dec-12 Exploration final report submitted
832689/2009 Exploration License 1,443.53 24-Jun-13 24-Jun-16 License renewed for additional 3 years 831630/2010 Exploration License 1,999.71 27-Nov-14 27-Nov-17 License renewed for additional 3 years 831631/2010 Exploration License 1,999.77 12-Nov-14 27-Nov-17 License renewed for additional 3 years 831632/2010 Exploration License 718.39 12-Nov-14 27-Nov-17 License renewed for additional 3 years 832220/2013 Exploration License 1,466.27 09-Apr-14 9-Apr-17 Exploration License granted for 3 years 831341/2012 Exploration License 1,464.13 06-May-14 06-May-17 Exploration License granted for 3 years TOTAL 24,071.77
Note. 1. For those licenses with expiration dates in May 2014, extensions have been submitted but final approvals have not been received yet.
ROYALTIES
Certain royalties are levied on mineral production in Brazil in accordance with Federal law. The current statutory royalty imposed by the federal government on gold properties is 1% of sales proceeds less sales tax, transportation, and insurance costs. Additionally, a royalty must be paid to the landowner if the surface rights do not belong to the mining titleholder. This landowner royalty is equal to one-half the government royalty, which in the case of gold would amount to an additional 0.5%. MRDM’s mine has the surface right ownership for the deposit area and infrastructure, so any mineral production from this portion of the Mine area, and any surface area subsequently acquired by Carpathian/MRDM, will carry no landowner royalty.
The Mine also carries a 1% royalty on gold and a 2% royalty on base metals, payable by MRDM to Mineração Brilhante Ltda, who previously had an interest in the property. The mineralization in the Mine area currently carries no economic base metals.
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RPA is not aware of any environmental liabilities on the property. MRDM has all required permits to conduct the proposed work on the property. RPA is not aware of any other significant factors and risks that may affect access, title, or the right or ability to perform the proposed work program on the property.
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70° 60° 50° 40°
Santa TRINIDAD AND TOBAGO Marta Maracaibo Caracas Legend: Barcelona Port-of-Spain 10° Barquisimeto Valencia Maturin International Boundary 10° NORTH Ciudad Bolivar State Boundary Cucuta San Cristobal ATLANTIC Georgetown National Capital New Amsterdam OCEAN Bucaramango VENEZUELA GUYANA Paramaribo State Capital Puerto Carreno Cayenne Santa Elena Road Bogota Rio Orinoco de Uairen French SURINAME Guiana Oiapoque Railway (FRANCE) COLOMBIA Boa Vista
AMAPA
Macapa Equator Rio Negro 0° 0° Belem Amazon Sao Luis Amazon Manaus Santarem Parnaiba Altamira Careiro Fortaleza Leticia Itaituba Iquitos Rio Tapajos CEARA AMAZONAS RIO GRANDE Benjamin DO NORTE Maraba MARANHAO Teresina Constant PARA Natal Rio Madeira Carajas Rio Teles Pires Joao BRAZIL Araguaina Picos Pessoa Rio PurusHumaita PARAIBA Cruzeiro do Sul Xingu PIAUI
Boca do Rio Salgueiro ACRE Acre Porto Cachimbo PERNAMBUCO Recife Rio Ucayali Tocantins Rio Branco Velho Juazeiro ALAGOAS Guajara-Mirim Palmas Maceio 10° Assis Brasil TOCANTINS 10° RIACHO DOS MACHADOS GOLD MINE Aracaju
Inapari Guayaramerin RONDONIA SERGIPE Rio BAHIA
PERU Rio Mamore Barreiras Quillabamba Rio Juruena MATO Cusco GROSSO Salvador GOIAS Vitoria da Rio Beni Francisco Araguaia Conquista Lago Cuiaba Rio Brasilia Sao Ilheus DISTRITO Titacaca Rio BOLIVIA Rondonopolis FEDERAL N Arequipa La Paz Caceres Goiania Cochabamba Matarani MINAS Ilo Santa Cruz GERAIS Tacna Oruro Rio Paranaiba Sucre Corumba Arica Puerto Suarez Santa Fe Uberlandia Campo Rio Grande ESPIRITO Grande do Sul Belo SANTO Potosi Horizonte Iquique MATO Vitoria 20° GROSSOPanorama SAO 20° DO SUL PAULO
Pedro Juan CaballeroRio Paraguay Ponta Sao RIO DE Pora Paulo JANEIRO SOUTH PARAGUAY PARANA Rio de Janeiro Antofagasta Ciudad Santos ATLANTIC del Este Curitiba Salta Asuncion OCEAN SOUTH Foz do Iguacu San Miguel Sao Francisco do Sul SANTA de Tucuman Rio Parana PACIFIC CATARINA Resistencia Florianopolis OCEAN RIO GRANDE DO SUL ARGENTINA Porto Alegre 0 200 400 Kilometres CHILE Santa Rio Parana Maria 0 200 400 Miles 30° Santa Fe 30° Cordoba URUGUAY Rio Grande Mendoza Rosario Valparaiso Figure 4-1 Colonia Santiago Buenos Aires Montevideo La Plata Brio Gold Inc.
Concepcion Mar del Plata Bahia Bianca Riacho dos Machados Gold Mine Minas Gerais State, Brazil 70° 60° 50° 40° 30° The islands of Trinidade, Martin Vaz, Trinidade and Martin Vaz are administered by Arquipelago de Fernando de Noronha, Espirito Santo; Arquipelago de Fernando de Location Map Atol das Rocas, and Penedos de Sao Noronha by Pernambuco. Pedro a Sao Paulo are not shown. December 2015
4-4 www.rpacan.com 4 000 240 8 685 000, 690 000, 695 000, 700 000, 705 000, 710 000, ,,
,, Legend:
8 240 000 Mineral Rights N NOVO PAE - New Plan for Economic Use PAE - Plan for Economic Use Exploration License granted for 3 years 831341/2012 License renewed for aditional 3 years Exploration final report submitted (Positive) MRDM Property Industrial Facilities 832220/2013 3 000 230 8 833479/2006 ,, 832689/2009
,, 8 230 000 831632/2010
831630/2010 833480/ 2006 831005/ 1982 834015/ Plant 2006
831631/2010 Pit Year 8 Tailing Dam Waste Dump 2 000 220 8
834016/2006 ,,
,,
8 220 000
834017/2006 831869/2008
834018/2006 1 000 210 8 ,,
,,
8 210 000
834020/2006
Figure 4-2
834021/2006 Brio Gold Inc. 0 2.5 575.10
Riacho dos Machados Gold Mine 000 200 8
Kilometres ,, Minas Gerais State, Brazil
,, Mining Concessions
8 200 000
December 2015 Source: Carpathian Gold Inc., 2015.
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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
ACCESSIBILITY
The Mine is approximately 145 km by road northeast of Monte Claros in the northern part of Minas Gerais State, southeastern Brazil. The Mine can be accessed from Monte Claros by traveling west on Highway 251 and north on MG 120. MRDM’s main gate is accessed from a west bound gravel road off MG 120. The nearest town is Riacho dos Machados (population approximately 10,000) approximately 25 km northeast from the Mine. Monte Claros (population 400,000) is the region’s largest industrial city, offering full service facilities and daily commercial air flights to the major Brazilian cities of Belo Horizonte (560 km from the Mine), Brasília, and Salvador.
CLIMATE
The Mine is located in southeastern Brazil in the northern part of Minas Gerais, in the Serrada climate zone. The climate is semi-tropical with two seasons, a dry winter and a rainy summer, with the main period of rain occurring between November and March. Average temperatures vary from 17°C in January to 30°C in July. Annual precipitation ranges from approximately 300 mm to 1,500 mm, with an average of 1,100 mm over the last few years, and pan evaporation averages 1,398 mm/year. The Mine is operated year-round.
Severe rainfall and drought can occur in the Mine area. In January 2014, the site experienced a rainfall of 680 mm in one storm event, during which the water overtopped the liner in the tailings storage facility (TSF) and ran underneath the liner. Since October 2015, at the time of RPA’s site visit, the Mine has been experiencing a drought, which has affected the water supply. Therefore, planning the appropriate storage capacity and designing and constructing a fresh water reservoir are of high priority for the Mine.
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LOCAL RESOURCES
The Mine area has a moderate history of mining activity. Mining suppliers and contractors are locally available. Both experienced and general labor is readily available from Porteirinha and Riacho Dos Machados, with an estimated population of approximately 38,700 citizens in the municipality of Porteirinha, and approximately 9,700 inhabitants in the municipality of Riacho Dos Machos (2014 census). Carpathian has had success in hiring experienced staff and personnel with good mining expertise. The Mine has the support of the local communities.
Within the state of Minas Gerais, many mining related services are available ranging from drilling and mining contractors to technical geological and engineering consulting firms which operate at world class standards.
INFRASTRUCTURE
The infrastructure at MRDM includes: • open pit mine • 7,000 tonnes per day (tpd) (2.55 Mtpa) processing facilities • three-bay, tent structure mine shop • offices and support buildings • access road • waste management • cafeteria • transportation facilities • communications systems • TSF • on-site power generation with eight diesel generators
Infrastructure remaining in place at the mine site from the previous owner includes an active 13.8 kV power line and right-of-way, a 120 m deep exploration shaft (2.8 m diameter) with headframe, warehouses, housing facilities, and various other buildings, including core storage. The old open pits and underground workings are now filled with water, and the waste dumps and leach pads have been reclaimed and re-vegetated. Water monitoring stations that CVRD installed are utilized to measure the water quality in the area of the Mine.
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PHYSIOGRAPHY
The Project is located within the Espinhaço Mountains (Serra do Espinhaço) that divide the São Francisco and Jequitinhonha river basins. The terrain consists of rolling hills, locally steep and drained by sparse intermittent streams, mainly active in the wet season. Elevations range from 770 MASL to 900 MASL.
The prevailing vegetation is overgrown semi-tropical savanna known as “cerrado,” consisting of brushy forest land interspersed with open grassy fields. The local area supports only limited agriculture, mainly subsistence cattle grazing in the area near the mine site. In addition to ranching, eucalyptus tree farms are found and principally produce charcoal consumed in metallurgical ovens.
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6 HISTORY
PRIOR OWNERSHIP
CVRD discovered the MRDM deposit in early 1986. CVRD operated the property as an open pit gold mine until closure in 1997. The mine remained idle from 1997 until October 2008, when Carpathian acquired the mineral rights of the Mine and started prospecting and exploration.
EXPLORATION AND DEVELOPMENT HISTORY
CVRD, through its exploration arm DOCEGEO, conducted geological mapping, geochemical and geophysical surveys, and trenching from 1979 to 1987. The work resulted in the discovery of the Ouro Fino deposit.
From 1987 through 1994, CVRD conducted the following exploration: • Reverse circulation (RC) drilling to define the oxide gold mineralization.
• Diamond drilling (DD) to explore the deeper sulfide mineralization.
• Underground exploration, to explore the mineralization below the southern portion of the open pit. The work included a vertical shaft, lateral development, underground drilling to further explore the deeper sulfide mineralization, and metallurgical test work (Technomin, 2011).
HISTORICAL RESOURCE ESTIMATES
Prior to start of mining operations in 1989, CVRD estimated open pit oxide Mineral Reserves of 2.7 million tonnes grading 2.22 g/t Au, containing 193,000 oz Au. RPA notes that this estimate is historical in nature, however, it is relevant as it shows a very good reconciliation with actual production.
In 1996, CVRD estimated underground sulfide Mineral Resources of 2.59 million tonnes grading 4.88 g/t Au, containing 405,000 oz Au in the Measured plus Indicated categories, and 1.19 million tonnes grading 4.01 g/t Au, containing 153,000 oz Au in the Inferred Resource category.
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RPA did not review the assumptions, parameters, and methodology of the underground estimate. The estimate pre-dates NI 43-101, is historical in nature, and should not be relied upon.
PAST PRODUCTION
CVRD began the open pit operation at the Ouro Fino deposit in 1989. Oxidized gold ore was mined and processed by cyanide heap leach until 1997, when operations ceased. Production from the operation is summarized in Table 6-1.
TABLE 6-1 HISTORICAL PRODUCTION SUMMARY - CVRD Brio Gold Inc. – Riacho dos Machados Gold Mine
Strip Contained Produced Process Ore Grade Waste Ratio Au Au Recovery Year (000 t) (g/t Au) (000 t) W:O (000 oz) (000 oz) (%) 1989 12 2.46 2 0.13 1 0 - 1990 334 1.89 321 0.96 20 14 71 1991 506 2.12 963 1.9 32 28 80 1992 517 1.93 1,175 2.27 40 27 83 1993 628 1.98 1,593 2.54 31 31 77 1994 568 1.68 1,378 2.43 20 26 84 1995 362 1.68 961 2.65 18 16 84 1996 294 1.88 487 1.66 - 13 72 1997 0 - - - - 1 - Total 3,220 1.89 6,879 2.14 196 155 79
Carpathian acquired the Mine on October 30, 2008, completed an FS, and began production in 2014. A summary of Carpathian’s production is shown in Table 6-2.
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TABLE 6-2 2014-2015 PRODUCTION - CARPATHIAN Brio Gold Inc. – Riacho dos Machados Gold Mine
Mined Ore Process Process Metallurgical Shipped Tonnes Tonnes Grade Recovery Au Au Month (000 t) (000 t) (g/t Au) (%) (oz) (oz) Mar-14 217 47 1.30 90 1,778 890 Apr-14 177 110 1.34 90 4,285 3,708 May-14 254 87 1.34 90 3,386 3,482 Jun-14 99 119 1.30 86 4,284 2,793 Jul-14 177 161 1.20 87 5,436 6,376 Aug-14 239 203 1.19 83 6,439 7,597 Sep-14 289 161 1.10 83 4,714 4,687 Oct-14 365 205 1.23 86 6,898 7,234 Nov-14 250 170 1.20 87 5,712 5,633 Dec-14 124 158 1.12 87 4,964 5,563 2014 Totals 2,191 1,422 1.22 86 47,897 47,964
Jan-15 283 151 1.23 83 4,989 5,080 Feb-15 109 181 1.00 84 4,896 6,377 Mar-15 160 152 1.00 84 4,119 5,972 Apr-15 209 151 1.05 86 4,402 3,987 May-15 198 92 1.74 85 4,413 5,277 Jun-15 62 31 1.92 83 1,570 1,943 Jul-15 60 22 2.65 87 1,606 1,058 Aug-15 67 24 1.74 77 1,044 968 Sep-15 54 9 1.84 86 478 624 Jan-Sept 2015 Totals 1,201 814 1.17 75 27,517 31,286
Project to Date Totals 3,392 2,236 1.20 82 75,414 79,250
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7 GEOLOGICAL SETTING AND MINERALIZATION
The description of the Geological Setting and Mineralization, and references therein, is taken largely from Tecnomin (2011).
REGIONAL GEOLOGY
The Mine occurs in the north-south trending Araçuaí Fold-Thrust Belt along the eastern margin of the São Francisco Craton, a major Archean-age basement block which underlies more than one million square kilometers in eastern Brazil. The Araçuaí Fold Belt is 15 km to 45 km wide and comprised of a series of metavolcanic-metasedimentary rocks of late Archean to late Proterozoic age, which were deposited in a broad intracontinental to oceanic rift-type basin that existed between the São Francisco Craton and the Congo Craton (now part of Africa). Subsequent closure of this rift basin by prolonged continental collision strongly deformed the rock strata and the units were metamorphosed, folded, intruded, and thrust westward against the São Francisco Craton. This formed the Araçuaí Fold-Thrust Belt during the late-Proterozoic Brasiliano orogeny. Mineralization along the Araçuaí Fold Belt is thought to be the result of hydrothermal fluids generated by syntectonic igneous and metamorphic activity.
Immediately east of the Araçuaí Fold Belt occurs a north-south trending structural window (300 km long) cored by Archean-aged migmatites (Porteirinha Complex) and flanked by apparent décollemont (basal detachment) structures and Proterozoic supracrustal sequences (Espinhaço and São Francisco Supergroups) forming a regional antiformal structure. This structural window has been termed the Guanambi-Corretina Block by Barbosa (1996) or the Porteirinha Complex by DOCEGEO (1994). At the Mine, basement gneissic-granitic rocks are interpreted to be overthrust westward on the supra-crustal rocks of the Riacho dos Machados group as part of the Brasiliano-Pan-African event. The tectonic superposition of basement rocks over supracrustal sequences is described along the entire eastern border of the São Francisco Craton with mineral occurrences known along this lineament.
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REGIONAL LITHOLOGY The major Precambrian rock sequences included in the Araçuaí Fold Belt, in order of oldest to youngest, are as follows.
PORTEIRINHA COMPLEX (CÓRREGO DO CEDRO METAMORPHIC COMPLEX) Archean age granite-gneiss and migmatite basement complex, includes minor meta-mafic intercalations and tight north-south folds, part of a poorly understood tectonic block immediately east of the São Francisco Craton.
RIACHO DOS MACHADOS GROUP Late Archean to Early Proterozoic age strongly metamorphosed volcanic-sedimentary rock sequence comprised of mafic to ultramafic rocks with mica schist and quartz-feldspar schist. This sequence contains a local rock sequence, the Ouro Fino Sequence, which is the principal host for gold deposits at the Mine.
PACIENCIA INTRUSIVE SUITE Early to Middle Proterozoic age bodies of granite, quartz monzonite, quartz-diorite, diorite and gabbro which intrude the Riacho do Machados Sequence; syn-to-late metamorphic deformation.
ESPINHAÇO SUPERGROUP A thick supracrustal sequence of Middle Proterozoic age moderately metamorphosed sedimentary-volcanic rocks, mainly sericitic quartzite, phyllite, conglomerate, and schistose felsic volcaniclastics.
SALINAS, MACAÚBAS AND BAMBUÍ GROUPS Sequences of Late Proterozoic age weakly metamorphosed sedimentary rocks, variably consisting of slates, meta-siltstones, phyllites, meta-arenites, quartzite (locally iron rich), and greenstone.
RIACHO DOS MACHADOS GROUP The supracrustal late-Archean to early-Proterozoic rocks of the Riacho dos Machados Group (RMG) are hosted within the Córrego do Cedro Archean gneissic-dome complex. The RMG is highly sheared and exhibits sheared contacts. The protoliths for the RMG are interpreted predominantly as meta-sedimentary (metapelite), meta-volcanic, and undifferentiated meta- volcanosedimentary units that host the MRDM deposit. The meta-sedimentary unit is
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www.rpacan.com dominated by pelitic schists (quartz-biotite) with variable portions of plagioclase, garnet, staurolite, and kyanite. Quartzofeldspathic schists occur in subordinate proportions and are composed essentially of plagioclase, quartz, phlogopite, and microcline, according to Fonseca (1993) this lithology type corresponds to a metamorphosed volcanoclastic rock. The undifferentiated meta-volcanosedimentary unit consists of intercalated metasediments and metavolcanic rocks in the form of titanite-bearing amphibolites and chlorite-talc-tremolite- -garnet-biotite-chlorite and carbonate-serpentine-chlorite-tremolite schists. Fine-grained amphibolites and mafic/ ultramafic schists are also intercalated with the metapelites and shearing has produced schistose rocks predominantly composed of chlorite and muscovite.
REGIONAL STRUCTURAL GEOLOGY The regional geology map patterns of the RMG consist of intercalated bands or beds up to six kilometers long within the gneissic basement and elongated north-south, parallel to strike of the Araçuaí Fold Belt. The mica schists of the RMG, which host the gold mineralization, demonstrate a well-developed planar foliation with mylonitic shear fabrics common throughout the mine area. The predominant shear fabric and foliation strike N20°E and dip 35° to 45° southeast. Generally, the lithological contacts are parallel to these thrust faults with wall rocks consisting of biotite schist, gneisses, and granitic rocks. Lithological units along the shear zones are silicified, sericitized, and sulfidized. Gold mineralization occurs as distinct tabular zones concordant with metamorphic and shear foliation with a present known continuous strike extent of 2,000 m at the mine site. Geologic mapping and a linear trend of anomalous Arsenic-in-soil extends northward from the mine for a further 10 km along structural strike.
Three major thermal-tectonic events are recognized in the area; Archean, Middle Proterozoic (Transamazonic), and Late Proterozoic (Brasiliano). The oldest event is related to migmatization of the gneissic basement rocks (Porteirinha Complex), the second event possibly resulted in the structural deformation of the Riacho dos Machados sequence, and the third event resulted in thin-skinned décollemont tectonics and development of the west- verging Araçuaí fold-thrust belt.
The regional geology is illustrated in Figure 7-1.
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43° 30'0"W 43°0'0"W N Legend: Mineral Rights
RIO PARDO PORTEIRINHA UPPER PROTEROZOIC Bambui Group JANAUBA Argillaceous and Carbonatic Sediments Macaubas Group RIACHO DOS Phyllite, Quartzite, Metadiamictite BIF (ff) MACHADOS Salinas Group 16°0'0"S MINE RIACHO DOS MACHADOS 16°0'0"S Micaschist
MIDDLE PROTEROZOIC
Espinhaco Group Quartzite, Conglomerates, Phyllite LOWER PROTEROZOIC / ARCHEAN Riacho dos Machados Group Metavolcanics & Metasediments
ARCHEAN BASEMENT BARROCÃO FRANCISCO SA Porteirinha Group Gneiss, Granite, Migmatite 16°30'0"S 16°30'0"S INTRUSIVE ROCKS Granite Mafic
Geologic Contact Structural Lineament Thrust Fault BOTUMIRIM Roads Towns
17°0'0"S 17°0'0"S
ITACAMBIRA
MINAS NOVA TERRA BRANCA
Figure 7-1 43°0'0"W Brio Gold Inc.
01020 30 40 Riacho dos Machados Gold Mine Kilometres Minas Gerais State, Brazil Regional Geology
December 2015 Source: Carpathian Gold Inc., 2015.
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LOCAL GEOLOGY
In the local area, the following lithostratigraphic units occur, from oldest to youngest: • Middle Archean basal migmatite gneiss of the Porteirinha complex with associated bodies of basic rock
• Late-Archean metavolcano-sedimentary rocks of the RMG, which host gold mineralization
• Early Proterozoic granitic intrusive of the syn-to-late deformation Pacienca Intrusive suite that may cut part of the RMG
• Late-Proterozoic supracrustal rocks of the Macaúbas Group outcropping west of the mineralized areas consisting of meta-diamictites, quartzites, and phyllitic meta- siltstones
The local geology is shown in Figure 7-2.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 7-5
695000 697500 700000 702500 705000 707500 710000 Legend: 8235000 Mineral Rights
8235000 "NOVO PAE" and Reseve re-evaluation Approved N PAE approved
Exploration License granted for 3 years 8230000 License renewed for aditional 3 years
8230000 Riacho dos Machados Exploration final report submitted (Positive)
Cenozoic 8225000 Pit Outline Lateritic-Detritic Cover
8225000 Neo-proterozoic
Quartzites, metadiamictites, phyllite
8220000 Paleo-proterozoic/Archean Riacho dos Machados Group
8220000 7-6 Metavolcanic Unit- Qz-ep-feldsp-anf schist, qz-chl schist, talc schist, serpentinites Metassediments Unit - qz-feldsp schist, qz-gr-st-bio schist, qz-ser schist, iron formation 8215000 Undivided Unit - Metassediment and metavolcanic rocks 8215000 Intrusive Paciencia Intrusive Suite - Monzonites, diorites, gabro, granites
8210000 Porteirinha Group
Pedra do Urubu - Granite affinity without bands
8210000
Corrego do Cedro - Gneiss and migmatites Figure 7-2 8205000
www.rpacan.com
8205000 Brio Gold Inc.
012345 Riacho dos Machados Gold Mine Kilometres 8200000 Minas Gerais State, Brazil
8200000 Local Geology
695000 697500 700000 702500 705000 707500 710000 December 2015 Source: Carpathian Gold Inc., 2015. www.rpacan.com
PROPERTY GEOLOGY
The lithological units on the property are described in the following sections.
BIOTITE (QUARTZ-OLIGOCLASE-SERICITE) SCHIST WITH STAUROLITE AND GARNET This unit is a medium to coarse-banded unit (bands up to meters thick) consisting of chloritized biotite (25% to 30% including 5% to 15% muscovite), moderately to strongly sericitized oligoclase (15% to 30%), and quartz (35% to 40%). Staurolite and garnet occur in separate bands. The staurolite clasts (up to 1 cm or more in size) are moderately to strongly sericitized and occasionally chloritized. Other Accessory minerals include tourmaline, rutile, apatite, ilmenite, and epidote, with rare zircon and carbonate crystals. Petrographic studies suggest the protolith (original rock) for this unit was a pelitic sediment.
QUARTZ-FELDSPAR SCHIST This unit has a more restricted occurrence than the other units in the central-north portion of the area. It consists of quartz, sericitized, and kaolinized oligoclase (40% to 47%), phlogopite mica (2% to 8%), microcline (3% to 5%), and muscovite (altered from phlogopite). The schist is gray (white when weathered) and has sparse fine-grained porphyro-clastic texture within moderate to well-developed mylonitic foliation. The protolith is considered to have been a felsic volcaniclastic rock.
QUARTZ-MUSCOVITE SCHIST This unit is the principal host for the gold mineralization at MRDM. It was likely formed by hydrothermal activity in a shear zone from potassic alteration of the biotite schist and quartz- feldspar schist units. The rock is white to clear greenish in color (yellowish-white when weathered) and consists predominantly of approximately equal, but variable, amounts of quartz and muscovite. Chlorite is also present in variable amounts, together with small amounts of siderite or calcite and up to 5% sulfide minerals occurring as pyrrhotite, pyrite, arsenopyrite and rare chalcopyrite, sphalerite.
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QUARTZ-SERICITE/MUSCOVITE-BIOTITE/CHLORITE SCHIST This unit is likely a transition zone lithologic unit, formed from the partial hydrothermal alteration of the biotite schist and quartz-feldspar schist units. Contacts with the other units are gradational.
Figure 7-3 illustrates the property geology and Figure 7-4 shows a geological cross section from MRDM.
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www.rpacan.com 698,600 698,800 699,000 699,200 699,400 699,600
Lithology:
8,224,400 Staurolite-Garnet-Biotite Schist Chlorite-Muscovite Schist Quartz-Muscovite Schist Quartz-Feldspar Schist Granite
8,224,200 Amphibolite
0100200 300 400 Metres
8,224,000
8,223,800
8,223,600
8,223,400
8,223,200
8,223,000 Figure 7-3 Legend: Local Grid Brio Gold Inc. Fault Tectonic Contact Structural Symbols Riacho dos Machados Gold Mine Li Minas Gerais State, Brazil Sn Property Geology
December 2015 Source: Carpathian Gold Inc., 2014.
7-9 Ultimate Pit MRDM 2014
7-10
Legend: Quartz-Muscovite Schist
Chlorite-Muscovite Schist
Quartz-Feldspar Schist
Staurolite-Garnet-Biotite Schist Figure 7-4
Brio Gold Inc. www.rpacan.com
050100 150 200 Riacho dos Machados Gold Mine Metres Minas Gerais State, Brazil 10600N Geological Cross Section
December 2015 Source: Carpathian Gold Inc., 2014. www.rpacan.com
MINERALIZATION
The principal host for the gold mineralization is the quartz-muscovite schist of the RMG. The mineralization occurs in a belt of hydrothermally altered rock developed along a district-scale shear zone that extends almost 30 km along a N20°E strike direction and dips 40° to 45° east. The mineralization has a typical amphibolite facies mineral association which is progressively altered to greenschist facies assemblage. The gold mineralization occurs as “stacked” tabular horizons that are mostly concordant with the principal rock foliation (shear zone). These tabular zones typically consist of a main zone which may be sided by a thinner footwall or hanging wall zones, separated by three meters to ten meters of unmineralized rock. Continuity along strike and at depth is good with gold mineralization occurring continuously over a 2,000 m strike length and up to 1,000 m down dip.
Mineralization occurs in the hydrothermal/shear zone and gold grades are closely related to the sulfide content, especially arsenopyrite. Gold occurs as microscopic native-gold grains - typically, finer than 400 mesh (37 microns) - at contacts between recrystallized quartz grains, muscovite grains and as inclusions in arsenopyrite, and less commonly in pyrrhotite, quartz- veinlets, tourmaline, and pyrite.
The following minerals and features, listed from high to low importance, are noted as indicators of gold mineralization. • Arsenopyrite (both anhedral and euhedral needles) • Pyrrhotite • Abundant quartz veinlets (sheared into foliation plane) • Pyrite • Crenulation folding • Tourmaline veins (fine-grained massive intergrown)
The arsenic content of the mineralization is quite high with an average of approximately 3,935 ppm As for samples greater than 1.0 g/t Au. Silver content is very low with the average Ag/Au ratio equal to 0.5 for samples with a gold concentration of greater than 1.0 g/t Au. Antimony, copper, lead, and zinc are mostly non-anomalous.
The gold mineralization is closely related to the structural fabric. The main mineralizing fluid upward flow was possibly along the thrust movement direction with lateral escape along
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www.rpacan.com interconnecting sub-horizontal structural fabric. Brittle deformation at the Riacho dos Machados gold deposit is limited to poorly defined cross-faults which may have anomalous geochemistry but do not host gold mineralization.
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8 DEPOSIT TYPES
The Riacho dos Machados gold deposit is considered to be a classic mesothermal orogenic gold deposit in a sheared and deformed Archean to Proterozoic age greenstone belt sequence. It is comprised of metamorphosed volcanic-sedimentary rock units intruded by slightly younger post-tectonic igneous bodies.
Orogenic gold deposits are formed during compressional to transpressional deformation processes at convergent plate margins in accretionary or collisional orogens. The single most consistent characteristic of these types of deposit is their association with deformed metamorphic terrains of all ages.
The deposit is classified as mesothermal as it likely formed under relatively high temperature at considerable depth in the earth’s crust by hydrothermal and/or metamorphic processes. Deposits of this type may have great vertical extents (down-plunge), commonly two kilometers or more. In many deposits, the gold occurs in fissure veins, veinlets, stockworks, and altered wall rock.
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9 EXPLORATION
The following description of exploration work completed by MRDM is taken largely from Cube (2014).
MRDM commenced exploration in 2008 and continued work until 2012. The objective of exploration work in 2008 to 2009 was to prepare an initial Mineral Resource estimate for the Mine. The work included: • Compilation of historical CVRD data into digital format. This included exploration and drilling data from 423 drill holes completed from 1989 to 1993.
• Resampling CVRD drill core from on-site storage facility. A total of 102 drill holes for 5,144 m were resampled through the mineralized sections.
• Resurveying CVRD hole collars. A total of 46 CVRD drill collars were located and surveyed for comparison with CVRD documents.
• A thorough QA/QC program was implemented for evaluation of precision and accuracy of assay lab sample preparation and analyses.
Three phases of drilling followed the initial Mineral Resource estimate published in May 2009, which are described in more detail in Section 10 of this report.
Further exploration work was focused on evaluation of targets generated by CVRD in close proximity to the Mine and within the surrounding area. This work included: • Acquisition of Ikonos Satellite image coverage with one metre of spatial resolution as well as regional magnetic and radiometric data
• Mapping
• Chip sampling (2,000 samples)
• Soil geochemistry (25 km2)
• Surface trenching (20 trenches 30 m to 40 m long and 2 m to 3 m deep in the South Extension area of the Mine)
• Exploration RC and diamond drilling
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EXPLORATION POTENTIAL
The surface exploration targets drilled to date have returned narrow or discontinuous zones of mineralization. There are no high priority targets defined by drilling to date that present prospective satellite pits to the current operation. There is, however, a clear 14 km trend of mineralization that has not been comprehensively drill tested, and in RPA’s opinion there is still moderate to good potential to discover additional mineralization. The targets located within this trend are shown in Figure 9-1.
Riacho dos Machados remains the principal deposit in the district, offering expansion potential along trend to the north and to the south, however, the degree of mineralization appears to be decreasing. Additional potential continues down dip where the mineralization is a target for potential underground mining. In RPA’s opinion, this potential is strongly limited by the geometry of the open pit.
In addition to the targets that have been drilled, MRDM has defined and explored a number of prospects in the region, with emphasis on exploring the 30 km district-scale shear with a N20°E strike direction and a 40° to 45° east dip. The Passagem Nova target area ten kilometers east of the Mine is the most promising of the exploration areas. Mineralization is characterized by injections of quartz sulfide veinlets and veinlet stockworks associated with kaolinite. The mineralization is in metavolcanic rocks adjacent to a dioritic intrusive body. Country rocks surrounding the intrusive are intensely propylitized and contain tourmaline, hematite, and quartz sulfide veinlets with gold and copper mineralization.
Two gold zones, 50 m long and seven meters wide, have been found with reported grades of 3.0 g/t Au, however, their lateral extent has not been determined with comprehensive drill testing. The geologic setting is quite different from that of the Mine, but the zones represent an interesting target.
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www.rpacan.com 685,000 690,000695,000 700,000 705,000 710,000 N
8,235,000
8,235,000
8,230,000
8,230,000
8,225,000 8,225,000
8,220,000
8,220,000
8,215,000
Legend: RDM Target
Mineral Rights 8,210,000 Exploration Licence Mining Concession Application for Exploration Lic. Au Soil Contours
8,210,000 8,215,000 1° Order 2° Order Planned 3° Order Soil Sample > Mean Geology
Recent Cover 8,205,000 Macaubas Group Mafic Intrusion Granitoid Metasedimentary Unit Basal Mafic-Ultramafic Unit 8,205,000 Granite-Gneiss Basement
685,000 690,000 695,000 700,000 705,000 710,000 Figure 9-1
Brio Gold Inc.
0 2.5 575.10 Riacho dos Machados Gold Mine Kilometres Minas Gerais State, Brazil Exploration Targets
December 2015 Source: Cube Consulting (PTY) Ltd., 2014.
9-3 www.rpacan.com
10 DRILLING
The drilling at the MRDM deposit included diamond drilling (DD) and reverse circulation (RC) drilling and is summarized in Table 10-1.
TABLE 10-1 DRILLING SUMMARY Brio Gold Inc. – Riacho dos Machados Gold Mine
Year Company Drilling Type Holes Meters 1987 DOCEGEO (CVRD) DD 30 2,091 1988 DOCEGEO (CVRD) DD 41 3,367 1989 DOCEGEO (CVRD) DD 23 3,502 1990 DOCEGEO (CVRD) DD 26 4,164 1991 DOCEGEO (CVRD) DD 20 3,677 1992 DOCEGEO (CVRD) DD 1 407 1993 CVRD DD 6 471 RC 179 7,430 1994 CVRD DD 17 2,891 DD_UG 64 2,348 1995 CVRD DD 8 6,020 2008 CARPATHIAN DD 64 11,277 2009 CARPATHIAN DD 29 3,684 RC 59 4,646 RC+DD 65 12,296 2010 CARPATHIAN DD 85 11,648 2012 CARPATHIAN DD 81 5,720 Grand Total 798 85,640
There has been no exploration drilling in the Mine area since 2012.
CVRD DRILLING 1988-1995
Diamond holes with an "F" prefix (surface diamond drilling) were collared with HQ-size core (76 mm diameter) in the saprolite and weathered rock and reduced to NQ-size core (54 mm diameter) after the hole intercepted fresh rock. The shorter holes in this series ranged from 30 m to 80 m deep with the deeper holes from 300 m to 416 m. The "FD" series core holes were drilled in the same manner as the “F” holes except the core was reduced to BQ-size (36 mm diameter) below the 540 m level. The shorter holes in this series ranged from 95 m to 150 m deep with the deeper holes from 700 m to 900 m deep. The "SU" series core holes
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www.rpacan.com were drilled from the underground workings with AQ-size core (33 mm diameter). These holes ranged from 10 m to 90 m.
Most of the RC drill holes were less than 50 m deep to a maximum of 80 m. No details on sample quality, e.g., wet/dry, are available.
Drill holes were surveyed for deviation in dip and azimuth using a Tropari survey instrument, a down-hole single shot instrument with azimuth determined magnetically. The “FD” holes that were drilled below the 540 m level were surveyed using a Reflex-Fotobor DDI, a mechanical-optical instrument.
MRDM has not located physical records of the down-hole surveys, although many old cross sections and longitudinal sections exist to support the current downhole survey data in the database.
MRDM DRILLING
Diamond drill holes were collared with HQ size core (76 mm diameter) in the saprolite and weathered rock and reduced to NQ size core (54 mm diameter) after the drill hole intercepted fresh rock. The average core recovery in each hole ranged from 84% to 99% with a total average of 95%.
RC drilling was utilized as pre-collars for the deeper diamond drill holes in zones where there is no known mineralization. A total of 65 diamond drill holes have RC pre-collars with depths ranging from 43 m to 100 m and average depth of 77 m. RC drilling was recorded as dry.
Diamond drilling was conducted by Servitec Sondagem Geológica using MACH 320 and MACH 1200 drill rigs, produced by Maquesonda of Rio de Janeiro along with a trailer- mounted Atlas Copco diamond drill rig. RC drilling was completed using an Atlas Copco track-mounted drill rig with a face sampling hammer.
Collar surveys were determined by survey with a Topcon Total Station model 102N. In the 2008 (Phase I) drilling program, three holes were surveyed downhole using a REFLEX Maxibor, 35 holes were surveyed with a REFLEX EZ-SHOT instrument, and 26 holes were surveyed with REFLEX Pewee instrument. In the 2009 and 2010 (Phase II and III) drill
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www.rpacan.com program, all drill holes were down-hole surveyed using the REFLEX EZ-SHOT. Peewee and EZ-SHOT measurements are done every 30 m and Maxibor measurements are done every three meters. The use of magnetic instruments for the downhole survey is reliable as the rocks in the area are weakly magnetic.
The documented core recovery in diamond drill core is 95% in both saprolite and fresh rock material. RC drilling was recorded as dry with good recoveries noted.
MRDM GRADE CONTROL DRILLING
The grade control procedures at the mine have incorporated both blast hole (BH) and RC sampling.
BLAST HOLE GRADE CONTROL DRILLING MRDM uses an Atlas Copco flexiROC D65 drill rig for blast hole (BH) drilling. The rig has a 171 mm (6.75 in) hammer. Drilling is by Rotary Air Blast (RAB) and is subject to wall contamination. Mineralization is drilled on a six meter bench and sampled every three meters. Waste is drilled on 12 m benches. The initial three meter sample has minimal contamination, however, the second sample is subject to wall contamination from the sample above.
Holes are drilled vertically and typical blast patterns are on an approximate 5.0 m by 5.0 m pattern (for sampling). Sampling was initially undertaken using the cyclone unit, and then quartered on a plastic mat to four kilograms. In May 2014, this method ceased when it was noted that cyclone recovery was very poor. The mine then reverted to a pie sampler placed at the mouth of the hole, and removed every three meters. The sample is reduced to four kilograms using a riffle splitter.
REVERSE CIRCULATION GRADE CONTROL DRILLING MRDM utilizes an Atlas Copco flexiROC D65 drill rig for RC drilling. The rig currently has a 140 mm (5.5 in) hammer which was converted from a 114 mm (4.5 in) hammer in June 2014.
Sampling is done on two meter intervals utilizing a cone splitter (approximately 10% reduction), which is mounted on the rig. RC grade control has varied from vertical 6.0 m and 12.0 m holes, to 8.0 m by 4.0 m grids (angled holes). The current spacing is 10.0 m by 5.0 m
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(-60º dipping west). RC grade control depths are designed to gain 12 m to 24 m vertical coverage. Poor rig performance in 2014 resulted in the rig being utilized for blast hole patterns, which are sampled on three meter composites.
Grade control drill hole collars were not surveyed prior to November 2014. Downhole surveys were not taken as short holes have no material deviation.
SAMPLING METHOD AND APPROACH
HISTORIC CVRD PROGRAM CVRD drill core consists of both NQ (47.6 mm) and BQ (36.5 mm) core. The core was logged by a geologist, the sample intervals were marked, and the core was sawed lengthwise in half with a core saw. A one-half split of the core for each interval was bagged, labelled, and sent for assay. Actual information on CVRD procedures is not available. All the core is stored securely at the MRDM mine site and is in good condition.
MRDM Core from all MRDM drill programs was split in half lengthwise with a hand-held blade in weathered material and a diamond saw in fresh rock. One half core sample from each one meter sample interval was bagged and sent for sample preparation and assay analysis. The remaining half core was returned to the core box, a plywood cover was nailed on the box, and the box was stored in a covered facility for future reference.
For RC sampling, MRDM geologists supervised all the sampling undertaken. RC samples were taken on one meter intervals in mineralized areas. In apparent barren areas, the samples were collected in one meter increments and then composited to five meter samples, after passing them through a riffle splitter to reduce the sample volume.
Samples were collected at the discharge cyclone using the pre-labelled sample bags for every meter drilled and then passed through a three-tier Jones Riffle Splitter. The cyclone and splitter were cleaned after each sample, between each rod change, and between holes. The samples collected from each hole were arranged sequentially and transported to the sample room at the MRDM camp for preparation.
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In the 2009 Phase II drill program, MRDM excavated 20 trenches and six lines of surface samples to quantify the surface expression of the mineral zone up-dip from drill holes. Trenches were nominally 40 m apart in the South Extension and oriented perpendicular to the strike of mineralization. Trenches were dug two meters to three meters deep or shallower, depending on the depth of the saprolite, and the trenches averaged 30 m to 40 m in length.
Systematic geologic mapping was completed for each trench by logging the lithology and structure of the north wall of each trench and the surface of the channel sampling lines. Trenches and sample locations were surveyed by total station. Samples were approximately three to four kilograms of material from channels measuring one meter by five centimeters, along the line of the north wall of each trench and in the surface channels as well.
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11 SAMPLE PREPARATION, ANALYSES AND SECURITY
SAMPLE PREPARATION AND ANALYSIS
CVRD All CVRD samples were sent either to the DOCEGEO laboratory in Araci, Bahia, or CVRD’s laboratories in Santa Luzia, Minas Gerais state, Brazil. Apparently, no blanks, standards, or duplicates were introduced into the sample/analytical stream prior to sending them to the laboratory. Analytical techniques were apparently changed during the different drilling campaigns. Original assay reports are not available. Assays that were hand entered on geologic logs provide the source of the historic drill assay database.
MRDM MRDM used independent and internationally recognized laboratories for sample preparation and analysis. The primary laboratories used were the following: • 2008 Phase I drilling campaign: ALS Brasil Ltda. (ALS), Vespasiano, Brazil (near Belo Horizonte). This laboratory is ISO 9001:2000 and ISO 17025:2005 accredited. The assay method was 50 g fire assay code A26 with a detection limit of 0.01 ppm Au.
• 2009 Phase II and 2010 Phase III drilling campaigns: SGS-Geosol Laboratorios (SGS), Vespasiano, Brasil (near Belo Horizonte). This laboratory is ISO 9001:2000 and ISO 17025:2005 accredited. The assay methods used was 50 g fire assay code FAA505 with a detection limit of 5 ppb Au.
Sample preparation and analytical procedures were similar for both laboratories. • Drying and weighing of whole sample • Crushing of sample to -2 mm • Sample homogenization and splitting to a one kilogram sub-sample • Pulverization to 95% passing -150 mesh • 50 g fire assay and analysis by atomic absorption spectroscopy (AAS)
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SAMPLE SECURITY Samples are currently collected by a trained sampler under the supervision of a technician or a geologist, with all QA/QC samples inserted within a sequential numbered sequence and recorded.
Prior to trucking to the laboratory, samples are stored in a secure locked room at the mine site. The samples are shipped by truck directly to the laboratory in Belo Horizonte using the transport company TNT Transportes Ltda. After arriving at the laboratory, the samples are checked in with the submission sheet, each sample is weighed, and each sample receives a new code and barcode label. If any problem is identified with the samples, the laboratory calls the site geologists for clarification on the specific discrepancies. The sample rejects are stored in the laboratory and are returned to the site in the next available transport.
RPA COMMENT RPA finds that the sampling methods, chain of custody procedures, and analytical techniques are appropriate and meet acceptable industry standards. In RPA’s opinion, the sample preparation, analysis, and security procedures at MRDM are adequate for use in the estimation of Mineral Resources.
QUALITY ASSURANCE/QUALITY CONTROL
The CVRD drill campaigns did not include the use of current quality assurance/quality control (QA/QC) procedures. The QA/QC program used in the MRDM 2008 to 2010 drilling campaigns included the insertion of Certified Reference Material (CRM), blanks, and duplicates into the sample stream at the frequency summarized in Table 11-1. Approximately 29,000 QA/QC samples were submitted. The MRDM program also included umpire assays.
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TABLE 11-1 QUALITY ASSURANCE/QUALITY CONTROL SAMPLES INSERTION RATE Brio Gold Inc. – Riacho dos Machados Gold Mine
Phase I 2008 Phase II 2009 Phase III 2010 (%) (%) (%) CRM 4.9 4.4 4.6 Pulp Blank 4.6 4.6 4.6 Coarse Blank 4.9 4.4 4.6 Pulp Duplicate 2.3 4.6 4.6 Coarse Duplicate 3.3 4.4 4.3 Total 20.0 22.3 22.5
Note: 1. Phase I 2008, Phase II 2009, and Phase III 2010 are drill campaigns. 2. Numbers may not add due to rounding.
CERTIFIED REFERENCE MATERIAL CRM samples are materials of known values used to check and quantify the analytical accuracy of laboratories.
CRM samples were purchased from Rocklabs as pulps that were assayed in a round robin of 28 laboratories. The average value and its standard deviation (SD) for the round robins are certified. The variation from the standard’s mean value in standard deviations defines the QA/QC variance and is used to determine acceptability of the standard sample assay. Approximately 150 g of sample material is submitted per QA/QC sample.
Twelve CRMs were used, ranging from a low of 0.025 g/t Au to a high of 8.573 g/t Au, and represented the expected range of grades at the Mine. The assay result was considered a failure if it returned a value greater than three SDs from the expected value or two consecutive readings of greater than two SDs from the expected value. In the case of a failure, the entire batch was returned to the assay laboratory for re-analysis.
After reviewing the CRM control charts for the three drill campaigns, RPA is of the opinion that the results display acceptable accuracy.
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CONTROL BLANKS MRDM submitted pulp blanks and coarse blanks (i.e., barren samples) into the sample stream to check for potential laboratory contamination, drift, or tampering. The detection limit was 0.01 g/t Au and a failure was defined as greater than 0.05 g/t Au.
RPA reviewed the control charts of the 1,338 pulp blanks submitted and notes there was no indication of contamination. Similarly there was no evidence of contamination in the 1,148 coarse blanks.
DUPLICATE SAMPLES MRDM submitted pulp and coarse duplicate samples to monitor data variability as a function of sample homogeneity and laboratory precision. The sample pairs are analyzed using relative difference plots and scatter plots.
In 2008, 255 pulps and 354 coarse samples from ALS Brasil Ltda. (ALS) were re-submitted to SGS for analysis. In 2009 and 2010, a total of 1,092 pulps and 549 coarse samples returned from SGS-Geosol Laboratorios (SGS) were re-submitted to SGS for analysis.
In RPA’s opinion, the relative difference and scatter plots demonstrate a reasonable variability between the duplicate analyses.
EXTERNAL CHECK ASSAY PROGRAM The check assay program in 2009 was comprised of 318 pulp samples sent to ALS to check the accuracy of the SGS laboratory. The samples returned acceptable accuracy. There were no external check assays submitted for the 2008 and 2010 drill campaigns.
In RPA’s opinion, the combination of the verification of the CVRD data, as discussed in Section 12, and the results of the MRDM QA/QC programs indicate that data is appropriate for Mineral Resource estimation.
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12 DATA VERIFICATION
VERIFICATION OF CVRD DATA
MRDM re-sampled approximately 25,000 m of mineralized sections in 156 holes drilled by CVRD. The MRDM results compare reasonably well with original assay results, reflecting the same mineralized intervals with adequate similarity in grade and thickness, although on a sample per sample comparison, the differences may be significant. The comparison between the population of historical assays and the population of re-sampling assays shows similar statistical behavior, as demonstrated in Figure 12-1.
VERIFICATION OF MINERAL RESOURCE ESTIMATION DATABASE
RPA conducted a limited number of checks on the resource database, including a search for unique, missing, and overlapping intervals, a total depth comparison, duplicate holes, and a visual search for extreme or deviant survey values. No significant errors were encountered.
RPA reviewed the original assay certificates from ten selected holes in the mineralization. No errors were found when compared to the Mineral Resource database.
RPA agrees with Cube and NCL that the Resource Definition (RESDEF) database is sufficiently reliable and appropriate for use in the estimation of Mineral Resources and Mineral Reserves.
INDEPENDENT SAMPLES
RPA did not collect independent samples, as in their opinion, the historical and current production of gold is sufficient to verify the presence of gold mineralization.
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FIGURE 12-1 COMPARISON OF CVRD VS. CARPATHIAN ASSAYS
Carpathian Resampling vs. CVRD Results
90%
80%
70%
60%
50%
40% Frenquency 30%
20%
10%
0% 0 0.5 1 1.5 2 2.5 3 Au g/t CPN CVRD
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13 MINERAL PROCESSING AND METALLURGICAL TESTING
CURRENT OPERATION
The MRDM processing facilities have been operating since March 2014, however, at that time, construction of a number of components of the processing facilities had not yet been completed. Currently, some operating challenges remain due to incomplete construction, and a lack of revenue has precluded the ability to correct all of the deficiencies. Two main issues negatively impact the operation, which are as follows: 1. The planned power line was not constructed so the plant is operating using power generated by diesel generators. The available power restricts the charge in the ball mill to 22% which makes it impossible to achieve the target grind size (i.e., 80% passing 54 µm) at the design tonnage of the plant (i.e., 7,000 tpd.)
2. Construction of a water reservoir was delayed so there is limited storage capacity for water within the tailings management area. The rainfall experienced in the past year has been lower than average and the water wells do not provide sufficient water to maintain the plant operation at design capacity. Consequently, the plant was operated with a very high slurry density in order to process a higher tonnage. A slurry density greater than approximately 45% solids by weight results in inefficient adsorption of the solubilized gold onto the activated carbon in the CIL circuit. Therefore, the solution tailings losses are greater than planned and the overall recovery of gold is lower than designed.
The impact of these two issues is the focus of the metallurgical discussion.
METALLURGICAL TESTING
The historical metallurgical testing is reported in detail in a previous NI 43-101 Technical Report (Tecnomin Projetos e Consultoria Ltda. 2011). A brief summary of the relevant test work is presented in this Technical Report.
Metallurgical test work was conducted in three phases. CVRD conducted testing on samples of sulfide ore at the time it was operating the mine. CVRD collected six bulk samples from an underground exploration gallery and completed cyanide leach tests at various sizes. The samples ranged in grade from 1.57 g/t Au to 4.78 g/t Au. Column leach tests showed average gold recovery of 67% for a minus 2 mm crush size. In bottle roll tests, the gold extraction averaged 81% at a grind size of 74 µm and the recovery increased with finer grind
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www.rpacan.com sizes. A significant observation was that the sulfide ores responded reasonably well to cyanide leaching.
In 2008, SGS-Geosol Brazil (SGS) conducted test work using three composite samples from Areas III, IV, and V of the open pit. Cyanide leaching kinetics tests were conducted on a particle size P80 of 75 µm. CIL tests were also conducted. The gold extraction ranged from 88.6% to 91.9% after 72 hours of leaching with activated carbon.
In 2010, G&T Metallurgical Services Ltd. (G&T) conducted tests on eleven samples that represented oxide, transition, and fresh (sulfide) ore taken from various areas of the pit at varying gold grades. The testing by G&T included grinding, leaching, cyanide destruction, and sedimentation test work in three series of leaching tests. The first series of tests was conducted using standard cyanide leach conditions. The second series of tests was conducted with lead nitrate added to the leaching tests, and the third series of leaching tests added both lead nitrate and activated carbon. Lead nitrate did not appear to improve the results. The average gold extraction was 91% after 72 hours of leaching at a particle size fraction of 80% passing (P80) of 55 µm to 60 µm.
The test work showed that a gold recovery of 90% can be achieved after 24 hours of leaching at a P80 of 55 µm.
One of the key observations, determined during earlier test work, that has a significant impact on the current operation, is that gold recovery is directly impacted by the particle size of the ore being leached (i.e., grind size). RPA completed an evaluation of the grind size versus recovery using all of the available data, as summarized in Table 13-1.
TABLE 13-1 SIZE RECOVERY DATA Brio Gold Inc. – Riacho dos Machados Gold Mine
Size in Microns Au Recovery (µm) [mesh] (%) 2,000 [10] 67 1,000 [18] 71 74 [200] 81 54 [270] 90
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This data is a mixture of bottle roll test data for the finer particle sizes and column test data for the coarser particle sizes so it is not definitive, however, it is indicative of the recovery that can be expected as the grind size increases.
PRODUCTION DATA
The monthly mill production in tonnes and the recovery for March 2014 through September 2015 are shown in Figure 13-1.
FIGURE 13-1 MILL MONTHLY PRODUCTION
Tonnes Recovery 250,000 94.0%
92.0% 200,000 90.0%
150,000 88.0%
86.0% 100,000
Plant Feed, t 84.0% Gold Recovery 50,000 82.0%
0 80.0% Jul-15 Jul-14 Jan-15 Jun-15 Jun-14 Oct-14 Apr-15 Apr-14 Feb-15 Sep-15 Sep-14 Dec-14 Aug-15 Aug-14 Nov-14 Mar-15 Mar-14 May-15 May-14
The production for 2015 has been severely limited due to a lack of processing water. Due to the erratic operation of the plant, it is difficult to determine whether there are any significant correlations with metallurgical data. As such, RPA has evaluated data for “typical” correlations in a carbon-in-leach (CIL) gold plant. Figure 13-2 compares the data for feed grade and gold recovery. No correlation is observed.
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FIGURE 13-2 GOLD FEED GRADE VS. GOLD RECOVERY
96.0%
94.0%
92.0%
90.0%
88.0% Recovery 86.0%
84.0%
82.0% 0.00 0.50 1.00 1.50 2.00 2.50 3.00 Feed Grade, g/t Au
MRDM metallurgical accounting practices meet typical industry standards. Gold production is estimated on a daily basis using mill samples, production throughput rates, and gold assays. At month end, a circuit inventory is completed to accurately estimate the gold production. The gold production is calculated based on the quantity of gold poured plus the change in inventory from one month to the next. Using the calculated gold production plus the quantity of gold that went to tailings from the daily production estimates and dividing by the tonnes of ore processed, the feed grade is adjusted and compared to the feed grade that was estimated in the daily production estimates. Figure 13-3 compares the estimated feed in total grams to the calculated feed in total grams.
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FIGURE 13-3 ESTIMATED GOLD FEED COMPARED TO ADJUSTED GOLD FEED
300,000 Estimated Feed Adjusted Feed
250,000
200,000
150,000 grams Au 100,000
50,000
0 Jul-14 Jul-15 Jan-15 Jun-14 Jun-15 Oct-14 Apr-14 Apr-15 Sep-14 Feb-15 Sep-15 Dec-14 Aug-14 Aug-15 Nov-14 Mar-14 Mar-15 May-14 May-15
For the time period that was evaluated, the difference between the estimated gold production and the calculated, or actual, gold production only showed a 3% difference. These are excellent results. It indicates that the metallurgical accounting for the Mine is accurate and reliable. RPA notes that in April 2015, the actual production was nearly 1,500 gold ounces less than the estimated production. The difference was over 30%. Typically, an unusually large difference in the metallurgical balance can be an indication of gold theft, however, RPA notes that in May 2014, the variance was positive by over 60%.
Due to the importance of the relationship between particle size and gold recovery, RPA completed a more detailed analysis of the data.
Based on the assumption that the recovery shows a linear trend in the size range that is shown, the recovery drops from approximately 90% at a grind size P80 of 54 µm to approximately 81% if the grind size is P80 of 74 µm. Figure 13-4 compares a plot of the data for 54 µm and 74 µm from Table 13-1 with the calculated data using the equation for the linear correlation.
MRDM reports their target grind size as percent passing 54 µm. In 2015, it ranged from a low of 66% passing 54 µm to 74% passing 54 µm with a weighted average of 70% passing
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54 µm. RPA estimates that this is a P80 of approximately 65 µm, which would result in a gold recovery of approximately 87%, based on the metallurgical data. This observation is shown on the graph as the “current” data point.
FIGURE 13-4 SIZE RECOVERY DATA
92% Metallurgical Data Calculated Au Recovery Target Current
89%
y = -0.0045x + 1.143
86% Gold Recovery
83%
80% 50 55 60 65 70 75 80
Particle Size, µm
Since the Mine is an operating mine and the metallurgical review has relied primarily on operating data, RPA has not evaluated whether the metallurgical samples are representative of the material or not. RPA is of the opinion that data generated from the operation is a valid means of assessing the metallurgical response of the ore.
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14 MINERAL RESOURCE ESTIMATE
RPA notes that the Mineral Resources were prepared by Cube in December 2014, and that they were independently audited. RPA has worked with MRDM and Cube staffs to deplete the resource block models to reflect the Mineral Resource as of September 30, 2015 (Table 14-1). The estimate conforms to Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (CIM, 2014).
TABLE 14-1 SUMMARY OF MINERAL RESOURCE ESTIMATE – SEPTEMBER 30, 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
Tonnage Au Grade Au Ounces Category (000 t) (g/t) (000 oz) Open Pit Resources
Measured 62 0.81 2 Indicated 6,864 0.84 186 Measured + Indicated 6,926 0.84 188 Inferred 3,306 1.12 119
Underground Resources
Indicated 43 1.54 2 Inferred 5,252 1.76 297
Total Resources Total Measured + Indicated 6,969 0.85 190 Total Inferred 8,558 1.51 416
Notes: 1. CIM Definition Standards (2014) were followed for Mineral Resources. 2. Mineral Resources are exclusive of Mineral Reserves. 3. Underground Mineral Resources are reported at a cut-off grade of 1.0 g/t Au. 4. Open Pit Mineral Resources are reported at a cut-off grade of 0.35 g/t Au. 5. Mineral Resources are estimated using a short-term gold price of US$1,500/oz and constrained by a pit shell. 6. Totals may not add due to rounding.
RPA is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political, or other relevant issues that would materially affect the Mineral Resource estimate.
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RPA has reviewed the Mineral Resource estimation methodology and results with MRDM personnel and with reference to audit reports of the MRDM Mineral Resource estimates listed below: • Mineral Resource Estimate Riacho dos Machados Gold Project, Minas Gerais, Brazil, Cube - December 30, 2014
• Technical Report on the Resource Estimate Update and Feasibility Study for Riacho dos Machados Gold Deposit, NCL – November 15, 2011
RESOURCE DATABASE
RPA was supplied with individual drill hole databases at MRDM by Cube. Database formats included Geovia Surpac and Micromine. The database included collar, survey, assay, alteration, density, lithology, and geotechnical tables and are complete as of October 31, 2014.
The drill hole databases were initially compiled into an MS Access drill hole database, and this database was then mapped into Surpac mining software (version 6.3), and is referred to as the RESDEF database. The combined RESDEF and Grade Control (GC) drilling database was compiled by Cube from three separate sets of files provided by MRDM. The database comprised diamond, RC, and GC (RC) drilling results available to October 2014.
RESDEF drilling has been completed on a variable grid ranging from 20 m by 20 m to 50 m by 50 m. RESDEF holes were generally angled at -60° toward 290° in the main deposit area to optimally intersect the gold mineralization. The RESDEF data comprises a mixture of re- sampled historical CVRD holes and more recent MRDM drill holes. Diamond drilling dominates the RESDEF data set, with subordinate GC (RC) sampling. A limited number of trench channel samples collected at surface are also available.
GC drilling has been conducted by MRDM, using RC drilling, along with some BH drilling. The blast hole, grade control (RAB) holes are not included in the RESDEF database. These holes are vertically oriented and spaced on grids of 5.0 m by 7.0 m and 5.0 m by 5.0 m. The results of this closely spaced drilling has shown that the spatial distribution of mineralized material appears to be somewhat more dispersed and less continuous than manifested by the mineralization interpretation in the FS (Technomin 2011).
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The collar surveys were carried out using generally accepted methods and equipment. Some of the downhole surveys were reported to have been suspect, and this has been factored into the resource classification where necessary.
Table 14-2 provides a summary of the drill hole databases.
TABLE 14-2 SUMMARY OF MRDM DRILL HOLE DATABASE – SEPTEMBER 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
No. of Length Company Drill Phase Program Drill Method Holes Drilled (m) CVRD (Vale) Exploration Diamond (DD) 133 23,334 Underground (DD) 23 1,326 Total 156 24,659
MRDM Phase I Exploration Diamond (DD) 60 10,745 Phase I Total 60 10,745 Phase II Exploration Diamond (DD) 32 4,044 RC with DD Tail 64 12,253 Reverse Circulation (RC) 60 4,689 Trench/Channel (TR) 26 827 Phase II Total 182 21,813 Phase III Exploration Diamond (DD) 90 12,866 Trench/Channel (TR) 14 306 Phase III Total 104 13,172 Grade Control Blast Hole (BH) 7,072 35,484 Grade Control RC (GCRC) 18,723 142,060 Grade Control Total 25,795 177,544 Total 26,141 223,273
Grand Total 26,297 247,933
Core recovery was measured for most of the drill holes, and is observed to have been generally within acceptable limits. Measured values ranged from a high of 100% to a low of 84%. The average recovery is observed to be greater than 90% for most domains and equal to 95% for the entire data set. The poorest recovery values are observed to have been from near-surface oxidized material, most of which has been removed by prior mining activity.
Cube reported completing a series of basic data validation checks and any issues identified were documented and emailed to site for final resolution before proceeding with block model estimations.
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Based on the above and the verification steps undertaken by RPA (see Section 12), RPA is of the opinion that the database is sufficiently reliable and appropriate for use in the estimation of Mineral Resources.
GEOLOGICAL INTERPRETATION AND MINERALIZATION WIREFRAMES
To prepare the Mineral Resource estimate, Cube used a block model method constrained by 3D wireframes of the principal geological and structural domains. The pre-existing mineralized domains, as modelled by NCL in the FS were consolidated by Cube into a single domain based on a 0.1 ppm Au cut-off grade. This domain (RESDEF Domain 1000) broadly encompasses the full extent of the controlling mineralized structures and associated alteration (Figure 14-1). A bounding wireframe volume solid was created around the GC drill holes and was used to flag the GC and BH data (GC Domain 2000). Three dimensional wireframes were “snapped” to drill holes where possible.
RPA inspected these wireframe models and notes that they appear to honor the logged lithology, and represent plausible interpretations of the geology that is consistent with field observations. The boundaries of the deposit appear to be constrained to a reasonable distance from drilling.
Surfaces were also created to represent the limit of the observed oxidation zone and fresh rock boundaries (Figure 14-2).
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Surface Domain 2000
14-5 Drill Hole Trace
Domain 1000
Figure 14-1
Brio Gold Inc. www.rpacan.com
Riacho dos Machados Gold Mine Minas Gerais State, Brazil 0100200 300 400 Mineralized Domains Metres
December 2015 NW SE
Surface
Oxidized Zone (3 & 4) Domain 2000
Transitional Zone (2)
Fresh Rock Zone (1) Figure 14-2
Brio Gold Inc. Domain 1000 Riacho dos Machados Gold Mine Minas Gerais State, Brazil 14-6 Oxidized and Fresh Rock Boundaries N NW
Block Model Depth Extent SE
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0100200 300 400 Metres
December 2015 www.rpacan.com
EXPLORATORY DATA ANALYSIS
RPA reviewed the statistical comparison of the RESDEF data with the GC data within the overlap between domains 1000 and 2000. The basic statistics are presented in Table 14-3.
TABLE 14-3 RESDEF VERSUS GC STATISTICS Brio Gold Inc. – Riacho dos Machados Gold Mine
RESDEF 3 m GC 3 m Campaign Composites Composites Number 601 29,840 Minimum 0.008 0.005 Maximum 7.83 121.44 Mean 0.53 0.63 Std Deviation 0.83 1.62 Variance 0.69 2.63 Coefficient of Variation 1.56 2.58
The statistics show that the GC gold grades are approximately 18% higher than the RESDEF grades. It appears that the GC drilling has better represented the upper tail (values above approximately 1 ppm Au) of the gold grade distribution than the RESDEF drilling.
RPA is of the opinion that rather than separate processes of GC and BH drilling, an evaluation should be undertaken of a single GC/BH drilling and sampling process, based on the technical and economic merits of making this change.
Reconciliation of sampling and mine production has shown nearly identical gold grades in the oxidized zones to the grades in the fresh sulfide zones. MRDM’s studies have shown that the Transition – Fresh interface is not a well-defined surface but rather an intermixing of Transitional and Fresh material. Therefore, Cube and MRDM decided not to separate any of the estimation domains on the basis of oxidation or weathering, and RPA finds this acceptable.
Gold assays located inside the wireframe models were tagged with domain identifiers and exported for statistical analysis. A summary is provided in Table 14-4.
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TABLE 14-4 DESCRIPTIVE STATISTICS OF GOLD ASSAYS Brio Gold Inc. – Riacho dos Machados Gold Mine
MRDM Description Exploration GCRC Count 17,040 36,741 Mean 0.73 0.62 Median 0.22 0.25 Standard Deviation 1.83 2.14 Variance 3.36 4.59 Kurtosis 154.08 3,549.76 Skewness 9.52 43.46 Range 56.90 221.55 Minimum 0.01 0.01 Maximum 56.90 221.55 Coefficient of Variation 2.53 3.45
GRADE CAPPING AND COMPOSITING
TREATMENT OF HIGH GRADE SAMPLES Where the assay distribution is skewed positively or approaches log normal, erratic high grade assay values can have a disproportionate effect on the average grade of a deposit. One method of treating these outliers in order to reduce their influence on the average grade is to cut or cap them at a specific grade level. In the absence of production data to calibrate the cutting level, inspection of the assay distribution can be used to estimate a “first pass” cutting level. A common threshold is one where 99% of the samples have a grade less than the capping value.
For the 2011 NI 43-101 Technical Report, NCL capped 15 raw assays (0.002%), which reduced the gold content of the open pit resource estimate by 1%. For NCL’s 2011 report on the MRDM deposit, a value of 30 g/t Au was chosen for the Main vein and 20 g/t Au was used for the hanging wall vein, based on the inflection of the curve at this grade. A total of 15 samples were capped.
The influence of outliers was assessed for each domain and involved: • Reviewing the grade histograms and the point at which the distribution tail begins to break up
• Reviewing the global influence after applying various top-cuts
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• Reviewing the spatial location of outliers
The highest grade samples in the distribution are normally outliers, which are deemed unrepresentative of the distribution under investigation. The identification and treatment of outliers is problematic in any statistical or geostatistical analysis. This is due to the influence on the modelled sample distribution and resultant estimate, which often has an influence on the overall mean grade of the blocks and biases the results. A number of strategies have evolved to address this source of bias, and include application of top-cuts, search distance constraints, and non-linear kriging techniques. Cube capped grades using composited assay values.
Cube created a single mineralization wireframe, which was assigned a domain code of 1000. The GC volume was defined by creating wireframes encompassing the three main areas of GC drill data. The boundaries of this wireframe were kept close to the limits of the GC data, primarily because the veracity of the GC drill data is less certain than that for the RESDEF data. The three GC areas were assigned domain codes 2001, 2002, and 2003 (i.e., collectively domain 2000).
The top-cut strategy was assessed by Cube for each estimation domain assigned in the wireframe development of the block model and the results are outlined in Table 14-5. Indicator methodologies were used to account for outliers or skewed distributions through the coding of assay values above (i.e., “1”) and below (i.e., “0”) the nominal threshold values. Thus, the top-cutting strategy described in this section is applicable only to the gold grade variogram modeling process.
TABLE 14-5 CUBE SUMMARY STATISTICS WITH AND WITHOUT TOP CUTS BY ESTIMATION DOMAIN Brio Gold Inc. – Riacho dos Machados Gold Mine
Domain and Campaign Variable Au (ppm) No. of Comps Cut Mean - Uncut 0.73 Mean - Cut to 20 ppm 0.72 1000 - RESDEF 3 Coeff Var - Uncut 1.89 Coeff Var - Cut to 20 ppm 1.86 Mean - Uncut 0.53 Mean - Cut to 25 ppm 0.52 2000 - GC 18 Coeff Var - Uncut 2.8 Coeff Var - Cut to 25 ppm 2.24
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RPA considers that the grade capping procedure used is appropriate for the style and nature of the gold mineralization at MRDM, however, prefers that capping should be applied to raw assays in the future.
TREATMENT OF BELOW DETECTION SAMPLES The Access database was changed during the validation and verification work by Cube as follows: • Negative or zero value gold grades from the MRDM data that are known to be below detection were assigned a value of 0.005 ppm Au. Missing samples and interval gaps within the interpreted mineralized wireframe were given a null value to indicate that the value would be ignored in the estimation work. RPA prefers that missing samples and intervals gaps be assigned a zero value, however, the number of blank intervals within Domain 1000 wireframe is less than 0.5%, which has little to no impact on the overall resource estimate.
• The conversion of negative numbers to an assigned background value allows compositing of more representative data during the exploratory data analysis. Having an assigned null value for missing or lost samples means that they can be ignored by the compositing routine.
COMPOSITES A downhole composite length of two meters was used for the RESDEF data in the main mineralization domain and three meter bench composites were generated for the GC drill data in the GC volume, which in RPA’s opinion is reasonable. Most DD holes were sampled at one meter intervals.
BULK DENSITY
A total of 109 bulk density determinations were made on core specimens using a water immersion method after having been dried and weighed in air. Some samples, in which porosity and permeability were judged as significantly high, were coated with paraffin before analysis.
Bulk density was determined for each of the major host lithologies (six domains in all) for both oxide and sulfide zones. Average density by zone range from 2.44 g/cm3 to 2.64 g/cm3 with an overall average of 2.60 g/cm3, which in RPA’s opinion is reasonable for the rock types observed at site (Table 14-6).
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TABLE 14-6 BULK DENSITY VALUES BY ROCK TYPE Brio Gold Inc. – Riacho dos Machados Gold Mine
Rock Type Density (g/cm3) Fresh rock 2.76 Transitional 2.40 Oxide in domain 1000 2.22 Oxide not in domain 1000 2.25 Dump material (CVRD heap) 1.60
VARIOGRAPHY ANALYSIS
Geostatistical analyses were carried out using Isatis (Version 2013.3) and Surpac (Version 6.3) 3D mining software. Nugget effects were derived from downhole correlograms. The mineralized structure (fault zone) has a N20°E strike and dips 40° to 45° east. The optimum range of mineral continuity and variogram results mirror the structural plane. Due to erratic variogram results, Cube transformed the raw gold grades into Gaussian space; the Gaussian variograms were then modelled and back transformed to real space for use in the estimation routines.
RPA visually inspected the correlograms and notes that they appear to have been generated and interpreted correctly and are reasonable. The observed distribution of grades within the model are reasonable, which suggests that the models were configured appropriately.
In RPA’s opinion, the search ranges are reasonable for the style of mineralization and are generally consistent with the correlogram results. The major and semi-major search directions are typically oriented N20°E and dip 40° to 45° east, which is the direction in which the mineralization is most continuous.
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FIGURE 14-3 VARIOGRAM MODELS (Taken From APPENDIX A - PAGE 111 – CUBE RESOURCE REPORT)
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BLOCK MODEL CONSTRUCTION
A single block model encompassing the mineralized zones was constructed using a 4 m by 8 m by 3 m (X,Y,Z+3) Selective Mining Unit (SMU) block size, with the X and Y axes rotated to 19.0652° east of true north (the primary strike of the orebody).
BLOCK MODEL VALIDATION The results of Cube’s validation indicated that the grade interpolations were reasonable and unbiased. The grade interpolations were validated using visual inspection and Swath Plots. In RPA’s opinion, the block model validation procedures employed by Cube were consistent with industry best practice.
RPA carried out the following checks on the MRDM block model: • Checked collar locations for zero or extreme values.
• Checked assays in database for missing intervals, long intervals, extreme high values, blank or zero values, and reasonable minimum/maximum values.
• Ran validity report to check for out-of-range values, missing intervals, overlapping intervals, etc.
• Visually checked that the zone wireframes and pit shells were reasonable.
• Validated the wireframes for closure, consistent topology and crossing triangles. Any issues found were corrected to ensure accurate volume and grade calculations.
• Checked for overlapping wireframes.
• Checked block coding for resource, reserve, mined, and empty classification.
• Visually checked block classification coding to resource wireframes.
• Checked block models for bulk density. Average density values assigned to most models used in the resource estimation seem reasonable based on reported values.
• Checked resource reporting to see if block models had been properly depleted and worked with MRDM staff to make corrections.
• Compared basic statistics of blocks and composites, i.e., max, min, mean, median, standard deviation, coefficient of variation (CV), histograms, probability, and cumulative frequency plots. Gold grades compared well. Basic statistics of the block model are shown in Table 14-7.
• Visually examined the values in the block models and compared them to drill holes within wireframes (Figure 14-4). Visual comparison on vertical sections found good
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overall correlation between the block grade estimates and supporting composite grades.
TABLE 14-7 COMPARISON OF BLOCK AND COMPOSITE GOLD GRADES Brio Gold Inc. – Riacho dos Machados Gold Mine
MRDM Description Domain 1000 BLKMDL Composite Decluster Count 297,799 8,687 8,687 Mean 0.76 0.72 0.73 Median 0.48 0.28 0.30 Standard Deviation 0.80 1.40 1.39 Variance 0.64 1.95 1.92 Kurtosis 14.78 71.20 69.33 Skewness 3.20 6.55 0.03 Range 11.18 28.95 28.95 Minimum 0.05 0.00 0.00 Maximum 11.24 28.95 28.95 Coefficient of Variation 1.06 1.94 1.90
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www.rpacan.com Figure 14-4 Brio Gold Inc. Composite Values MRDM Domain 1000 Minas Gerais State, Brazil NW-SE Cross Section with NW-SE Riacho dos Machados Gold Mine Original Hole Locations N
SE 0.500 - 0.800 0.800 - 1.200 > 1.200 Block: Au (ppm) 0.350 - 0.500 0.200 - 0.350 < 0.200
NW NW SE December 2015
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GRADE INTERPOLATION
Multiple Indicator Kriging (MIK) was used to estimate panels with a dimension of 8 m by 24 m by 6 m (X-8,Y,Z) using only RESDEF data. A change of support correction was subsequently applied to the panel estimates to estimate recoverable resources at the SMU block size. A localizing process known as Localized Indicator Kriging (LIK) was applied to the MIK panels in order to create a block model that directly represents the gold grades of the SMUs.
Ordinary Kriging (OK) was used to estimate the GC data within the GC volume. The GC gold grade estimates were adopted in preference to the LIK estimates in the final model.
CLASSIFICATION
Definitions for resource categories used in this report are consistent with those defined by CIM (2014) and adopted by NI 43-101. In the CIM classification, a Mineral Resource is defined as “a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction”. Mineral Resources are classified into Measured, Indicated, and Inferred categories. A Mineral Reserve is defined as the “economically mineable part of a Measured and/or Indicated Mineral Resource” demonstrated by studies at Pre-Feasibility or Feasibility level as appropriate. Mineral Reserves are classified into Proven and Probable categories.
In RPA’s opinion, the Mineral Resources are classified according to the nomenclature specified in CIM (2014). A range of criteria were used in determining an appropriate Mineral Resource classification including: • Representativeness, quality, and positional accuracy of samples • Geological continuity and veracity of the interpreted mineralized model • Geostatistical spatial continuity and estimation quality • Scale of mining and associated level of risk
Kriging slope of regression can be used as a guide for resource classification, as it provides an objective method of comparing the relative quality of block estimates, whereby high quality block estimates will approach a value of one. It was determined that areas where the
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In RPA’s opinion, the classification appears to be reasonable, and appropriate for the style of mineralization and deposit type. It is likely that definition drilling could upgrade a portion of the Inferred Resources to Measured and Indicated Resources.
CUT-OFF GRADE AND PRELIMINARY OPEN PIT SHELL
CIM (2014) specifies that to satisfy the definition of Mineral Resources, there must be “reasonable prospects for eventual economic extraction”. This is most commonly taken to mean that a cut-off grade should be applied to the resource model, which reflects some generally acceptable assumptions concerning metal prices, metallurgical recoveries, costs, and other operational constraints. RPA prepared a preliminary open pit shell to constrain the block model for resource reporting purposes. The preliminary pit shell was generated using Whittle software.
RPA notes that the price assumptions for gold are different for Mineral Resource and Mineral Reserve pit shells. The Mineral Resource pit shell uses US$1,500/oz as the gold price for Whittle pit optimization and a 0.35 g/t Au cut-off grade. The designed Mineral Reserve pit uses a US$1,150/oz gold price and cut-off grades of 0.3 g/t Au (Oxide) and 0.4 g/t Au (Transitional and Fresh Rock), which are dependent on material type and operating costs. The Mineral Resource pit optimization inputs are shown in Table 14-8.
Metal prices used for Mineral Reserves are based on consensus, long term forecasts from banks, financial institutions, and other sources. For Mineral Resources, metal prices used are slightly higher than those for Mineral Reserves. The foreign exchange rate used in this analysis has changed significantly to the present exchange rate, and it represents an economic benefit to the Project. It is anticipated that this exchange rate will continue into the future, at least through the next year.
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TABLE 14-8 PIT SHELL OPTIMIZATION FACTORS AS OF JULY 11, 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
Factor Value Gold price US$1,500/oz Royalty 2% Ore and Waste Mining Costs (avg. with US$1.41/t mined incremental mining costs applied) Process and G&A US$14.05/t mined Treatment and Refining US$10.00/oz Au produced Gold recovery 90% Slope angle (varies by sectors) 29° - 51°
Note: 1. US$1.00 =R$2.35 exchange rate.
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15 MINERAL RESERVE ESTIMATE
SUMMARY
A summary of Mineral Reserves is shown in Table 15-1. RPA notes that the Mineral Reserves were prepared by Cube in December 2014, and have been independently audited and depleted by RPA to reflect the Mineral Reserves as of September 30, 2015.
TABLE 15-1 MINERAL RESERVES – SEPTEMBER 30, 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
Tonnage Au Grade Au Ounces Category (000 t) (g/t) (000 oz) Proven
Open Pit 15 0.90 0.4 Stockpile 1,234 0.73 29 Total 1,249 0.74 30
Probable
Open Pit 17,619 1.20 682 Stockpile 0 0 Total 17,619 1.20 682
Proven + Probable
Open Pit 17,634 1.20 682 Stockpile 1,234 0.73 29 MRDM Total 18,869 1.17 711
Notes: 1. CIM Definition Standards (2014) were followed for Mineral Resources. 2. Mineral Reserves were generated by Cube and adjusted by RPA to reflect the September 30, 2015 mining surface. 3. Mineral Reserves are quoted at a cut-off grades of 0.3 g/t Au for oxide, 0.4 g/t Au for transition, and 0.4 g/t for fresh rock. 4. Mineral Reserves are reported using a long-term gold price of US$1,250/oz. 5. Process recovery of 90%. 6. The numbers may not add due to rounding.
RPA is not aware of any known mining, metallurgical, infrastructure, permitting, or other relevant factors that could materially affect the Mineral Reserve estimate. Approximately 98% of the Mineral Reserves remaining in the open pit are either fresh rock (93.5%) or transition material (5.3%). Very little oxide ore remains in the Mineral Reserves.
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DENSITY, DILUTION, AND SELECTIVE MINING UNIT
The average material bulk densities are listed below: • Oxide: 2.25 g/cm3 • Transition: 2.40 g/cm3 • Fresh Rock: 2.76 g/cm3
RPA considers that the compositing and modelling processes used incorporate adequate dilution. The Mine is a moderately sized operation, in which most of the ore grade material is shipped to a crusher for crushing, or to a low grade stockpile for future processing at the end of the Mine’s life.
The resource block model has been estimated as a “recoverable resource”, which is advantageous as dilution and ore loss are largely accounted for in the recoverable resource methodology. The MIK resource estimation process attempts to estimate the recoverable tonnage and grade based on the dimensions of a SMU, which is regarded as representative of what is practically achievable during actual mining. The SMU is the smallest volume that can be classified as ore or waste. If the average grade of the SMU is greater than the cut-off grade, the SMU is classified as ore.
For the recoverable resource estimate, the large estimated panels (8 m by 24 m by 6 m) (X,Y-24,Z) can be considered “diluted”, as they are estimated using all data within a broad mineralized envelope defined by an approximate 0.1 g/t Au cut-off grade.
The estimation process incorporates a change of support to the large diluted panels in order to predict the likely grade-tonnage distribution at SMU selectivity (4 m by 8 m by 3 m) (X,Y,Z). An advantage of the MIK method is that mining dilution is implicit within the predicted tonnage and grade distribution of the SMUs as the distribution of grades are “conditioned” by the diluted panel grades. The SMU dimensions are considered to be large enough to incorporate sufficient dilution for the geometry of the MRDM mineralization. The implicit inclusion of dilution in the SMU will also result in some ore loss from the resource where the grade of the SMU drops below the economic cut-off grade. Additionally, a further “information effect” modification was made to the change of support to allow for imperfect grade estimation and mining selection as a result of an assumed grade control spacing of (5 m by 10 m by 3 m).
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As a result of the adopted recoverable resource estimation methodology, no further modifying factors for dilution or ore loss were applied to the resource block mode for use in mine planning and reporting.
CUT-OFF GRADE
Metal prices used for Mineral Reserves are based on consensus and long term forecasts from banks, financial institutions, and other sources. For Mineral Resources, metal prices used are slightly higher than those for Mineral Reserves. There are three major ore types as part of the MRDM Mineral Reserves, which are listed below: • Fresh (unoxidized), reported at a cut-off grade of 0.4 g/t gold • Transition, reported at a cut-off grade of 0.4 g/t gold • Oxide, reported at a cut-off grade of 0.3 g/t gold
The majority of the remaining ore is composed of either Fresh (unoxidized) or Transition material (a combination of fresh rock and oxidized rock), with only approximately 158 kt of oxide ore remaining.
PIT OPTIMIZATION
Table 15-2 is a summary of the Lerchs Grossmann pit analysis, which is further used for pit designs. The Base Case gold price used for design was US$1,100/oz, however, a base price of US$1,250/oz was used to establish the final pit and a cut-off grade of 0.4 g/t Au. Note that there is a 42,000 oz difference between the US$1,100/oz gold price pit and the US$1,250/oz gold price pit in the Whittle pit optimization results. Table 15-2 shows the impact of the gold price on the reserve Whittle shells. Table 15-3 lists the base inputs used for the pit optimization performed, which are acceptable to RPA.
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TABLE 15-2 PIT OPTIMIZATION RESULTS (PRE-FINAL DESIGN) Brio Gold Inc. – Riacho dos Machados Gold Mine
Tonnes Au Price Processed Gold Grade Gold Waste Total Strip ($/oz) (000 t) (g/t Au) (000 oz) (000 t) (000 t) Ratio 300 696 1.61 36.1 287 983 0.4 350 1,161 1.5087 56.3 612.92 1,774 0.5 400 2,013 1.3698 88.7 1,499 3,513 0.7 450 2,990 1.3184 126.8 3,036 6,026 1.0 500 4,612 1.3258 196.6 7,907 12,519 1.7 550 5,267 1.3005 220.2 9,391 14,658 1.8 600 6,304 1.2859 260.6 13,429 19,733 2.1 650 7,356 1.2703 300.4 17,722 25,078 2.4 700 8,016 1.2549 323.4 20,271 28,287 2.5 750 8,432 1.2485 338.4 22,340 30,772 2.6 800 10,809 1.2154 422.4 35,563 46,372 3.3 850 11,221 1.2072 435.5 37,640 48,861 3.4 900 14,524 1.222 570.6 68,330 82,855 4.7 950 14,935 1.2155 583.6 70,747 85,682 4.7 1,000 15,996 1.202 618.2 77,719 93,715 4.9 1,050 18,107 1.1881 691.7 96,036 114,144 5.3 1,100 21,024 1.1853 801.2 127,991 149,015 6.1 1,150 21,529 1.1831 818.9 133,610 155,139 6.2 1,200 21,958 1.1809 833.7 138,115 160,073 6.3 1,250 22,559 1.1763 853.2 144,226 166,786 6.4 1,300 22,857 1.1732 862.1 146,941 169,798 6.4 1,350 23,333 1.1671 875.5 151,181 174,513 6.5 1,400 23,624 1.1651 884.9 154,891 178,515 6.6 1,450 23,894 1.1607 891.7 157,347 181,241 6.6 1,500 24,095 1.1583 897.3 159,319 183,415 6.6 1,550 24,289 1.1556 902.4 161,634 185,922 6.7 1,600 24,372 1.1548 904.9 162,770 187,141 6.7 1,650 24,419 1.154 906.0 163,265 187,684 6.7 1,700 24,480 1.1532 907.6 164,216 188,696 6.7 1,750 24,563 1.1519 909.7 165,294 189,857 6.7 1,800 24,885 1.1519 921.6 166,749 191,633 6.7 1,850 24,997 1.1505 924.6 168,239 193,236 6.7 1,900 25,078 1.1498 927.1 169,550 194,628 6.8 1,950 25,084 1.1497 927.2 169,616 194,700 6.8 2,000 25,104 1.1493 927.6 169,862 194,966 6.8
Notes: 1. Base Case Whittle shell used for design was the US$1,100 case, but the ultimate pit was set at a US$1,250 gold price. 2. Pit optimization used Measured and Indicated Resources, only. 3. After Cube (December 2014), confirmed by RPA.
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As noted in Table 15-2, the pit optimization results (Pre-Final Design) show that at a US$1,800/oz gold price, there would be 24,885,000 tonnes with a grade of 1.152 g/t Au and a waste burden of 166,749,000 tonnes. Using a US$1,300/oz gold price, there would be 22,857,000 tonnes at a grade of 1.173 g/t Au and a waste burden of 146,941,000 tonnes. The US$1,300/oz gold price eliminates 20 Mt of waste stripping and decreases gold contained ounces by 60,000.
TABLE 15-3 PIT OPTIMIZATION COST AND RECOVERY INPUTS Brio Gold Inc. – Riacho dos Machados Gold Mine
Pre 2016 Pre 2016 Post 2016 Post 2016 Cost/Input Cost/Input Cost/Input Cost/Input Description Units Oxide Fresh Oxide Fresh Mining US$/t 1.45 1.97 1.04 1.41 Mining Increment US$/t US$0.013/t starting at bench 882 Process US$/t 8.22 12.60 6.33 9.58 G&A US$/t 5.09 5.09 4.47 4.47 Recovery % 90 90 90 90 Refining Cost US$/oz 10.00 10.00 10.00 10.00 Royalties % 2 2 2 2
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16 MINING METHODS
Conventional open pit mining methods are employed at the MRDM open pit including drilling, blasting, loading, and hauling. MRDM began production in March 2014 and, to September 2015 inclusive, has mined approximately 3.4 million ore tonnes grading approximately 1.20 g/t Au. Current pit bottom elevations for the north and south ends of the open pit were approximately 789 m and 813 m, respectively, as of October 2015. Surface rights are sufficient for mine waste stockpiles, tailings facility, and processing plants sites.
The mining schedule is composed of four crews, which alternate over a two-week period for eight-hour shifts. Operations are 24 hours per day, 365 days per year scheduled time, which is common in Brazil and is considered reasonable.
Pit dewatering was carried out in 2015, primarily from in-pit sumps and perimeter wells, and will also be required in the upcoming production year (2016).
Excavator and truck availabilities are estimated to be 85% and 85% to 90%, respectively, which are reasonable. Equipment life hours used are slightly optimistic, however, RPA is of the opinion that they are acceptable. For a seven year mine life, major rebuilds and/or replacements capital will be required for some of the mine equipment.
MRDM currently has a separate grade control drill that drills 40 m to 60 m deep holes spaced at 4 m by 8 m. These grade control holes are not backfilled after drilling and sampling are complete, which reduces blasting efficiency.
Dinex Engenharia Mineral ltda (Dinex), which replaced Afonso in December 2014 as the mine contractor, is employed by MRDM to assist with mining of the open pit. Dinex’s primary task is to mine waste, while MRDM mines the ore. The Dinex contract period is for three years, from 2015 to 2017. RPA recommends that MRDM evaluate using MRDM’s larger trucks for mining waste and that MRDM employ Dinex for mining ore.
Haul distances to the waste dumps and run-of-mine (ROM) ore stockpile crusher area are moderate (approximately 1.5 km to 2.0 km in the first two years). MRDM consultants and
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MRDM personnel are evaluating alternate waste dump locations. If acceptable alternative dump locations are identified, the mining permit will require amendment.
RPA is of the opinion that blasting powder factors for the mine are reasonable for the type of material mined. To date, most of the material mined was softer oxides. The majority of the material mined in the LOM plan will be fresh rock.
The strip ratio is relatively high at approximately 6.9:1 (waste:ore). The mined tonnage is proposed to be at a constant rate throughout the LOM. The Mine does not require any pre- stripping.
Total daily waste material movement is estimated to be approximately 55,000 tpd and direct ore haulage is estimated to be 7,000 tpd (2.55 Mtpa).
Weather and altitude should not impact productivities, however, severe rainfall can occur, and drought can impact the water supply, as MRDM primarily relies on make-up water from the tailings dam.
The current mine site layout is shown in Figure 16-1.
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North Pit Process Plant
South Pit
Tailings Dam
16-3
Ore Stockpiles
Waste Dump Mine Gate Figure 16-1
Brio Gold Inc. www.rpacan.com 0 1000 2000 Feet
0 500 Metres Riacho dos Machados Gold Mine Minas Gerais State, Brazil Site Layout
December 2015 Image Source: Google earth, 2014. www.rpacan.com
MINE DESIGN
The bench height is 12 m, however, mining occurs on six meter lifts (flitches) in waste, and three meter lifts in ore. Road widths are 21 m. Berm widths normally are six meters in the oxide and transition ore, eight meters in the hanging wall fresh rock, and 12 m in the footwall fresh rock.
The mine planning is appropriate for this stage of production. One of the primary reasons for this level of engineering is the need to have accurate information for production, budgeting, and permits. Current economic models have been based on Lerchs-Grossmann pits using a varied number of slopes. Bench-by-bench, monthly production schedules have been developed to identify ore types, waste removal, and stripping requirements. A lower stripping ratio will be required in the latter years.
Waste rock facility (waste dump) designs have been completed to a moderate level of detail. The mining engineers are evaluating the cost of locating additional waste dumps closer to the open pit, which should reduce the overall unit mining cost. RPA notes that from the Carpathian reports, the stockpiled low grade material amounts to 1.23 million tonnes at 0.73 g/t Au that equates to approximately 29,000 ounces as of September 30, 2015. Carpathian also has mineralized waste stockpiles, which contain material that grades from 0.2 g/t to 0.5 g/t. Mineralized waste of 0.2 g/t to 0.5 g/t Au is currently stockpiled and not included in the Life of Mine (LOM), however, if the price of Au rises then this LG material may become economic and processed accordingly.
The current pit is approximately 1,620 m long and 620 m wide, with elevations that range from a high of 906 MASL to a low of 870 MASL. Final pit exits for the south and north ramps are approximately 882 MASL and 870 MASL, respectively. The crusher dump pocket is less than 500 m horizontal distance from the pit exit. MRDM has left adequate buffers around the open pit for possible future expansions, e.g., if the price of gold increases. Some condemnation holes have been drilled in the infrastructure and waste dump areas. It should be noted that the offices, core storage, and cafeteria will have to be moved in 2016, and it appears that no cost has been included for their relocation in the capital cost projections. There is some flexibility (approximately four to six months), but given the short mine life of seven years and the size of the open pit, the offices should be moved sooner.
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Figure 16-2 shows the ultimate pit with the extent of the current mining limit. MRDM received its operations license (LO) permit on June 9, 2015, which allows MRDM to expand the open pit to the final design limits. The process of obtaining all of the subsequent permits for the open pit, waste dumps, and tailings dam is a work-in-progress for MRDM. Figure 16-3 shows a plan map of the open pit excavation and waste dump, September 30, 2015 topography, and the relative locations of the process plant and other infrastructure.
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N
NOTE: Figure 162 - Magenta coloured lines for the pit are 12 metres contour intervals. Brio Gold Inc.
0100200 300 400 500 Riacho dos Machados Gold Mine Metres Minas Gerais State, Brazil Ultimate Pit with Environment Mining Limit December 2015 Source: Cube Consulting (PTY) Ltd., 2014.
1-66 698000 698500 699000 699500 700000 700500 701000 701500 8224500
8224500 N North Pit
Permitted Open Pit Boundary 8224000 Structures: 1 Central Office 8224000 12 2 Outpatient 6 Process Area Boundary 5 3 Environment 11 4 9 4 Shed Geology 2 1 3 5 Cafeteria 8223500 6 Planning / Geology 16-7 Waste Dump Boundary 8223500 9 Rank Supply 11 Supplies 12 ROM Pad
8223000
8223000
South Pit
8222500
FigureFigure 15-2 16-3
8222500
Brio Gold Inc. www.rpacan.com
Riacho dos Machados Gold Mine 8222000 Minas Gerais State, Brazil
8222000 698000 698500 699000 699500 700000 700500 Open701000 Pit and Waste701500 Dump 0205 500 750 100 0 September 2015 Topography Metres December 2015 Source: Carpathian Gold Inc. www.rpacan.com
GEOMECHANICS
Geotechnical designs are based on reports from Golder (Diláscio and Castro, 2010) and Xstract Mining Consultants Pty Ltd (Xstract, 2015), which have estimated open pit and waste dump mine slopes.
Slopes in the mine pit are dependent on geological conditions. The major geological condition that impacts the pit slopes occurs in the footwall of the shear zone, and is related to the flat dipping foliation found in the muscovite schist.
Dewatering is also an issue and will be required in the upcoming production year (2016). Most of the water that reports to the pit bottoms is either from rainfall or water that intersects the contact of the transition zone and the fresh rock. Current water elevations in the north and south pit bottoms are 789 MASL and 813 MASL, respectively. It has been estimated that approximately 40 m3/hr will need to be pumped from the open pit.
A review of the 2011 FS geotechnical slope design parameters was undertaken by Xstract. Table 16-1 shows Xstract’s recommended slope design parameters (Xstract 2015).
TABLE 16-1 RECOMMENDED SLOPE DESIGN PARAMETERS Brio Gold Inc. – Riacho dos Machados Gold Mine
Overall Slope Batter Angle Batter Height Berm Width Domain Zone Angle 240 m (°) (m) at toe (m) Depth (°) Oxide 45 12 6 Footwall 40 Fresh 60 12 6 Oxide 45 12 6 Hanging Wall Transition 60 12 6 50 North - Schist Fresh 75 24 10 Hanging Wall Oxide 45 12 6 South - Transition 60 12 6 52 Silicified Fresh 80 24 10
The pit slopes used in the mine design for footwall material located on the west side are up to 40°. Hanging wall slopes range from 50° to 52°. Operating practices can have an impact on pit slopes, and careful blasting practices will be needed near the final pit slopes. Final pit slopes have begun to be established on the west side (footwall) of the pit. RPA does not see
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Footwall pit slope construction will continue to challenge MRDM. Given the oblique intersection of the fault structure with the major plane of foliation, footwall dip, and the large unsupported wedge blocks that are created by these structural conditions, multiple bench failures can occur. RPA is of the opinion that this situation is manageable.
Waste dumps are contoured for final reclamation slopes concurrent with active mining.
FEBRUARY 8, 2015 PIT SLOPE FAILURE Figure 16-4 is a photograph of the footwall pit slope failure that occurred on February 8, 2015. An Xstract principal, Will Sarunic, General Manager of Geotechnical Engineering, was on site during the RPA visit reviewing the slide. It was verbally relayed to RPA that the estimated tonnage in the slider was approximately 200,000 t, which represents approximately three to four days of total mine production. Based on the analysis by Xstract and given the size of the failure, most of the slide material, which is shown in Figure 16-4, should be excavated and/or a step-in bench should be installed that will contain the slide material. This step-in bench does not appear to have a significant impact on the LOM Mineral Reserves. Pre-splitting of the high wall blasts is also being tested by MRDM.
MRDM is currently evaluating its blasting practices for its impact on high walls, fragmentation, and costs. MRDM contracted the services of Peter Bellairs Consulting Pty Ltd (Bellairs), based in Bolwarra Heights, New South Wales, Australia, in early 2015.
The actual 2014 Powder Factor (PF), kilograms of explosive per tonne of rock, for the period of June to December 2014 was 0.12 kg/t, however, most of this rock was oxidized and a lower PF could be used.
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Flt Movement Fol
Figure 16-4 Fol - 40°/105° Brio Gold Inc. Flt - 38°/070° Riacho dos Machados Gold Mine Movement - 38° ->125° Minas Gerais State, Brazil West Pit Wall Slope (February, 2015)
December 2015 Source: Xstract Mining Consultants, 2015.
16-10 www.rpacan.com
LOM PRODUCTION SCHEDULE
The mining schedule is based on operating 24 hours per day, 365 days per year, however, the cash flow generated for this report used a conservative 350 days per year. The mine and maintenance department’s shift schedule is planned to be three, eight-hour shifts per day with four alternating crews. This schedule is quite common and acceptable in Brazil. MRDM appears to provide a safe work environment and competitive wages and benefits. MRDM and Cube use average salary and wage rates for the positions at the Mine. Burden levels above the average salary range from 60% to 70%, according to MRDM management.
Nine pit phases have been designed as a basis for the LOM production schedule. These phases are named N1, C1, S1, N2A, N2B, N3, N4, S2, and S3. The letter “N” stands for the north part of the open pit, “C” for central, and “S” for south. Projected stockpile balances as of September 30, 2015 total approximately 1.234 Mt at a grade of 0.73 g/t Au and include the following: • ROM: 117 kt at 1.25 g/t Au; • Low Grade: 1,117 kt at 0.68 g/t Au.
Due to a projected lack of water in 2016, the processing operation has been scheduled at 1.4 Mtpa. In 2017, the processing rate is planned to increase to 2.55 Mtpa. Mining rates were adjusted for the planned MRDM processing schedule. The following cut-off grades were used to generate the LOM schedule: • High Grade: >1.2 g/t
• Medium Grade: 0.8 g/t to 1.2 g/t
• Low Grade (Oxide): 0.4 g/t to 0.8 g/t through Q2 2016; 0.3 g/t to 0.8 g/t after Q2 2016
• Low Grade (Transition and Fresh): 0.5 g/t to 0.8 g/t through Q2 2016; 0.4 g/t to 0.8 g/t after Q2 2016
• Mineralized Waste: 0.2 g/t to 0.5 g/t LG cut-off grade, respectively
Table 16-2 summarizes the phased design estimate for the LOM production schedule. Table 16-2 shows the amount of material and contained gold for each phase, the phases mined per period, and the significant benches and pit bottom elevations that will be achieved during the respective periods. RPA is of the opinion that the LOM production schedule created by Cube is achievable.
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RPA generated an independent yearly production schedule (2016 to 2022) for the MRDM LOM utilizing Runge’s XPAC scheduling software. Cube’s phase designs and ultimate pit were used as a guide. Slope stability and pit dewatering will continue to be the major mining risk to achieving the production targets, however, these risks are inherent to most open pit mines and they are manageable.
The LOM phase designs generated by Cube in Table 16-2 contain approximately 3 Mt (14%) of mineralized waste and Inferred Mineral Resource material, which accounts for the increase in the total material mined and approximately 155 koz of gold contained. Approximately 4.7% (1.1 Mt) of 23.7 Mt shown in the LOM phase designs are classified as Inferred Mineral Resources. Most of this material is slated to be stockpiled and processed in the latter part of the mine life, if gold prices improve. Inferred Mineral Resources and mineralized waste (material that grades between 0.2 g/t Au and 0.5 g/t Au) were not used in RPA’s LOM production schedule.
It should be noted again that the ultimate pit, the LOM mine production schedule generated by RPA for the years 2016 to 2022, and the LOM processing schedule generated by RPA only use Proven and Probable Mineral Reserves (Measured and Indicated Resources). No Inferred Resources are included in the LOM phase designs and mining or processing schedule.
TABLE 16-2 SUMMARY OF PHASE DESIGNS – QUANTITIES AND TARGETS Brio Gold Inc. – Riacho dos Machados Gold Mine
PHASE QUANTITIES
Phase Ore Tonnes Au Rec. Au Waste Tonnes Total Tonnes Strip Name (000) (g/t) (oz) (000) (000) Ratio N1 809 1.44 33,677 1,174 1,983 1.5 C1 791 1.25 28,576 1,073 1,864 1.4 S1 2,112 1.27 77,451 7,833 9,946 3.7 N2A - - - 970 970 - N2B 3,284 1.24 117,771 15,146 18,431 4.6 N3 - - - 5,728 5,728 - N4 6,073 1.30 228,115 53,732 59,805 8.8 S2 3,187 1.10 101,749 25,898 29,085 8.1 S3 4,875 1.22 171,740 53,747 58,622 11.0 Total 21,143 1.24 759,221 165,292 186,435 7.8
Note: 1. The LOM phases include approximately 1.1 Mt of Inferred Resources, which are not included in the Mineral Reserves and supporting Mineral Reserve LOM plan.
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PHASE TARGETS
Pit Bottom/Major Bench Quarter/Year Phases Mined Elevations, MASL Q1 2015 N1, C1, S1, N2A, N2B 801, 810, 843, 825 Q2 2015 N1, C1, S1, N2A, N2B 786, 825, 801, 813 Q3 2015 N1, S1, N2B 777, 807, 801 Q4 2015 S1, N2B 777, 789 Q1 2016 S1, N2B, N3, S2 777, 780, 873, 780, 891 Q2 2016 S1, N2B, N3, S2 774, 855, 870, 774 Q3 2016 S1, N2B, N3, N4, S2 771, 762, 852, 846, 867 Q4 2016 S1, N2B, N3, N4, S2 762, 756, 840, 849 Q2 2017 S1, N2B, N3, N4, S2, S3 753, 810, 837, 918 Q4 2017 N2B, N4, S2, S3 729, 792, 825, 885 2018 N4, S2, S3 726, 810, 873 2019 N4, S2, S3 666, 765, 831 2020 N4, S2, S3 621, 723, 762 2021 N4, S2, S3 621, 693
Blending of the sulfide ore will be handled at the primary crusher pad area. As of September 2015, the majority of the ore to be mined in the future will be sulfide (fresh) rock.
A detailed pit dewatering plan will be required, which should include in-pit sumps and dewatering wells. Capital has been allocated, however, a formal plan was not available for review. MRDM cannot extract groundwater until its hydrological plans and permits have been approved by SUPRAM. At present, MRDM can only use surface runoff which accumulates in areas such as the sump in the pit, the sump down gradient of the waste rock pile, and the sedimentation pond located at Piranga Creek. For these areas, there is no limit of how much can be pumped, however, due to the current drought, RPA assumes that the water volumes will continue to be minimal. MRDM’s environmental manager mentioned that MRDM can also use any water that accumulates in the shafts, however, RPA was not provided with the information on how much water typically accumulates in the shafts.
Tables 16-3 and 16-4 show the 2015 LOM mining and processing schedules for the LOM budget, which are achievable with the projected fleets for MRDM and Dinex.
RPA notes that there is some flexibility in the mine plan to accommodate a delay in receiving the amended operations permit. Mining could continue through 2021, however, there would be a loss of ounces due to the requirement to stay within the permitted boundary. It appears that MRDM could almost reach the currently designed pit bottom elevation with redesign of the ultimate pit.
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Brio Technical Gold Inc. Report – Riacho NI
43-101 TABLE 16-3 LOM MINING SCHEDULE dos Brio Gold Inc. – Riacho dos Machados Gold Mine – Machados Gold Mine,
December 16, Years Units Totals 2016 2017 2018 2019 2020 2021 2022 Mining Total Ore Mined1 (000 t) 17,054 1,400 2,550 3,000 3,177 3,177 1,439 2,311 Head Grade g/t 1.20 1.19 1.13 1.20 1.33 1.16 1.14 1.21
2015 Total Waste Mined (000 t) 117,764 10,926 12,000 16,000 22,994 25,000 28,000 2,844 Total Tonnes Mined (000 t) 134,818 12,326 14,550 19,000 26,171 28,177 29,439 5,155
Project Strip Ratio 6.9 7.8 4.7 5.3 7.2 7.9 19.5 1.2
Days Per Year days 350 350 350 350 350 350 350 350 #2555 Total Tonnes Mined ktpd total 55.0 35.2 41.6 54.3 74.8 80.5 84.1 14.7 per Day
Note: 1. Table 16-3 does not include low grade mineralization and Inferred Resources. www.rpacan.com Page 16-14
Technical Brio Gold Inc. Report – Riacho NI
43-101
dos TABLE 16-4 2015 LOM PROCESSING SCHEDULE –
Machados Gold Mine, Brio Gold Inc. – Riacho dos Machados Gold Mine December 16, Years Units Totals 2016 2017 2018 2019 2020 2021 2022 Total Milling Tonnes (000 t) 18,326 1,400 2,550 3,000 3,000 3,000 3,000 2,376 Total Milling Grade g/t 1.16 1.25 1.15 1.19 1.38 1.19 0.84 1.19 Total Milling Ounces 000 Au oz 686 56 94 115 133 115 81 91 2015
Recovery (Average) % 90 87 90 90 90 90 90 90
Project Recovered Ounces oz 616 49 85 104 120 103 73 82
Note:
#2555 1. Table 16-4 does not include low grade mineralization and Inferred Resources. 2. Table 16-4 contains stockpile and re-handle material. www.rpacan.com Page 16-15
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MINE EQUIPMENT AND MINING CONTRACTOR
Conventional open pit mining methods are employed at the MRDM open pit. Caterpillar 390 (6 m3) hydraulic excavators, Caterpillar 775G (65 t) mechanical rear-dump trucks, and Atlas Copco flexiROC D65 (140 mm/5.5 in diameter) diesel drills are used to drill, blast, load, and haul ore and waste material to designated locations. RPA is of the opinion that the mining method and mine design criteria, which include bench height, road widths, pit slopes, etc., are appropriate for mining of the orebody at the Mine. All of the major equipment has been purchased new. Major MRDM mining equipment currently on site is listed in Table 16-5.
TABLE 16-5 MAJOR MINING EQUIPMENT ESTIMATE, NOVEMBER 2014 Brio Gold Inc. – Riacho dos Machados Gold Mine
MRDM No. of Units Type Make/Model 3 Excavator CAT 390 DL 11 Off road trucks CAT 775G 1 Dozer CAT D6T 1 Dozer CAT D9T 1 Motor grader CAT 14M 1 Drill rig Atlas Copco flexiROC D65 to blasting 1 Drill rig Atlas Copco flexiROC D65 with reverse circulation system to grade control 1 Water truck FORD Cargo 3133
MINE CONTRACTOR - DINEX No. of Units Type Make/Model 4 Excavator VOLVO EC480 DL 17 Truck SCANIA G440 1 Excavator VOLVO EC250DL with rock breaker 1 Drill rig SANDVIK DP 1500 1 Drill rig SANDVIK DX 800 1 Dozer CAT D6T 1 Dozer CAT D8T 1 Water truck SCANIA P310 B6X4 1 Wheel loader CAT 966 1 Wheel loader VOLVO 6940 2 Motor grader VOLVO G940
Note: 1. Additional excavators will be required.
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Dinex signed a three-year contract (2015 to 2017) with MRDM and has two road graders, four excavators, and 17 Scania trucks. Dinex mining is primarily relegated to mining the waste, however, it is also assigned to the liberation of ore blocks on an as needed basis. Based on brief observations while on site, RPA is of the opinion that Dinex and MRDM have a good working relationship.
The LOM estimated 6 m3 excavator productivity is 1,003 tonnes per operating hour (tph), which appears high to RPA. RPA would normally see productivities from 600 tph to 900 tph. The LOM truck productivity used is 125 tph. The average ore and waste mined per year is estimated to be 3.7 Mt and 19.6 Mt, respectively. MRDM plans to mine an average total of 55,000 tpd of ore and waste at a strip ratio of 6.9:1 (waste to ore). Mineralized waste and low grade material are stockpiled for processing at the end of the mine life, however, the gold price will need to be higher. LOM haul truck availabilities and utilizations are acceptable to RPA at approximately 88% and 85%, respectively. LOM excavator availabilities and utilizations are acceptable to RPA at approximately 82% and 85%, respectively. RPA is of the opinion that an additional excavator will be needed to ensure scheduled production. It may be possible for the existing mining contractor, who appears to have a good working relationship with MRDM, to supply the necessary equipment/production without a significant capital outlay. The 2014 yearly average for Carpathian excavators averaged 612 tph, however, there were days that averaged greater than 850 tph.
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17 RECOVERY METHODS
The processing plant was designed to process 7,000 tpd, with the potential to expand to 9,000 tpd (3.28 Mtpa) with some modifications, using three-stage crushing, ball mill grinding, CIL, sulfur dioxide-air cyanide detoxification, and a gold adsorption, desorption, and recovery (ADR) plant.
The crushing circuit is shown in Figure 17-1. It includes a three-stage crushing plant with an availability based on 80% for the crushing circuit. ROM ore is dumped into a feed hopper. A variable speed apron feeder reclaims ore from the feed hopper onto a vibrating grizzly with openings set at 152 mm (6 in). Oversize from the grizzly discharges into the primary Metso model 125 jaw crusher. Undersize from the grizzly combines with the discharge from the jaw crusher onto a conveyor belt. The conveyor belt feeds the primary double deck vibrating screen. Undersize from the screen is conveyed to a fine ore bin via a conveyor belt. Oversize from the screen is fed to the secondary Metso HP-500 cone crusher. Product from the secondary cone crusher is transferred to the vibrating single deck secondary screen. Undersize from the screen is conveyed to the fine ore bin. Oversize from the screen feeds the tertiary crusher. Discharge from the tertiary crusher is returned to the feed of the secondary screen, thus operating the tertiary crusher in closed circuit.
Ore was originally reclaimed from the fine ore bin by four apron feeders and designed to be fed to the ball mill at the rate of 310 tph. Since the fine ore bin did not have sufficient capacity to operate the plant efficiently, modifications were made to use one of the apron feeders to feed a parallel fine ore storage system. This system consists of a transfer conveyor, radial stacker, and a reclaim feeder. The reclaim feeder is fed by a rubber tired front end loader to place the crushed ore on mill feed conveyor.
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Rock Breaker (PELA MRDM) 2005-OC-01 Over Head Crane 2010-VS-01 2010-VS-02 From the Mine (15 t - 15 kW) Primary Vibratory Screen Secondary Vibratory 9 Double Deck 2005-HH-01 Screen Run of Mine RF - 1.8 mm x 4.8 mm 2010-BC-02 Hidraulic Hammer Single Deck 5 DD-xH Belt Conveyor (11 kW) MF 3m x 6m (20 kW) (55 kW) (56 kW) 1000 mm % " " " ( $
Front Loader 2005-MG-01 Dump Pocket 6 2005-SG-01 Cap. 80 t 10 Static Grizzly 2010-CC-02 1 (850 mm x 850 mm) Tertiary Cone Crusher 2005-BC-02 7 HP 500 Belt Conveyor (370 kW) (30 kW) 2005-VG-02 800 mm Appron 2 Vibratory Grizzly Feeder M-3015 2010-CC-01 AF-60180 (30 kW) Secondary Cone Crusher (45 kW) HP 500 11 (370 kW)
2010-BC-01 3 Belt Conveyor 8 2005-JC-01 (37 kW) To Cyclone Feed Box Primary 1000 mm 2020-CF-02 4 Jaw Crusher C-125 (185 kW) 2010-BC-03 2010-BS-01 To Cyclone Feed Chute Belt Conveyor Belt Scale 2020-CH-02 (37 kW) 800 mm
17-2 2005-BM-01 2005-BC-01 Belt Magnet Reclaim Water Belt Conveyor 2015-SP-01 2005-BS-01 Dust Control (7.5 kW) 2005-MD-01 Sump Pump Belt Scale 2005-DC-02 800 mm Metal Detector 2015-BF-01 Belt Feeder (5.5 kW) 1000 mm To Grinding 2020-CH-01 12 2015-BC-01 Principal Slurry Flow Belt Conveyor (30 kW) Intermitent Slurry Flow 800 mm Principal Solution Flow % " " " Intermitent Solution Flow ( $
Figure 17-1
www.rpacan.com Flow Number 14253 6789101112 Brio Gold Inc. Solids tph 364.6 364.6 209.3 155.3 364.6 336.2 28.3 336.2 649.0 312.7 364.6 310.3 Water tph 19.2 19.2 11.0 18.2 19.2 17.7 1.5 17.7 35.4 17.7 19.2 16.3 Total Flow tph 383.8 383.8 220.3 163.5 383.8 353.9 29.8 353.9 707.9 353.9 383.8 326.6 % Solids 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% Riacho dos Machados Gold Mine Ore S.G. 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Slurry Density t/m3 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Minas Gerais State, Brazil Total Flow m3/h 213.2 213.2 122.4 90.8 213.2 196.6 16.6 196.6 393.3 196.6 213.2 181.5 Crushing Circuit Flowsheet
December 2015 Source: Carpathian Gold Inc., 2015. www.rpacan.com
The flowsheet for the grinding circuit is shown on Figure 17-2. Ore is transferred from the fine ore storage to the ball mill feed conveyor. Water mixes with the ore in the feed to the ball mill. The mill is 6.7 m diameter by 11.1 m long with twin 4,500 kW motors. Slurry discharges from the ball mill into the cyclone feed box where the slurry is pumped to the cyclones. Underflow from the cyclones returns to the ball mill feed. The cyclone overflow is the product from the comminution circuit. It flows by gravity to a linear trash screen. The underflow from the trash screen flows by gravity into a thickener feed box. The slurry is pumped to slurry holding tanks that feed the CIL circuit. The thickener overflow solution is returned to the process water tank.
The flowsheet for the CIL circuit is provided as Figure 17-3. The CIL circuit includes two leach tanks followed by six CIL tanks. The slurry flows by gravity from the first tank to the last. Cyanide and milk of lime are added to the circuit to obtain the correct pH and to extract the gold from the ore. Activated carbon is advanced counter currently through the circuit from the last tank to the first. From the first CIL tank, the activated carbon is pumped to a loaded carbon tank. From the tank it is transferred to the ADR plant.
A sulfur dioxide-air cyanide destruction circuit is provided to reduce the cyanide concentration in the tailings to less than 1.0 ppm of total cyanide in order to meet discharge criteria in the International Cyanide Management Code.
Gold is recovered from the activated carbon in the ADR plant which is designed to handle carbon in three tonne batches. Loaded carbon is transferred from the loaded carbon tank to a hydrochloric acid wash tank. After acid washing, the carbon is rinsed, neutralized with caustic soda to increase the pH, and transferred to a vertical pressure strip vessel. In the vessel, cyanide-caustic solution is used to strip the gold from the activated carbon. The pregnant solution is stored in the pregnant solution tank. From there it is pumped to the electrowinning cells where the gold is plated onto cathodes. The sludge from the cathodes is removed by high pressure washing and filtered to remove excess water. The filter sludge is dried and smelted in an electric induction furnace to produce gold doré that is shipped off site for further refining and sale.
After the stripping circuit, the activated carbon is fed to the carbon regeneration kiln for removal of any organic contaminants in order to maintain the carbon activity required to
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www.rpacan.com adsorb gold from the CIL solution. After regeneration, the carbon is pumped to the last CIL tank.
The slurry discharging from the cyanide destruction circuit are the final tailings from the plant. They flow to a tailings pump box. From the pump box they are pumped to the TSF. The tailings dam is designed to be raised on an annual basis. An area of the TSF is available for water storage. A small dike isolates the water storage area from the rest of the TSF.
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From Storage Bin 2015-SB-01 12 2020-HC-01 Hidrocyclones Batery 2015-BC-01 (6 Working, 2 Stand By) Belt Conveyor 2015-BS-01 (30 kW) Belt Scale 14 800 mm 30 2020-BR-01 Ball Storage Area Ball Reposition 2020-SA-01 Primary Sampler
Hold 2020-SA-02 Secondary 17 Sampler Ball Bin 18 2020-CH-03 Ball Reposition Chute Tank 2020-SA-03 Primary Sampler
Principal Slurry Flow 2020-SA-04 Secondary Intermitent Slurry Flow 21 Sampler Principal Solution Flow 2020-CH-01 Mill Feed Chute 2020-TR-01 Intermitent Solution Flow Trommel Tank 16
2020-LR-01 2020-BM-01 2020-CH-04 Linner Replace Device Ball Mill 2020-TS-01 6.7mDx11.1mL Trommel Oversize Trash Screen (2x4650 kW) Chute Process Water 2010-PW-02 Process Water 23
17-5 5010-PW-02 22 20 15 Sump Pump from Refinery 3003-SP-01 Lime Loop Sump Pump from Secondary and Tertiary Crushing 4018-LL-03 2020-SP-01 48
Sump Pump from Storage Bin 19 2015-SP-01 2020-TK-01 2020-BX-01 CIL Feed Thickener Cyclones Feed Box Process Water Tank
2020-PP-01/01R Cyclones Feed Pump CIL Feed (132 kW) 2025-PP-01/01R 2020-SP-02 Thickener U/F Pump Sump Pump from Grinding
Flow Number 14 171615 18 19 20 21 22 23 48 Figure 17-2 Solids tph 310.3 1086 1086.0 310.3 775.7 310.3 0.62 tph 16.3 465.41746.01413.5 332.41433.51280.5 116.6 1397.2 20.0 5.59 Water www.rpacan.com Total Flow tph 326.6 1551.4 2832.0 1723.8 1108.2 1743.8 6.21 Brio Gold Inc. % Solids 95% 70% 38.3% 18% 70% 17.8% 10% Ore S.G. 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Riacho dos Machados Gold Mine Slurry Density t/m3 2326 17241299 121 17241120 1.06 Minas Gerais State, Brazil Total Flow m3/h 140.4 899.8 2180.41537.6 642.7 1557.6 1280.5 116.6 1397.2 20.0 5.83 Grinding Circuit Flowsheet
December 2015 Source: Carpathian Gold Inc., 2015. Process Water 2010-PW-02 38 39 2030-SC-10 Loaded Carbon Screen
From Thickener U/F Pump 36 37 2025-PP-01 2030-TK-08 24 Loaded Carbon Tank 2030-SA-03 Primary Sampler
To Loaded 34 2030-SA-04 Cyanide Seconadary Water to Clean Interstage Screen 4010-SP-02 Sampler 47 32 Milk from Lime Loop Tank 4015-SP-03 From Carbon Regeneration Screen 48 32 35
From Carbon Regeneration Screen
29 2030-TK-02 2030-AG-02 From Dessorption Sump Pump 2030-SP-02 Leach Tank Agitator 3000-SP-01 Sump Pump (1014 m3) (110 kW) 2030-TK-01 (11 kW) Carbon Regen Sump Pump Leach Tank 3000-SP-01 (1014 m3) 47 29 2030-AG-01 Agitator (110 kW)
17-6
45 45 45 45 45 45 Potable Water 45 45 2030-SC-09 5005-PW-03 Safety Screen
30 2030-SS-01 Safety Shower 2030-SA-01 3000-SP-10 Primary Sampler Sump Pump 2030-PP-01/01R Compressed Air CIL Transfer Pump 5015-CA-02 (60 kW) 2030-SA-02 From Acid Wash 46 Secondary 2030-PP-03 to 08 2030-TK-03 to 08 2030-AG-02 Interstage Screen Sampler Sump Pump Carbon Transfer Pump CIL Tank Agitator 2030-IS-01 to 06 (Working) 3000-SP-102 (13.5 m D x 14.3 m H) (110 kW) 2030-IS-07 to 08 (Stand By) (1014 m3) 8.5 m2 To Detox 2035-BX-01 2030-BX-01 31 Principal Slurry Flow Tailings Pump Sump Intermitent Slurry Flow 2030-PP-09/09R Principal Solution Flow CIL Tailings Pump Intermitent Solution Flow
Figure 17-3
Flow Number 24 333231302928 34 35 36 37 38 39 45 46 101 102 Solids tph 310.3 310.3 310.3 310.3 310.3 39.6 39.6 2.73 2.7 0.31 0.62 Brio Gold Inc. www.rpacan.com Water tph 455.88 462.8 462.8 472.8 472.8 59.1 64.1 2.73 10.9 10 0 5 15 696 5568 1.41 5.59 Total Flow tph 766.1 773.1 773.1 783.1 783.1 98.8 103.8 5.46 13.7 % Solids 40.5% 40.1% 40.1% 39.6% 39.6% 40.1% 38.2% 50.0% 20.0% Riacho dos Machados Gold Mine Ore S.G. 2.5 2.5 2.5 2.5 2.5 2.5 2.5 1.3 1.3 Minas Gerais State, Brazil Slurry Density t/m3 1321 1317 1317 1312 1312 1317 1297 1130 1048 Carbon In Leach Circuit Total Flow m3/h 580 587 587 597 597 75 80 4.8 13 10 0 5 15 696 5568 1.57 5.83 Flowsheet
December 2015 Source: Carpathian Gold Inc., 2015. www.rpacan.com
18 PROJECT INFRASTRUCTURE
All of the necessary infrastructure for the operation is built, which includes but is not limited to: • open pit mine • open pit waste storage facilities • internal mine property roads • the processing facilities • three-bay, tent structure mine shop • offices and support buildings • water wells • diesel-powered electrical generation • access road • waste management • cafeteria • transportation and shipping facilities • communications • TSF
POWER
Operating power has been estimated to be approximately 12.9 MW. Power is currently generated on site by eight diesel-powered generator sets. The existing, CVRD-installed 13.8 kV power line cannot satisfy the Mine’s power demand. A project to install an upgraded power line to site will be completed once capital is available, and is currently scheduled for 2018. The new power line is planned to follow the same route as the CVRD powerline (Technomin, 2011). Installation of the power transmission line and substations to supply electrical power will reduce operating costs and improve production.
WATER BALANCE
Due to the length of the drought that can be expected under the worst case scenario, a high priority for MRDM is understanding the water balance and planning the appropriate storage
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www.rpacan.com capacity and designing and constructing a fresh water reservoir as required. Completing this task and optimizing all aspects of water usage in the processing plant is required to mitigate the risk of reduced production.
Knight Piésold Pty Ltd (Knight Piésold) was contracted by MRDM in 2015 to re-evaluate the water balance for the mine. Currently, MRDM is experiencing a shortfall of approximately 1.5 million m3 for the 2014/2015 year, based on the rainfall received to date. This water shortfall has impacted mill production. Recommendations from Knight Piésold consultants in August 2015 are to improve harvesting of precipitation that enters the Mine area, build an additional raw water supply dam, and/or harvest water from external sources. All of these options are being investigated by MRDM and are subject to the necessary permit approvals.
Currently, water storage in the TSF and eight fresh water wells provide a limited supply of water to the MRDM mine site. The quantity of water that can be pumped from the wells is limited by the permit. The permitted quantities of water that can be taken from the water wells is provided in Table 18-1.
TABLE 18-1 WATER WELL CONDITIONS OF WATER INTAKE Brio Gold Inc. – Riacho dos Machados Gold Mine
Flow Total Total Wells Months (m3/h) Hours/day (m3/day) (m3/60 days) 13, 14, 15 March, April 37 14 518 31,080 11, 17 May, June 43.24 14 605.36 36,330 13, 14, 15 July, August 37 14 518 31,080 12, 16, 17 Sept, Oct 60 14 840 50,400 15 Jan to Dec 5.95 12 71.4 26,061 (365 days)
The availability of make-up water that is required to run the operation is highly dependent upon rain water. Based on the historical precipitation data from the site, the average is approximately 945 mm/yr. A typical dry year is approximately 500 mm and a wet year is approximately 1,380 mm. The rain is concentrated between November and April.
As of October 2015, the Mine has been experiencing a drought. MRDM has obtained permits for the water supply and pit dewatering wells, however, the wells are unable to compensate for the drought conditions since the total amount of water that can be drawn from the wells is an average of approximately 18 m3/hr.
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Based on the water balance that was provided, the Mine will require an average water supply of 1,452.2 m3/hour at the full processing tonnage of 3.0 Mtpa (8,000 tpd). A breakdown of components of the water supply is provided in Table 18-2.
TABLE 18-2 FUTURE, REQUIRED MAKE-UP WATER SOURCES SUMMARY Brio Gold Inc. – Riacho dos Machados Gold Mine
Water Demand Water Demand Source (m3/h) (%) Thickener Overflow (recycled/reused) 977.7 67 Tailing Dam Recycle (recycled/reused) 341.8 24 Dewatering, Water Wells, Rain Water Collection Areas (Make-up 132.7 9 Water) Total Demand 1,452.2 100
As shown in Table 18-2, the total amount of fresh water make-up required is approximately 133 m3/hr at full production of 3.00 Mtpa. Only a small amount of water is available from dewatering of the open pit mine and less than 20 m3/hr is available from the wells. This leaves over 100 m3/hr that is required from rain collection and storage. A fresh water reservoir is planned to store water collected during the rainy years to be subsequently used in dry years. Until such time that the reservoir is available, there is a risk that production will be limited or curtailed due to lack of available water.
For the current financial analysis, the production is limited to 1.40 Mtpa (or 3,800 tpd) in 2016. It increases to 2.55 Mt (7,000 tpd) in 2017 and peaks at 3.0 Mt (8,200 tpd) for the remainder of the mine life. The production rates are based on the assumptions that the fresh water reservoir will be constructed in 2016 and the power line and substations will be completed in 2017. The estimated costs for construction of the reservoir and the grid power are also included in the financial analysis.
TAILINGS STORAGE FACILITY
The current TSF is built to 826 MASL level, which is adequate for the 2016 production year, and into the 2017 production year. The future tailings dam raises have been included in the sustaining capital over the LOM, however, the basic and detailed engineering have yet to be completed. Final design of the TSF has been sized for a Mineral Reserve of 21 Mt and the dam will be raised to an RL of 840 MASL.
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The latest indication of the MRDM LOM plan is that there could be approximately 23 Mt (which could account for any conversion of Inferred Mineral Resources or improvements to the LOM plan due to gold price increases) of ore processed, which will require an additional tailings dam raise in the last few years of the mine life. If these additional tonnes are proven, then the subsequent dam raises will need to be designed to accommodate the additional ore tonnage.
In January 2014, the site experienced a rainfall of 680 mm in one storm event. During this rainfall, the water overtopped the liner in the TSF and ran underneath the liner. Coincidentally, the water flows exceeded the capacity of the diversion ditches and encroached upon the processing areas.
Since that time, a number of design modifications have been completed to prevent this from reoccurring. The liner is now extended and secured over a berm to prevent water from penetrating underneath the liner, and the diversion ditches have been increased in size to increase the capacity.
The regulatory agency that audited the Mine site following the heavy rains in January 2014 considered the surface drainage deficient, and required lining of the TSF. Initial concerns that tailings had been released into the environment were not substantiated, as neither the tailings nor the water level overflowed their containment barriers. The primary problem was defined as soil erosion from a storm event.
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19 MARKET STUDIES AND CONTRACTS
The principal commodity from the MRDM operation is gold, which is freely traded, at prices that are widely known, so that prospects for sale of any production are virtually assured. RPA used a gold price of US$1,200/oz for the Base Case cash flow.
CONTRACTS
RPA’s comment on terms of contracts, arrangements, rates, or charges are as follows: • Mining – An agreement with Dinex is in place for contract mining a portion of the waste material. MRDM also performs all mining functions, except for the loading of the blast holes. Novotrac supplies maintenance services to MRDM for the mining fleet.
• Concentrating – No concentrating contract is needed for MRDM material; Carpathian processes all.
• Smelting and Refining – Final, commercial smelting and refining is completed by Asahi Refining Canada Limited, Brampton, Ontario, Canada.
• Sales, Hedging, Forward Sales – RPA is unaware of any Sales, Hedging, and Forward sales contracts in place for the MRDM gold production.
All major contracts are within industry norms.
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20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT
ENVIRONMENTAL STUDIES
The Mine is located in a remote and dry location, and vegetation and faunal compositions are consistent with populations found in a broad geographic range. The area does not represent critical habitat for any biodiversity resources. The general area of the mine was previously disturbed by Vale (formerly known as CVRD), which operated the mine from 1989 to 1997. The mining operations will result in vegetation suppression over an area of approximately 362 ha.
Due to the previous mining activities and environmental liabilities, MRDM has conducted supplementary baseline studies to assess groundwater, surface water, and soil quality prior to the start of operations. As part of conditions of the environmental license, MRDM conducts environmental monitoring programs of surface water, groundwater, soil, fauna, and flora to closely monitor potential changes in quality of these resources. MRDM has ongoing reclamation programs and also has set-aside areas for biodiversity conservation.
ENVIRONMENTAL PERMITTING HISTORY AND CURRENT SITUATION
The Mine was put into production in 1989 by CVRD (Vale) and operated until 1997. The mine operations consisted of open pits and heap leach processes. The Mine remained idle from 1997 until October 2008, when Carpathian acquired the mineral rights and started prospecting and exploration. In 2009, Carpathian completed a Preliminary Economic Assessment (PEA) report, submitted it to the National Department of Mineral Production (Departamento Nacional de Produção Mineral, DNPM), and obtained approval to proceed.
As part of the environmental permitting process, MRDM conducted environmental and social baseline studies to prepare an Environmental Impact Assessment (EIA) in accordance with the terms of reference as required by the regulatory agency, State of Minas Gerais Environmental Agency (SUPRAM). Baseline studies included fauna, flora, soils, geology, archaeological sites and historical buildings, social and economic conditions in the general
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www.rpacan.com area of the Mine. The EIA was submitted to the SUPRAM in October 2009, and the preliminary environmental license (LP) was granted in April 2010. Upon approval of the Plan of Environmental Control (Plano de Controle Ambiental, PCA), the installation license (LI) was issued in November 2011.
The Mine is unique in that it operated simultaneously under both an LI and a temporary operations license (LO) that was issued by SUPRAM on December 3, 2013. On June 9, 2015, MRDM received the LO for the mine operations and groundwater wells from SUPRAM. The LO contains 50 conditions, including environmental and social monitoring plans, environmental compensations and reclamation. MRDM will apply for permits for future expansions or changes in project design, as required by Brazilian regulations. To ensure that future operations will have a reliable source of water, MRDM will submit environmental studies to obtain the necessary environmental licenses for the construction of a water dam, which will be located to the east of the mine. MRDM expects to obtain the installation license for the water dam in 2016.
In 2013, the Mine received a notice of violation (NOV) from the State of Minas Gerais Public Ministry (PM), an equivalent to the Attorney General in the US, a governmental agency that commonly brings charges against large projects during the permitting process. Following the NOV, MRDM signed a term of adjustment of conduct (TAC, or consent order) in July 2013. MRDM complied with the terms and conditions of the July 2013 TAC and, prior to the issuance of the operation license in June 2015, MRDM signed an agreement with the PM that includes provisions for external audits of the Mine and funds for environmental and social programs to be developed in coordination with local communities.
The Mine currently operates under conditions of the following permits and licenses: • Operation License (Parecer Único No. 0390682/2015 SIAM) – Valid until June 8, 2019
• Agreement with the PM (MPMG-0522.11.000.018-2)
• Groundwater well permits (COPAM No. 17991 through 17998)
• Authorization for the construction of the TSF (Portaria No. 03842/2011)
• Authorization for dewatering of the pit (Portaria No. 00935/2012)
• Authorization for an impoundment of the Ribeirao Piranga for an area of 0.29 ha
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• Authorization for onsite storage and handling of 90 m3 of fuel
MRDM will operate in compliance with requirements of the above listed permits and authorizations. The company will also comply with other applicable regulations, such as physical integrity and stability of large structures (e.g., tailings dam, pit, waste rock piles, and stockpiles) that must be reported to DNPM and occupational health and safety performance indicators and plans that must be submitted to the Ministry of Labor and Employment.
OTHER ENVIRONMENTAL ISSUES
POWER Electricity is currently supplied at the mine by eight diesel-powered generators. MRDM has entered into a preliminary agreement with CEMIG, the State of Minas Gerais Distribution Company, to construct and operate a 138 kV transmission line that will connect the Substation Janaúba 4 to the Mine substation. Both substations will be constructed as part of the transmission line project. The transmission line will be approximately 33 km long, and will be located within a 23 m wide right-of-way (ROW). As commonly done in Brazil, CEMIG will negotiate the easements along the 23 m-wide ROW and will also obtain the environmental license for the construction and operation of the substations and the 138 kV transmission line.
Compensations to affected landowners will be conducted in accordance with Brazilian laws, which has established costs for properties and assets directly impacted by the ROW. MRDM will pay for all the costs of the land acquisitions/compensations, environmental studies and permitting process, and for the construction of the substations and transmission line. Once constructed and commissioned, the substations and transmission line will be owned and operated by CEMIG. MRDM personnel indicate that the transmission line will be constructed within 18 months from the time MRDM mine signs a firm agreement with CEMIG.
EXPLOSIVE MANAGEMENT The transport, storage, handling, and application of explosives are conducted by PIROBRÁS, a Brazilian company founded in 1986 that fabricates various types of explosives. During the RPA site visit, personnel from PIROBRÁS showed their permits, procedures, and temporary storage areas. No issues were observed in relation to explosive management.
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CYANIDE Cyanide is transported to the site in a liquid form via trucks and transferred to a tank in the process area. Unigel (or Proquigel Química), a company located in the State of Bahia, manufactures the cyanide, which is transported to the site by Cabral, a company also from the State of Bahia. Both companies are certified. Efforts for full alignment with the International Cyanide Management Code (ICMI) are ongoing.
ACID ROCK DRAINAGE AND ENVIRONMENTAL CONTAMINATION/LIABILITIES
Overall, historical environmental liabilities at the site have been related to acid rock drainage (ARD) and arsenic concentrations in water resources and offsite runoff and sedimentation of nearby surface water bodies.
In 1999, two years after CVRD (Vale) stopped operations at the Mine, the company reported evidence of ARD at the site. In 2001, Vale contracted the services of an international consulting firm to assess the problem and to develop a remediation plan. From 2002 through 2004, CVRD (Vale) conducted various remediation and reclamation activities. Since that time, there has been no evidence of ARD at the site as shown by the results of the water analyses from the site monitoring points (Technomin, 2011).
In 2005, Vale initiated a remediation project to treat arsenic-contaminated water that was accumulated in the shaft. In 2006, Vale presented to SUPRAM a long-term monitoring plan, which was approved in March 2006.
In 2011, MRDM prepared a plan for the management and control of ARD, which included several measures to control the generation of ARD, a stormwater drainage system, and semi-annual groundwater and surface water monitoring. As condition of the environmental license, MRDM will continue to monitor ground and surface water resources and additional mitigation measures will be implemented should ARD be detected.
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ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM
MRDM has environmental and social staff, policies, and procedures required for compliance with Brazilian regulations, but the company does not have an integrated Environmental and Social Management System (ESMS). Environmental monitoring data are compiled into Excel spreadsheets and managed with assistance of external consultants. Moving forward, RPA recommends that MRDM develop and implement an integrated ESMS consistent with ISO 14001.
SOCIAL ASPECTS
MRDM’s relations with local communities started back in 2009, when the company initiated baseline studies and subsequently conducted formal (regulatory-driven) and informal meetings with directly and indirectly affected stakeholders. MRDM currently employs approximately 522 people, including direct employees and contractors, and the majority are from local communities and towns. MRDM conducts monthly meetings with local communities and coordinates with directly affected stakeholders regarding issues related to water resources. As part of environmental and social compensation programs, MRDM will develop social programs that are aligned with the communities’ interests.
HEALTH AND SAFETY ISSUES
The Mine has a small onsite health clinic, with an onsite doctor during the day (Monday to Friday) and one nurse and one technician per each shift. The onsite brigade has 76 trained members and there is a brigade for each of the three shifts. MRDM has prepared plans and procedures for full compliance with the applicable Brazilian regulatory norms (NRs). Full compliance is expected within the next two years. MRDM is developing a plan for the implementation of a management system consistent with OHSAS 18001.
ANTICIPATED FUTURE COMPLIANCE COSTS The Mine has not yet prepared a budget for implementation of the environmental management and monitoring programs (excluding internal staff). The required budget should include funds for community assistance and donations, government interface, and use of consultants for monitoring activity. RPA recommends that this budget be developed as soon as possible to allow for appropriate allocation of funds going forward.
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MINE CLOSURE AND RECLAMATION
Total estimated closure costs are approximately US$5.3 million, as presented in the cash flow model. RPA considers this low given the size, nature, and location of the Mine. Mine infrastructure such as the accommodation cafeteria, warehouses, and the process plant will be dismantled and sold. The tailings dam will be exposed to reduced NaCN levels at the end of operations, and an assumed two-year rinse period with raw water will follow. The rinse solution will gradually be shut off with any drainage monitored until it meets applicable standards. As part of the regulatory process in Brazil, a conceptual closure study will be prepared by MRDM in the future.
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21 CAPITAL AND OPERATING COSTS
CAPITAL COSTS
Initial capital cost to construct the mine and mill was estimated to be approximately US$171 million.
The MRDM gold mine is an active mining operation, however, production is currently limited by power and water supplies. Capital expenditures are planned for 2016 and 2017 to remedy these limitations. In addition, there is some construction work that is not complete. Production forecasts in this Technical Report anticipate that maximum mill production (mill tonnes processed) will be achieved in 2018
RPA was provided with individual project schedules for the various contractors however, not an overall construction schedule. Given that the project is in a punch list type of approach, this method was reasonable.
The review of the capital costs indicated a number of areas that should be reviewed to understand the overall capital expenditures required to complete the project, as well as ongoing sustaining capital costs. These areas are as follows: • Final overall asset cost including finance cost • Overall project capital cost excluding financing • Project capital expenditures for 2015 that extends into 2016 • Sustaining capital required for 2016 to 2023 • Reclamation and closure costs • Additional items that were identified by Brio and RPA
Exclusions from the capital cost estimate include, but are not limited to, the following: • Project financing and interest charges • Sunk costs • Exploration drilling • Costs of fluctuations in currency exchanges • Relocation of any mine offices and facilities, if required, in the future
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The summary of the overall LOM costs, excluding the finance costs, is shown in Table 21-1.
TABLE 21-1 SUMMARY OF TOTAL CAPITAL COSTS Brio Gold Inc. – Riacho dos Machados Gold Mine
Capital Costs Capital Cost Area (US$ 000) Direct Cost
Critical Capital Projects 17,265 Secondary Capital Projects 16,185 Total Direct Cost 33,450
Other Costs EPCM / Owners / Indirect Cost 1,672 Subtotal Costs 35,122
Contingency 7,608 Initial Capital Cost 42,730
Sustaining 12,013 Exploration - Working Capital (Not Applied) - Reclamation and Closure 5,255 Total Capital Cost 59,997
Note: 1. R$4.0:US$1 exchange rate 2. Critical capital items include a water dam, power line, and critical spares.
KEY ELEMENTS CAPITAL REQUIRED DURING 2016 AND 2017 The Mine team submitted a list of work items required to be completed during 2016 as part of their yearly budget. Included in this list were a number of items that were carried over from 2015. The delay and subsequent carryover of capital resulted from a lack of funds available to complete the capital projects. These items were subdivided into items that should be executed in 2015, items that were possible to defer, and items that could be deferred by rentals.
During the February 2015 site visit, RPA was made aware of an assessment of the process plant and infrastructure that was being completed by Ausenco Limited (Ausenco). The Ausenco review made only minor suggestions of the additional scope of work that they recommended for 2015/2016. The Ausenco report did not comment on the scope that had
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www.rpacan.com the potential to be delayed, nor on the scope that could be replaced by rentals. The plant is considered to be complete and operational, however, it requires some additional reparations and corrections to operate more efficiently. The execution of a reparation and corrective scope inside an operating plant is inherently less productive than construction work executed in a non-operational plant. Accordingly, contingency should be applied for this scope to be completed during 2015 and into 2016/2017. As shown in Table 21-1 above, contingency was added as a separate line item.
The scope that could be replaced by rental equipment includes the grid connection power line installation contract and some mining equipment. Currently, the operation is powered by diesel generators, which results in process power costs of approximately US$5.20/t milled. Installation of the electrical power line has the potential to reduce process power costs by approximately US$3.22/t milled. At a throughput rate of 3.0 Mtpa, the conversion to grid power has the potential to save approximately US$9.66 million in power costs per year. Therefore, in RPA’s opinion, installation of the electrical power line should be considered critical.
Capital expenditures required to be completed in 2016 is approximately US$15 million. The cost represents new capital projects, secondary capital projects, sustaining capital, and other Indirect costs, which includes some additional reparations and corrections to operate more efficiently.
The four main components of the final scope are the construction of a separate water storage dam, installation of the power transmission line, the raise in height of the tailings dam from RL826 MASL to RL831 MASL, and repairs/improvements to the process plant.
Additional Water Dam Storage Facility For the water storage facility, MRDM is currently permitting an identified specific site for the dam, negotiating the purchase of land, designing the water dam structure, completing environmental studies and permitting, performing field investigations (seismic, structural, geotechnical, geology, etc.), and completing costing. MRDM expects this project to be completed by the fourth quarter of 2017 at an estimated cost of US$6.0 million (with an exchange of R$4.0 to US$1).
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Power Line Construction MRDM plans to begin power line construction in 2016, and aims for it to be fully operational for 2018, which will reduce process power costs from US$5.20/t milled to approximately US$2.00/t milled. The current project estimate includes approximately US$11.9 million for the installation of this power line, with the project costs already having incurred approximately US$6.6 million for the purchase of materials for this power line. The remaining cost for the power line completion (including contingency and indirects) is approximately US$5.3 million.
The overall cash flow requirements, as assessed by RPA, do not make any allowance for the sale of the diesel generators that are currently owned by MRDM, once the grid connection is installed. Once the project is installed, there is potential salvage value from the diesel generators, however, how many should or could be sold would be an operational decision made by management at the time of grid connection. Ideally, the plant should have emergency generation for a portion of the typical loads.
Tailings Dam Raises The tailings dam raises have been included in the sustaining capital over the LOM, however, the basic and detailed engineering have yet to be completed. The current design of the tailings facility will be raised to an RL of 840 MASL, which will accommodate approximately 21 Mt of tailings material. The latest indication of the LOM plan is that there could be approximately 23 Mt (which could account for any conversion of Inferred Mineral Resources or improvements to the LOM plan due to gold price increases) of ore processed, which will require an additional tailings dam raise in the last few years of the mine life. An allowance of R$12.7 million (US$3.1 million) has been included in the sustaining capital estimate for this additional cost.
The 2011 FS indicated that the tailings will not be acid generating.
Process Plant The work to be completed includes items that were deferred from 2015 to 2016, which are critical for the functioning of the process plant. A review of the items in the deferred list includes a number of items of scope that have been identified but have no cost amounts. This provides further justification for the inclusion of contingency in the assessment of the final value of this scope. A partial list of these capital cost items is shown below:
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• Repair work for secondary cone crusher foundation • Modifications to the acid wash circuit • Repairs to concrete internal to the CIL area and bunding repairs in acid area • Office relocation • Secondary crusher by-pass • Gold room - fume/scrubber and area upgrades • Vibration skid crushers • Interstage carbon screens • Carbon safety screen - replacement • Agitation adjustments CIL • Scrubbing system crusher area - dust control
SUSTAINING CAPITAL REQUIRED FOR 2016/2017 MRDM presented a table of sustaining capital activities that are required to be performed in 2016. These items were checked against the plant completion scope and these items were determined to be approximately US$890,000. Sustaining capital in 2016 is estimated to be US$1.3 million.
There could be a possibility for the elimination of some of these elements of scope, however, these costs indicate that there are ongoing sustaining capital costs required for plant operations due to the mine commencing operations prior to process plant construction completion. The health and safety items and the plant maintenance items should be considered essential for ongoing plant operations. Included in the list was an item for checking dye penetration tests for all of the welds on the CIL tanks, and an air ventilation system near the cathode cells located in the refinery area.
EXPANSION TO 3.28 MTPA For the expanded production (up to 3.28 Mtpa), further design and detailed costing needs to be completed for the future tailings dam raises and enhancements to the process plant. In this report, the economic analysis limited the production to 3.0 Mtpa. It should be noted that the original embankment of the current tailings dam cost approximately R$40 million (US$10.0 million). During the site visits, it was indicated that the construction of the water dam may eliminate some of the requirement for the installation of groundwater wells for plant make-up water. This scope should be considered from the point of view of both operational risk elimination, and reduction of potential for government/community issues.
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The original sustaining capital summary did not include any allowances for minor plant maintenance capital items for the operation of the plant. Given the Mine went into production well before it was complete, RPA assessed that there will be ongoing plant capital maintenance costs, and capital was included for plant reparations. These costs will include items such as belt replacements, piping line changes, and seal and valve replacements.
The RPA assessment of the ongoing sustaining capital includes an additional US$1.0 million for ongoing community and governmental programs and activities required throughout the life of the operation up until the final year.
The expansion capital includes bulk earthworks required to be completed in and around the tailings dam. The current estimate of cost for the completion of the raise from RL826 MASL to RL831 MASL includes allowances for the supply and installation of the HDPE required for the increase in height, however, the site visit indicated that there would be additional work required prior to the placement of the HDPE. This would include rerouting of the perimeter roads around the dam and additional bulk earthworks for profiling of dam embankments.
LIFE OF MINE ADDITIONAL CAPITAL REQUIREMENT SUMMARY The overall LOM cash flow requirements include the following elements: • Construction of a separate water storage facility • Power line construction costs • Reparation work • Expansion scope up to 3.28 Mtpa (9,000 tpd) • Scope that could be replaced by rentals • Elements of scope missing from the previous lists • Sustaining capital for 2016 to 2023 o Sustaining capital life of mine o Tailings dam raises to an RL of 840 MASL. o Waste dump raises and waste dump remediation o Closure costs (2023 to 2027).
The yearly summary for the remaining capital requirements of the Mine is provided in Table 21-2 and Figure 21-1.
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TABLE 21-2 LOM CAPEX SUMMARY BY YEAR Brio Gold Inc. – Riacho dos Machados Gold Mine
Capital Costs, 2024- Capital Cost Area US$000 2016 2017 2018 2019 2020 2021 2022 2023 2027 Direct Cost Critical Capital Projects 17,265 7,932 5,212 824 824 824 824 824 - - Secondary Capital Projects 16,185 3,357 588 3,681 2,853 2,853 2,853 - - - Total Direct Cost 33,450 11,289 5,800 4,505 3,677 3,677 3,677 824 - -
EPCM/Owners/Indire ct Cost 1,672 564 290 225 184 184 184 41 - - Subtotal Costs 35,122 11,854 6,090 4,730 3,861 3,861 3,861 865 - -
Contingency 7,608 1,883 1,093 1,033 801 775 738 310 561 414 Initial Capital Cost 42,730 13,737 7,183 5,762 4,662 4,637 4,599 1,175 561 414
Sustaining 12,013 1,265 1,487 2,379 1,662 1,492 1,242 1,242 1,242 - Exploration - Working Capital (Not Applied) - Reclamation and Closure 5,255 ------2,496 2,759 Total Capital Cost 59,997 15,002 8,670 8,141 6,324 6,129 5,841 2,418 4,300 3,173
Notes: 1. Production ends in 2022, reclamation and closure continue to 2027. 2. Capital costs at R$4.0:US$1 exchange rate.
FIGURE 21-1 LOM MRDM CAPITAL COST PROJECTED EXPENDITURES
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CLOSURE COSTS MRDM capital indicates that the allowance included for the closure cost is R$21.0 million, or US$5.3 million. Typically, historical closure costs should be in the range of 10% of the direct cost of the facility. Given the final direct costs of the facility, including the mine, infrastructure and tailings dam will be in the US$200 million range, there is the potential that the closure costs allowance could be low. As part of the regulatory process in Brazil, MRDM will prepare a closure plan and cost estimate in the future.
OPERATING COSTS
A summary of the operating costs over the LOM is shown in Table 21-3. LOM mining costs are reported to be US$1.62/t of total material, which is normal.
TABLE 21-3 SUMMARY OF MRDM LOM OPERATING COSTS Brio Gold Inc. – Riacho dos Machados Gold Mine
LOM Mining Area Units 2016 2017 2018 2019 2020 2021 2022 Average Mining US$/t moved 1.62 1.93 1.73 1.62 1.55 1.54 1.61 1.54 Mining US$/t ore milled 11.94 16.99 9.85 10.24 13.54 14.46 15.75 3.35 Processing US$/t ore milled 9.77 13.75 12.83 8.79 8.79 8.79 8.79 9.08 G&A US$/t ore milled 2.44 4.79 2.44 2.14 2.14 2.14 2.14 2.58 Re-handle US$/t moved 0.45 0.37 0.32 0.30 0.34 0.33 0.48 1.30 Total US$/t ore milled 24.21 35.70 25.17 21.17 24.46 25.38 26.93 15.04
Note: 1. R$4.0:US$1 exchange rate.
RPA has reviewed MRDM’s operating plan. MRDM is currently revising the Mine schedule. A LOM schedule needs to be generated which incorporates the following factors and elements: mining, permitting, tailings dam expansions, construction projects (mill completion, water supply wells, dewatering, power line, office/cafeteria relocation), mine closure, and potential future resource/reserve area development.
The unit operating costs have been high, due to the low tonnage plant throughput that has been spread over the fixed costs for the Mine. As the plant throughput increases, the unit operating costs are expected to decrease, however, many of the initiatives taken by MRDM to increase production are expected to increase unit operating costs compared to those estimated in the FS. MRDM’s 2014 and 2015 unit operating costs are summarized in Table 21-4 and Figure 21-2.
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Figure 21-3 summarizes the plant production for 2014 and 2015, which is a key component in the determination of the unit operating cost, which is usually given in US$ per tonne of milled ore or US$ per gold ounce produced. MRDM has shown much improvement in reducing its unit operating cost since start-up in March 2014. MRDM has recently completed most of its construction in 2015, and most of the production that occurred in 2014 was concurrent with the final stages of process plant and site infrastructure construction.
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Technical Report NI Brio GoldInc.
TABLE 21-4 SUMMARY OF MRDM 2014-2015 ACTUAL OPERATING COSTS Brio Gold Inc. – Riacho dos Machados Gold Mine
Total –
Riacho Mine Mine Plant G&A-Mine G&A Recovery (US$/t (US$/t (US$/t (US$/t G&A-BH (US$/t (US$/t Total Costs
43-101 – Month (%) moved) feed) feed) feed) feed) feed) (US$/t feed)
dos Mar-14 90 2.08 10.67 39.41 13.69 5.93 19.62 69.70 Apr-14 90 1.64 8.23 17.07 6.65 3.92 10.57 35.87 Machados Gold Mine,
December 16, May-14 90 1.78 15.02 19.97 9.78 4.06 13.84 48.83 Jun-14 86 2.52 14.25 19.28 3.76 3.64 7.40 40.93 Jul-14 87 1.78 21.11 18.23 4.26 1.82 6.08 45.42 Aug-14 84 2.01 13.38 12.26 2.89 1.30 4.19 29.83 Sep-14 83 1.71 13.31 15.99 3.01 1.68 4.69 33.99 Oct-14 86 2.14 12.51 14.35 2.98 1.30 4.28 31.14 2015 Nov-14 87 2.08 11.69 11.34 3.11 1.48 4.59 27.62 Dec-14 87 2.71 14.10 16.43 3.71 2.20 5.91 36.44
Project Mar-Dec 2014 Totals 86 2.01 13.69 16.35 4.34 2.25 6.58 36.62
Jan-15 83 1.66 15.95 17.15 2.76 2.38 5.14 38.24
#2555 Feb-15 84 2.41 38.94 14.38 2.17 2.93 5.10 58.42 Mar-15 84 1.83 23.64 14.04 2.88 2.17 5.05 42.73 Apr-15 86 2.34 23.02 15.98 2.78 2.56 5.34 44.34 May-15 85 1.68 14.62 20.65 3.79 9.32 13.11 48.38 Jun-15 83 3.10 34.46 36.56 10.88 9.49 20.37 91.39
Jul-15 87 3.39 27.76 35.99 13.72 11.36 25.08 88.83 www.rpacan.com Aug-15 77 1.99 19.43 26.45 12.45 10.46 22.91 68.79 Sep-15 86 2.11 26.51 61.51 25.10 14.04 39.14 127.16 Jan-Sept 2015 Totals 84 2.07 24.90 18.15 3.91 4.16 8.08 51.13 Page Notes:
21-10 1. BH – Belo Horizonte
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FIGURE 21-2 MRDM ACTUAL 2014 AND 2015 UNIT COSTS
FIGURE 21-3 2014 AND 2015 MRDM MILL PRODUCTION
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MANPOWER Current manpower levels for the operation are listed in Table 21-5, and these manpower levels appear to be reasonable for the size, location, and type of operation at MRDM.
TABLE 21-5 SUMMARY OF MRDM 2015 MANPOWER LEVELS – SEPTEMBER 2015 Brio Gold Inc. – Riacho dos Machados Gold Mine
MRDM Contractor Location Employees (Third-party) Total Site 340 168 508 Belo Horizonte 14 0 14 Total 354 168 522
From Riacho dos Machados 157 100 257 From Porteirinha 95 25 120 From Other Cities 102 43 145 Total 354 168 522
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22 ECONOMIC ANALYSIS
An after-tax Cash Flow Projection has been generated from the LOM production schedule and capital and operating cost estimates, and is summarized in Table 22-1. A summary of the key criteria is provided below.
ECONOMIC CRITERIA REVENUE • Approximately 55,000 tpd (19.3 Mtpa) total material (ore and waste) from open pit and stockpiles, including 7,500 tpd of ore.
• Mill recovery by zone, as indicated by test work, averaging 90% over LOM.
• Reduction in ounces for gold entrained in mill circuit.
• Gold at refinery 99.965% payable.
• Exchange rate US$1.00 = R$4.0.
• Metal price: US$1,200/oz gold.
• Net Smelter Return includes doré refining, transport, and insurance costs.
• Revenue is recognized as a mid-year value.
COSTS • No pre-production period, as the Mine has been operating since March 2014.
• Mine life: seven years (2016 to 2022).
• LOM mine and process production plans as summarized in Tables 16-3 and 16-4.
• Mine life and closure capital (2016 to 2027) totals US$60 million, which includes US$5.3 million for closure and reclamation.
• Average operating cost over the mine life is US$24.21/t milled.
• Costs are recognized on a mid-year basis.
• Average All-In Sustaining Cost (AISC) of US$783 is projected over the LOM.
TAXATION AND ROYALTIES • A royalty of 2.0% was applied to the gross revenue. RPA relied on Brio for the taxes applied to the Mine.
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The cash flow is based on the assumption that the majority of the reparation work to the plant will commence immediately, as well as the construction of the power transmission line.
CASH FLOW ANALYSIS Considering the Mine on a stand-alone basis, the undiscounted pre-tax cash flow totals US$213.9 million over the mine life, and simple payback occurs approximately within the first year of full production.
The average annual AISC is US$783/oz gold, according to the World Gold Council definition. The mine life capital cost, which includes unfinished or new capital projects, is US$69/oz gold, for an all in cost (AIC) of US$852/oz gold. Average annual gold production during mine operation (2016 to 2022) is approximately 88,000 oz.
The after-tax Net Present Value (NPV) at a 5% discount rate is US$170 million with an IRR of 341%.
A summary of the cash flow analysis is presented in Table 22-1.
CASH FLOW PROJECT AND ACTUAL REQUIREMENTS RPA has completed a cash flow analysis of the following scope: • All revenues and costs were evaluated on a mid-year basis.
• Plant reparation work.
• Expansion scope is up to 3.28 Mtpa (9,000 tpd), however, the cash flow was limited to 3.0 Mtpa.
• LOM recovery is expected to reach 90%, based on current production data.
• Scope that could be achieved by the use of rentals for the mining fleet, and the use of a mining contractor.
• Assumption that a power line will be installed within the next two years.
• Tailings dam raises estimated to a minimum elevation of 840 m RL. Final designs for this dam have yet to be completed.
• Sustaining capital for 2016 and 2017 has been detailed by MRDM, and reviewed by RPA.
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TABLE 22-1 CASH FLOW SUMMARY Brio Gold Inc. – Riacho dos Machados Gold Mine
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 INPUTS UNITS TOTAL Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 MINING Open Pit #2 Medium Case - 1.4 Mtpa in 2016, 2.5 Mtpa 2017, 3.0 Mtpa 2018 Operating Days 350 days 2,450 350 350 350 350 350 350 350 Tonnes milled per day tonnes / day 7,480 4,000 7,286 8,571 8,571 8,571 8,571 6,789 Tonnes moved per day tonnes / day 55,028 35,217 41,571 54,286 74,774 80,506 84,111 14,728
Mine Production '000 tonnes 17,054 1,400 2,550 3,000 3,177 3,177 1,439 2,311 Au g/t 1.20 1.19 1.13 1.20 1.33 1.16 1.14 1.21
Waste '000 tonnes 117,764 10,926 12,000 16,000 22,994 25,000 28,000 2,844 Total Moved '000 tonnes 134,818 12,326 14,550 19,000 26,171 28,177 29,439 5,155 Stripping Ratio w:o 6.91 7.80 4.71 5.33 7.24 7.87 19.46 1.23 Rehandle Tonnage '000 tonnes 2,684 670 388 - - - 1,561 65
PROCESSING Mill Feed '000 tonnes 18,326 1,400 2,550 3,000 3,000 3,000 3,000 2,376 Au g/t 1.16 1.25 1.15 1.19 1.38 1.19 0.84 1.19
Contained Au oz 685,860 56,251 94,166 115,112 133,266 114,738 81,055 91,271 Recovery Au 90% % 90% 87.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0%
Total Recovered Au oz 615,586 48,939 84,750 103,601 119,939 103,265 72,950 82,144
REVENUE Metal Prices Input Units Au US$1,200 /oz Au US$/oz Au $1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 Au Payable Percentage 99.965% US$ '000 100% 100% 100% 100% 100% 100% 100% 100%
Au Gross Revenue US$ '000 $ 738,445 $ 58,706 $ 101,664 $ 124,277 $ 143,877 $ 123,874 $ 87,509 $ 98,538
Total Gross Revenue US$ '000 $ 738,445 $ 58,706 $ 101,664 $ 124,277 $ 143,877 $ 123,874 $ 87,509 $ 98,538
Refining cost Au US$10.00 /oz Au US$ '000 $6,156 $ 489 $ 847 $ 1,036 $ 1,199 $ 1,033 $ 729 $ 821
Total Charges US$ '000 $6,156 $ 489 $ 847 $ 1,036 $ 1,199 $ 1,033 $ 729 $ 821
Royalty NSR 2.0% US$ '000 $14,646 $ 1,164 $ 2,016 $ 2,465 $ 2,854 $ 2,457 $ 1,736 $ 1,954
Net Revenue US$ '000 $ 717,644 $ 57,052 $ 98,800 $ 120,776 $ 139,824 $ 120,385 $ 85,044 $ 95,762 Unit NSR US$/t milled $39.16 $ 40.75 $ 38.75 $ 40.26 $ 46.61 $ 40.13 $ 28.35 $ 40.30
OPERATING COST Mining (Open Pit) US$/t moved $ 1.62 $ 1.93 $ 1.73 $ 1.62 $ 1.55 $ 1.54 $ 1.61 $ 1.54 $ - Mining (Open Pit) US$/t milled $11.94 $ 16.99 $ 9.85 $ 10.24 $ 13.54 $ 14.46 $ 15.75 $ 3.35 $ - Processing US$/t milled $ 9.77 $ 13.75 $ 12.83 $ 8.79 $ 8.79 $ 8.79 $ 8.79 $ 9.08 $ - G&A US$/t milled $ 2.44 $ 4.79 $ 2.44 $ 2.14 $ 2.14 $ 2.14 $ 2.14 $ 2.58 $ - Rehandle US$/t moved $ 0.45 $ 0.37 $ 0.32 $ 0.30 $ 0.34 $ 0.33 $ 0.48 $ 1.30 $ - Total Unit Operating Cost US$/t milled $24.21 $ 35.70 $ 25.17 $ 21.17 $ 24.46 $ 25.38 $ 26.93 $ 15.04 $ - Mining (Open Pit) US$ '000 $ 218,831 $ 23,786 $ 25,126 $ 30,724 $ 40,606 $ 43,370 $ 47,260 $ 7,958 $ - Processing US$ '000 $ 178,957 $ 19,245 $ 32,711 $ 26,358 $ 26,358 $ 26,358 $ 26,358 $ 21,569 $ - G&A US$ '000 $44,715 $ 6,699 $ 6,215 $ 6,416 $ 6,416 $ 6,416 $ 6,416 $ 6,138 $ - Rehandle US$ '000 $1,211 $ 250 $ 123 -$ -$ -$ $ 753 $ 85 $ - Total Operating Cost US$ '000 $ 443,713 $ 49,981 $ 64,176 $ 63,498 $ 73,379 $ 76,144 $ 80,786 $ 35,750 $ - Operating Cashflow US$ '000 $ 273,930 $ 7,071 $ 34,625 $ 57,279 $ 66,445 $ 44,241 $ 4,258 $ 60,012 $ -
CAPITAL COST Direct Cost Critical Capital Projects US$ '000 $17,265 $ 7,932 $ 5,212 $ 824 $ 824 $ 824 $ 824 $ 824 $ - -$ -$ -$ -$ Secondary Capital Projects US$ '000 $16,185 $ 3,357 $ 588 $ 3,681 $ 2,853 $ 2,853 $ 2,853 -$ $ - -$ -$ -$ -$ Total Direct Cost US$ '000 $ 33,450 $ 11,289 $ 5,800 $ 4,505 $ 3,677 $ 3,677 $ 3,677 $ 824 $ - -$ -$ -$ -$
Other Costs EPCM / Owners / Indirect Cost 5% US$ '000 $1,672 $ 564 $ 290 $ 225 $ 184 $ 184 $ 184 $ 41 $ - Subtotal Costs US$ '000 $ 35,122 $ 11,854 $ 6,090 $ 4,730 $ 3,861 $ 3,861 $ 3,861 $ 865 $ - -$ -$ -$ -$
Contingency 15% US$ '000 $7,608 $ 1,883 $ 1,093 $ 1,033 $ 801 $ 775 $ 738 $ 310 $ 561 $ 374 $ 13 $ 13 $ 13 Capital Cost US$ '000 $ 42,730 $ 13,737 $ 7,183 $ 5,762 $ 4,662 $ 4,637 $ 4,599 $ 1,175 $ 561 $ 374 $ 13 $ 13 $ 13
Sustaining US$ '000 $ 12,013 $ 1,265 $ 1,487 $ 2,379 $ 1,662 $ 1,492 $ 1,242 $ 1,242 $ 1,242 -$ -$ -$ -$ Exploration US$ '000 $ - Working Capital (Not Applied) US$ '000 $ - Reclamation and Closure US$ '000 $5,255 $ - -$ -$ -$ -$ -$ -$ $ 2,496 $ 2,496 $ 88 $ 88 $ 88 Total Capital Cost US$ '000 $ 59,997 $ 15,002 $ 8,670 $ 8,141 $ 6,324 $ 6,129 $ 5,841 $ 2,418 $ 4,300 $ 2,871 $ 101 $ 101 $ 101
CASH FLOW Net Pre-Tax Cashflow US$ '000 $ 213,933 $ (7,931) $ 25,955 $ 49,137 $ 60,121 $ 38,112 $ (1,584) $ 57,594 $ (4,300) $ (2,871) $ (101) $(101) $ (101) Cumulative Pre-Tax Cashflow US$ '000 $ (7,931) $ 18,024 $ 67,161 $ 127,282 $ 165,394 $ 163,810 $ 221,405 $ 217,105 $ 214,235 $ 214,134 $ 214,033 $ 213,933
Operating Cost US$/oz $ 721 All-In Sustaining Cost US$/oz $ 783 $ 1,081 $ 809 $ 670 $ 659 $ 786 $ 1,158 $ 484 $ - -$ -$ -$ -$ All-In Cost US$/oz $ 852 Capital Cost US$/oz $ 69 Date for NPV, IRR (Mid-Year Convention) 15/02/2016 30/06/2016 30/06/2017 30/06/2018 30/06/2019 30/06/2020 30/06/2021 30/06/2022 30/06/2023 30/06/2024 30/06/2025 30/06/2026 30/06/2027 PROJECT ECONOMICS Pre-tax NPV at 5.0% discounting 5% US$ '000 $ 181,191 Pre-tax NPV at 8.0% discounting 8% US$ '000 $ 164,973 Pre-tax NPV at 10.0% discounting 10% US$ '000 $ 155,326 Pre-tax IRR % 390%
After-Tax NPV at 5.0% discounting 5% US$ '000 $ 170,342 After-Tax NPV at 8.0% discounting 8% US$ '000 $ 154,748 After-tax NPV at 10.0% discounting 10% US$ '000 $ 145,480 After-tax IRR 341%
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SENSITIVITY ANALYSIS Project risks can be identified in both economic and non-economic terms. Key economic risks were examined by running cash flow sensitivities: • Gold price • Head grade • Operating costs • Capital costs • Recovery • Exchange Rate
NPV sensitivity over the base case has been calculated for -20% to +20% variations. The sensitivities are shown in Figure 22-1 and Table 22-2.
FIGURE 22-1 AFTER-TAX SENSITIVITY ANALYSIS
Note: 1. Sensitivity analyses may overlap.
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TABLE 22-2 SENSITIVITY ANALYSIS Brio Gold Inc. – Riacho dos Machados Gold Mine
Parameter Units -20% -10% -5% Base 5% 10% 20% Variables Gold Price US$/oz 960 1,080 - 1,200 - 1,320 1,440 Head Grade - Au g/t 0.93 1.05 - 1.16 - 1.28 1.40 Operating Cost US$ millions 355 399 - 444 - 488 532 Capital Cost US$ millions 48.00 54.00 - 60.00 - 66.00 72.00 Exchange Rate Ratio 3.20 3.60 - 4.00 - 4.40 4.80 Recovery % - 81 85 90 95 100 -
After-tax Units -20% -10% -5% Base 5% 10% 20% Gold Price US$ millions 56 116 - 170 - 224 277 Head Grade - Au US$ millions 57 116 - 170 - 224 276 Operating Cost US$ millions 238 204 - 170 - 136 102 Capital Cost US$ millions 181 176 - 170 - 165 160 Exchange Rate US$ millions 57 116 - 170 - 224 276 Recovery US$ millions - 116 143 170 197 223 -
Note: 1. Recovery rate adjusted by -10%, -5%, 0%, 5%, and 10% increments.
RPA COMMENTS
The MRDM gold mine is currently an active mining and processing operation, however, there are a number of areas within the operation that have yet to be completed. During the site visit in February 2015, RPA identified a number of outstanding items, as well as areas that require work to bring the facility to a good working standard. Many of the items identified in February 2015 have now been completed; however, there are some items that need to be completed in 2016 and 2017.
The overall Mine construction progress curves indicated that the Mine was at 99% of construction completion prior to commencement of first operations, i.e., first gold doré poured, however, the Mine was far from complete as is evident by the Mine progress curves as a function of financial cost. Indeed, the plant would probably be considered to be approximately 95% complete in its current state.
The current areas that have not been completed that can impact the future cash flows of the project are listed below: Tailings disposal system and water reclaim system from the tailings dam. Once the tailings disposal system and water reclaim system from the tailings dam are improved, the lack of water supply will be reduced.
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Installation of a power line to the MRDM site. Currently, the Mine’s electricity is supplied by on-site generator power. A power line would reduce the process operating cost.
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23 ADJACENT PROPERTIES
There are no adjacent properties to report in this section.
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24 OTHER RELEVANT DATA AND INFORMATION
No additional information or explanation is necessary to make this Technical Report understandable and not misleading.
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25 INTERPRETATION AND CONCLUSIONS
Based upon a preliminary review of the MRDM gold mine documentation and discussions with Carpathian personnel, RPA has the following conclusions and observations:
GENERAL • The supporting data used for the different project studies, and presented to RPA during the site visit, were well organized, and prepared in a professional manner.
• CVRD (Vale) previously mined the Mine, having recovered approximately 155,000 oz of gold. Carpathian has recovered approximately 76,000 oz of gold between March 2014 and June 2015.
GEOLOGY AND MINERAL RESOURCES • Cube of Perth, Australia, prepared a Mineral Resource estimate for Carpathian in December 2014. RPA has reviewed the Cube Mineral Resources and is of the opinion that the parameters, assumptions, and methodology used for Mineral Resource estimation are appropriate for the style of mineralization. The estimate has been validated by the reconciliation reports.
• Mineral Resources were prepared in accordance with Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated May 10, 2014 (CIM definitions).
• Work completed to date by the geological staff is appropriate.
• The geological model employed by Carpathian geologists is reasonably well understood and is well supported by field observations in both outcrop and drill intersections. Carpathian benefits from having hired an experienced Exploration Manager, the individual responsible for the district geology and exploration during discovery and initial production by Vale.
• Interpretations of the geology and the 3D wireframes of the estimation domains derived from these interpretations are reasonable.
• Sampling and assaying have been carried out following standard industry QA/QC practices. These practices include, but are not limited to, sampling, assaying, chain of custody of the samples, sample storage, use of third-party laboratories, standards, blanks, and duplicates.
• The resource model has been prepared using appropriate methodology and assumptions. These parameters include: o Treatment of high assays o Compositing length o Search parameters o Bulk density o Cut-off grade
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o Classification
• The block model has been validated using a reasonable level of rigor consistent with common industry practice.
• Definition drilling will likely result in the upgrading of Inferred Mineral Resources to the Indicated category in the structural tend, both down-dip and laterally along strike to the north and south directions. Down-dip underground potential has only been drilled to a limited extent and requires further drilling.
• Significant exploration potential exists laterally along strike both north and south from the existing MRDM pit, although this area is currently outside the permitted mining boundary. Exploration potential at the Mine, and in the surrounding property, is expected to be relatively high.
• Condemnation drilling has been completed for the tailings dam pad, waste dumps, and process plant.
MINING AND MINERAL RESERVES • The economic assumptions and methodology used for estimation of the Mineral Reserves are appropriate.
• Proven and Probable Mineral Reserves for the Mine, as of September 30, 2015, total 18.87 million tonnes grading 1.17 g/t Au, containing 711,000 oz of gold.
• The Mine is a conventional open pit operation, composed of three meter operating benches in ore and six meter high operating benches in waste.
• Mining rate is approximately 55,000 tonnes per day (tpd) ore and waste, including ore production of 7,000 tpd (2.55 Mtpa). •
• All Carpathian systems (safety, geological control, mining, processing, administration, and environmental) have been implemented for mining at the MRDM pit, and they are operating efficiently.
• Mineral Reserves are restricted to the MRDM pit, composed of north, central, and south areas.
• Mining of the MRDM pit began in 2012 with limited pre-stripping of the open pit. Mill production started March 2014, and the mine/mill has been operating since March 2014. Current estimated mine life is approximately seven years.
• Mining is performed by Carpathian personnel, and a mining contractor is also employed. The mining contractor is primarily used to strip waste.
• Dewatering and slope stability represent the greatest risks to the mining area, however, in RPA’s opinion, there does not appear to be reason for concern at this time.
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METALLURGICAL TESTING AND PROCESSING • Since the start of operations in March 2014, MRDM has progressively completed construction and improvement projects to increase the efficiency of the operation, however, a lack of capital has limited the work that was accomplished. Two primary capital projects remain that severely impact the ability to operate the plant under design conditions. They are: o Insufficient available power, which limits the operation of the ball mill. This impacts the achievable grind size and/or the realistic mill throughput. o Insufficient water supply which limits the time the plant can be operated.
• The metallurgical testing that was conducted before the gold mine was designed and built indicated: o Gold recovery is sensitive to particle size; the target grind size was P80 of 54 µm to achieve a gold recovery between 88% and 92% at a retention time of 24 hours. At the current grind size (i.e., P80 approximately equal to 65 µm), the gold recovery is reduced to approximately 87%. o The Bond work index of the samples ranged from 16.5 kWh/t to 18.5 kWh/t.
• Current production statistics indicate that the process flow sheet is adequate and suitable for processing the MRDM ore types.
• Further optimization of the circuit is expected to improve production throughput and recovery once the operation can be run at steady state.
INFRASTRUCTURE • Electricity is currently supplied at the Mine by eight diesel-powered generators, with two more generators to be leased, and estimated to be on site by December 2015. These additional generators should allow the plant to operate at or near full capacity. Neither the benefit nor costs have been included in the economic evaluation presented in this Technical Report. For the long term, MRDM is planning to tap into the Brazilian national electric grid operated by CEMIG with plans to be on line in 2018. Grid power will greatly reduce operating costs and allow the processing plant to be operated under design conditions.
• The Mine is susceptible to drought. For full production, MRDM requires approximately 1.2 million m3 per year of make-up water. Insufficient rainfall has impacted mill production in 2015. Recommendations from Knight Piésold Pty Ltd consultants in August 2015 are to improve harvesting of precipitation that enters the Mine area, build an additional raw water supply dam, and/or harvest water from external sources. All of these options are being investigated by MRDM and are subject to the necessary permit approvals. Currently, MRDM is in the process of permitting an additional water storage facility.
• The majority of the workers who reside in small towns within 20 km of the site are transported to the Mine by commercially operated buses. MRDM provides subsidies for transportation in accordance with the law that governs the “Vale-Transporte”, whose monthly costs cannot exceed 6% of the worker’s salary.
• The Mine is located in an easily accessible location in Minas Gerais in Brazil at elevations that range from approximately 770 MASL to 900 MASL. The driving distance to the Mine from Belo Horizonte is 560 km, which takes between nine and
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11 hours on the existing roads. The nearest commercial airport is located in Montes Claros approximately 170 km from the mine site.
• The nearest major hospital is in Montes Claros (170 km away), however, Riachos dos Machados (15 km away) has a health clinic. The medical staff is provided by a contractor. It includes two nurses located on site and one doctor, who works four hours per day and is on call during his offsite hours.
ENVIRONMENTAL, SOCIAL, AND PERMITTING CONSIDERATIONS • The Mine is a conventional CIL operation that has proposed/incorporated environmental mitigation into daily operations (i.e., water mitigation, concurrent reclamation/closure design).
• No outstanding technical issues were identified for environment and permitting, however, the mining operational boundary does not allow mining into the down-dip and along strike continuity of the mineralization. The application for the expansion of the Mine operations is expected to reflect this project need. The application for this expansion was submitted to environmental authorities in July 2015 and is undergoing agency review.
• Historic acid rock drainage (ARD) issues and high concentrations of arsenic in ground and surface water need to be closely monitored to prevent offsite contamination of water resources. A comprehensive hydrogeological study has been requested by the Public Ministry and SUPRAM to assess the nature and extent of arsenic, lead, and other metals in ground and surface water. Based on the results of the studies, additional mitigating measures will be developed and implemented, if deemed necessary. The first monitoring campaign was conducted in June to July 2015. Mitigation of ARD has begun on the construction of the waste rock storage facility.
• ARD and offsite runoff are environmental issues that can be managed through good industry practices.
• MRDM has the necessary in-country permits and licenses to operate in compliance with Brazilian regulations. Additional permits will be obtained, as needed, to accommodate the future Mine operations.
ECONOMIC ANALYSIS • The Mine is currently an active mining and processing operation, however, there are a number of areas that remain to be completed. These include an additional tailings disposal facilities, a water reclaim system from the tailings dam, and a power line. Capital cost allocations have been made in the financial analysis for the items that are required.
• The economic analysis assumes an average recovery over the life of the mine. Since the proportions of oxide, transition, and fresh or sulfide ore change over time, using an average recovery may not produce an accurate short-term estimation of the cash flow, however, this averages out over the mine life.
• The LOM mining and processing schedules do not include Inferred Resources. No Inferred Resources were included in the processing plan as this procedure is
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standard engineering practice. If Brio can convert the Inferred Resources to Mineral Reserves, then this would increase the mine life.
• The most recent cost estimate was completed using 2013 US dollar costs. These costs have been updated to reflect the current plan for the Mine and current prices. The majority of the capital and operating cost estimates were completed in Brazilian Reais. RPA has converted the MRDM estimates using a 4.0 to 1 (R$:US$) exchange ratio.
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26 RECOMMENDATIONS
RECOMMENDATIONS RPA makes the following recommendations: • Carry out additional drilling to upgrade Inferred Mineral Resources at the Mine, as time and budget permits.
• Conduct drilling and interpretive work along strike both north and south of the deposit to increase the Mineral Resource estimate for the Mine, as time and budget permits.
• Evaluate the modification of the grade control drilling to merge into a comprehensive program for grade control and blasting. Additionally, the blasthole design should be evaluated for blasting efficiency.
• Evaluate the use of MRDM’s larger trucks for waste mining instead of the smaller units employed by the mining contractor.
• Evaluate the lease/purchase of either small hydraulic shovels or front-end loaders for the loading of waste, as compared to the existing fleet of track excavators.
• Evaluate the impact of the grind size that can be achieved versus recovery and plant throughput to maximize the cash flow.
• Evaluate the changes in recovery based on ore types and head grades in order to provide more detailed information for the economic analysis and improve the accuracy.
• Complete installation of the grid power supply, which is scheduled to be on line in 2018, in order to reduce costs and allow the processing plant to operate as designed.
• Develop a comprehensive and over-arching Permit Register to consolidate information related to required operational permits, agreements, and other applicable requirements. This information is currently tracked in multiple tables. The Permit Register should be part of an integrated environmental and social management system.
• Provide more detail in the environmental operating budget, such as costs for installation of a groundwater monitoring network, costs for contracted environmental monitoring, etc.
• Fully evaluate and update the water balance in order to confirm the availability of water to meet the needs of the Mine, understand the requirements for water storage, and to build the water storage facilities that are required to supply an adequate source of fresh water.
• Re-evaluate the mining cost, focusing on contractor costs, powder factor, maintenance, and rebuild and replacement costs, slope stability/control, and manpower.
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• Re-evaluate and adjust general and administrative (G&A) costs to account for replacement of electric power by CEMIG, haulage, site maintenance, water pumping costs, and expatriate labor costs.
• Update the capital and operating cost estimates to reflect the current equipment selection, and the intended operating plan.
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27 REFERENCES
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Sarunic, W., 2014, MRDM Gold Operation - Geotechnical Slope Design Study, Xstract Mining Consultants, Perth, WA, Australia, 385 p. (October 2014).
Sarunic, W., 2015, MRDM Gold Operation - Geotechnical Review Study, Xstract Mining Consultants, Perth, WA, Australia, 36 p. (February 2015).
SGSGEOSOL Laboratorio Metalurgico, 2009, Leaching kinetics of three RDM samples, 15 pgs: Tartarotti, F., Savassi, O., Belo Horizonte, Brasil; private report to Carpathian Gold (January 15, 2009).
Stevenson, B., 2015, Site Water Balance Modelling, Carpathian Gold Inc., Memorandum by Knight Piésold Consulting Pty Ltd, August 2015.
SUPRAM, 2012, Portaria No. 00942/2012, Barramento, Montes Claros (Brazil): Superintendência Regional de Regularização Ambiental.
SUPRAM, 2012, Portaria No. 00935/2012, Cava, Montes Claros (Brazil): Superintendência Regional de Regularização Ambiental.
SUPRAM, 2012, Poetaria No. 0384/2011, Barramento para Disposição de Rejeitos, Montes Claros (Brazil): Superintendência Regional de Regularização Ambiental.
SUPRAM, 2012, Autorização Ambiental de Funcionamento No. 1006117/2012, Montes Claros (Brazil): Superintendência Regional de Regularização Ambiental.
Tecnomin, 2011, Technical Report on the Resource Estimate Update and the Feasibility Study for Riacho dos Machados Gold Deposit, prepared by Tecnomin Projetose Consultoria Ltda. (Tecnomin), for Carpathian Gold Mines Ltd. (May 20, 2011).
Watergeo Solutions, 2014, Avaliação Hidrogeológica *WGS-RT059-03P-14), Riacho dos Machados (Brazil) - Technical Report:Watergeo Solutions.
Xstract Mining Consultants Pty Ltd, 2015, MRDM Gold Operation Geotechnical Review February 2015, Effective Date March 2015 (Draft Report).
YKS Serviços, 2010, Plano de Controle Ambiental, Riacho dos Machados (Brasil): YKS Serviços.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 27-3 www.rpacan.com
28 DATE AND SIGNATURE PAGE
This report titled “Technical Report on the, Riacho dos Machados Gold Mine, State of Minas Gerais, Brazil” and dated December 16, 2015 was prepared and signed by the following authors:
(Signed and Sealed) “Mark B. Mathisen”
Dated at Denver, CO December 16, 2015 Mark B. Mathisen, P. Geo. Principal Geologist
(Signed and Sealed) “Stuart E. Collins”
Dated at Denver, CO December 16, 2015 Stuart E. Collins, P.E. Principal Mining Engineer
(Signed and Sealed) “Kathleen Ann Altman”
Dated at Denver, CO December 16, 2015 Kathleen Ann Altman, P.E., Ph.D. Principal Metallurgist and Director of Metallurgy and Mineral Processing
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 28-1 www.rpacan.com
29 CERTIFICATE OF QUALIFIED PERSONS
STUART E. COLLINS I, Stuart E. Collins, P.E., as an author of this report entitled “Technical Report on the Riacho dos Machados Gold Mine, Minas Gerais, Brazil” prepared for Brio Gold Inc. and dated December 16, 2015, do hereby certify that:
1. I am Principal Mining Engineer with RPA (USA) Ltd. of 143 Union Boulevard, Suite 505, Lakewood, Colorado, USA 80228.
2. I am a graduate of South Dakota School of Mines and Technology, Rapid City, South Dakota, U.S.A., in 1985 with a B.S. degree in Mining Engineering.
3. I am a Registered Professional Engineer in the state of Colorado (#29455). I have been a member of the Society for Mining, Metallurgy, and Exploration (SME) since 1985, and a Registered Member (#612514) since September 2006. I have worked as a mining engineer for a total of 29 years since my graduation. My relevant experience for the purpose of the Technical Report is: • Review and report as a consultant on numerous exploration, development and production mining projects around the world for due diligence and regulatory requirements; • Mine engineering, mine management, mine operations and mine financial analyses, involving copper, gold, silver, nickel, cobalt, uranium, coal, and base metals located in the United States, Canada, Mexico, Turkey, Bolivia, Chile, Brazil, Costa Rica, Peru, Argentina, and Colombia. • Engineering Manager for a number of mining-related companies; • Business Development for a small, privately owned mining company in Colorado; • Operations supervisor at a large gold mine in Nevada, USA; • Involvement with the development and operation of a small underground gold mine in Arizona, USA.
4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101.
5. I visited the MRDM Mine on November 4 to 6, 2014, February 23 to 28, 2015, and October 26 to 29, 2015.
6. I am responsible for the overall preparation of this report, and specifically for Sections 2 to 6, 15, 16, 19, 20, and 22 of the Technical Report. I share responsibility with my co- authors for Sections 1, 21, 23, 24, 25, 26, and 27.
7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.
8. I have previously prepared two due diligence reports on the property that is the subject of the Technical Report.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-1 www.rpacan.com
9. I have read NI 43-101, and the Technical Report has been prepared in compliance with NI 43-101 and Form 43-101F1.
10. At the effective date of the Technical Report, to the best of my knowledge, information, and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
Dated this 16th day of December, 2015
(Signed and Sealed) “Stuart E. Collins”
Stuart E. Collins, P.E.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-2 www.rpacan.com
MARK B. MATHISON I, Mark B. Mathisen, CPG, as an author of this report entitled “Technical Report on the Riacho dos Machados Gold mine, Minas Gerais, Brazil” prepared for Brio Gold Inc. and dated December 16, 2015, do hereby certify that:
1. I am Senior Geologist with RPA (USA) Ltd. of Suite 505, 143 Union Boulevard, Lakewood, Co., USA 80228.
2. I am a graduate of Colorado School of Mines in 1984 with a B.Sc. degree in Geophysical Engineering.
3. I am a Registered Professional Geologist in the State of Wyoming (No. PG-2821) and a Certified Professional Geologist with the American Institute of Professional Geologists (No. CPG-11648). I have worked as a geologist for a total of 20 years since my graduation. My relevant experience for the purpose of the Technical Report is: • Mineral Resource estimation and preparation of NI 43-101 Technical Reports. • Director, Project Resources, with Denison Mines Corp., responsible for resource evaluation and reporting for uranium projects in the USA, Canada, Africa, and Mongolia. • Project Geologist with Energy Fuels Nuclear, Inc., responsible for planning and direction of field activities and project development for an in situ leach uranium project in the USA. Cost analysis software development. • Design and direction of geophysical programs for US and international base metal and gold exploration joint venture programs.
4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101.
5. I visited the MRDM Mine on October 26 to 29, 2015.
6. I am responsible for Sections 7 to 12 and 14 of the Technical Report and contributed to Sections 1, 25, 26, and 27.
7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.
8. I have had no prior involvement with the property that is the subject of the Technical Report.
9. I have read NI 43-101, and the Technical Report has been prepared in compliance with NI 43-101 and Form 43-101F1.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-3 www.rpacan.com
10. At the effective date of the Technical Report, to the best of my knowledge, information, and belief, the sections for which I am responsible in the Technical Report contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
Dated this 16th day of December, 2015
(Signed and Sealed) “Mark B. Mathisen”
Mark B. Mathisen, CPG
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-4 www.rpacan.com
KATHLEEN ANN ALTMAN I, Kathleen Ann Altman, P.E., as an author of this report entitled “Technical Report on the Riacho dos Machados Gold mine, Minas Gerais, Brazil” prepared for Brio Gold Inc. and dated December 16, 2015, do hereby certify that:
1. I am Principal Metallurgist and Director, Mineral Processing and Metallurgy with RPA (USA) Ltd. of Suite 505, 143 Union Boulevard, Lakewood, Co., USA 80228.
2. I am a graduate of the Colorado School of Mines in 1980 with a B.S. in Metallurgical Engineering. I am a graduate of the University of Nevada, Reno Mackay School of Mines with an M.S. in Metallurgical Engineering in 1994 and a Ph.D. in Metallurgical Engineering in 1999.
3. I am registered as a Professional Engineer in the State of Colorado (Reg. #37556) and a Qualified Professional Member of the Mining and Metallurgical Society of America (Member #01321QP). I have worked as a metallurgical engineer for a total of 34 years since my graduation. My relevant experience for the purpose of the Technical Report is: • Review and report as a metallurgical consultant on numerous mining operations and projects around the world for due diligence and regulatory requirements. • I have worked for operating companies, including the Climax Molybdenum Company, Barrick Goldstrike, and FMC Gold in a series of positions of increasing responsibility. • I have worked as a consulting engineer on mining projects for approximately 15 years in roles such a process engineer, process manager, project engineer, area manager, study manager, and project manager. Projects have included scoping, prefeasibility and feasibility studies, basic engineering, detailed engineering and start-up and commissioning of new projects. • I was the Newmont Professor for Extractive Mineral Process Engineering in the Mining Engineering Department of the Mackay School of Earth Sciences and Engineering at the University of Nevada, Reno from 2005 to 2009.
4. I have read the definition of "qualified person" set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI 43-101.
5. I visited the MRDM Mine on November 4 to 6, 2014
6. I am responsible for Sections 13, 17, and 18 of this report and contributed to Sections 1, 21, 22, 25, 26, and 27 of the Technical Report.
7. I am independent of the Issuer applying the test set out in Section 1.5 of NI 43-101.
8. I have been involved in internal reviews of the property that is the subject of the Technical Report.
9. I have read NI 43-101, and the Technical Report has been prepared in compliance with NI 43-101 and Form 43-101F1.
10. At the effective date of the Technical Report, to the best of my knowledge, information, and belief, the sections for which I am responsible in the Technical Report contain all
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-5 www.rpacan.com
scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
Dated this 16th day of December, 2015
(Signed and Sealed) “Kathleen Ann Altman”
Kathleen Ann Altman, P.E.
Brio Gold Inc. - Riacho dos Machados Gold Mine, Project 2555 Technical Report NI 43-101 – December 16, 2015 Page 29-6