Evaluación de Minas

• Valor Actual Neto

• “VAN”

• Tasa Interna de Retorno

• “TIR”

• Tiempo de Retorno de la Inversión

• “Payback”

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2015-II
Feasibility Study NI 43-101
Technical Report

THE SANTA ROSA

GOLD PROJECT October 27,
2014

Yanlui Velásquez Cárdenas

2015-II
 1. Summary
Project : Feasibilyty Study of the Santa Rosa Gold

Report : CIM Canada National Instrument 43-101 Technical Report

Location : Department of Antioquia to the Northern Colombia.

Resources Mineral : Cut off grade: 1.2%Au g/t

Measured Indicated : 4,153 K Tonnes @ 3.59 g Au/t @ 479 K Ozs A
Inferred : 1,524 k Tonnes @ 2.72 g Au/t @ 133 K Ozs Au

Reserves Mineral : Cut off grade : Au g/t (Oxides:1.96 Mixed:2.14 Sulfide:1.20 )

Proven Probable :2,424 K Tonnes @ 5.20 g Au/t @ 405 K Ozs Au
Price Au : 1,300 US$/oz Au

Mining Cost UG : $ 37.36 per tonne Cash Cost: $265.61 per ounce of gold
produced
Plant : $ 24.11 per tonne of ore processed or Cash Cost: $171.48 per ounce
G&A : $ 9.68 per tonne
Plant + G&A : $ 33.80 per tonne of ore processed or Cash Cost: $240.35 per ounce of gold

Capex : $ 69.90 M Mine : 9.64 M US$ Plant & Infrastructure: 59.25 M US$
* Sustaining Capital: 32.88 M US$ * Working Capital :4.02 M US$

Oxide Mixed Sulfide

Recoveries : Milling Au 95.0% 87.0% 93.0%
Payable 99.5% 99.5% 99.5%

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2015-II
 1. Summary

Project :Feasibilyty Study of the Santa Rosa Gold

Report :CIM Canada National Instrument 43-101 Technical Report

Deposit Type : Mesothermal or orogenic and intrusion-hosted gold veins

Mineralization :Sulfide-mineralized quartz veins or as steep high-grade quartz-sulfide veins

Mining Method : Mechanized Shrinkage with Delayed Fill

Mine Development :28 km of development drifts over the mine life, and averaging 3.5 km per year.

Plant throughput : 1,000 tpd

360,000 tpa with provision for future expansion to at least 720,000 tpa;

Metallurgical recoveries : 95%&

Mechanical availability : For the process plant of 91.3%;

Geotechnical : the quality for the hanging and foot walls is expected to be good to very
good with minimal support requirements for 20 m spans or less.

Hydrological : The mine design for pumping has been conservatively sized for an initial
inflow of 5 L/sec, rising to 10 L/sec as the operations increase with depth

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2015-II
 Economic Analysis
Financial
Assumptions Performance Indicators

The economic analysis was developed for the Santa Rosa Gold Project
using:

1. The production schedule along with capital and operating costs.

2. The diluted Proven and Probable reserves.
3. The generated cash-flow model was carried out on a pre-tax and
post-tax basis.

4. Net gross revenues were estimated using a $1,300 per ounce gold
price with revenue deductions for royalties, refining, transportation
and insurance costs.

5. Cash cost calculations use the total operating cost + royalties divided by the payable gold ounces.
6. Total costs are calculated using the total costs (operating and capital) + royalties and taxes divided by the payable gold ounces.

7. The cash-flow model calculates the Net Present Value (NPV) based on a discounted rate of 0% (undiscounted), 5% and 8%. The
base case considers the NPV at 5%.
8. The Internal Rate of Return (IRR) on total investment and the payback period were also calculated.

A sensitivity analysis was also conducted on parameters that are deemed to have the biggest impact on the Project financial
performance (capital cost, operating cost and gold selling price).

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2015-II
 Principal Assumptions

1. Life-of-Mine Process Plant Feed Schedule and Recovery 2. Gold Selling Price, Exchange Rate and Escalation

• Gold Price: US$ $1,300 per ounce.

• The exchange rate of $1,900 COP per US$
• No sensitivity analysis was conducted for fluctuations in
exchange rate. Escalation is not applied in the cash-flow
model.

3. Revenue Deductions - Refining Costs and

. Royalties

• Refining, transportation and insurance costs of US$ 6.10 per

ounce of gold produced.
• The presents the “State” and “LMM” royalties applied to the
cash-flow model.
• Producing mines in Colombia are subject to a federal royalty
of 4.0% of the gross value of gold and silver production at
80% of the current London gold price so the royalty becomes
in effect 3.2% (under a modification of mining law 685 of
2001).
• The “LMM” royalty of 3.0% refers to the royalty held by Liberty
Metals and Mining

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 Principal Assumptions

4. Land Reclamation Cost 5. Working Capital 6. Depreciation

• Cost of US$1.0 million is applied to the
operating costs. Third of this cost is
covered in the second last year of
production (Year 7) and the remainder is
covered in the final year of production
(Year 8).
• This cost assumes a reasonable salvage
value from the dismantling of the
process plant offsetting the reclamation
cost. .
• A working capital allowance of US$4.01
million is applied to the Project cash-flow
model.
• This covers 2 months of operating costs
(mine, process plant and G&A).
• This is included to fund the project from
the time production starts until the receipt
of payment for the doré sales.
• Declining balance depreciation at a rate
of 25% was applied to capital spent to
reduce taxable income in the cash-flow
model once the mine is in production.
• The depreciation model and rate were
provided by Red Eagle Mining

7. Taxes

• Income taxes were estimated based on information provided to Lycopodium by Red Eagle Mining and its financial advisors.
• Corporate taxation and revenue streaming is applied to cash-flow model for the Project.
• Red Eagle Mining is adopting revenue streaming between its branches in Colombia and Barbados.
• The cash-flow model uses a corporate taxation rate of 33% on taxable income in Colombia and 1.75% on taxable income in Barbados.

• Red Eagle Barbados is to fund $25 million US dollars in equity, amortised over the 8-year LOM, for the development by purchasing the right to buy all the
gold doré produced from Red Eagle Mining de Colombia for US$1,200 per ounce. This forms the basis for the revenue streaming system of the Project.

• The taxable income in Colombia included the gross free cash-flow less deductions for:
Exploration and acquisition cost amortization of $35 million, carried over 5 years;
Declining balance depreciation at 25% on capital spent, fully depreciated at the end of LOM;

• Using the revenue streaming system, any revenue above $1,200 per ounce is taxable in Barbados. .

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2015-II
 Principal Assumptions
8. Cash-flow Model

• A cash-flow model was created based on the production schedule, cost inputs, and economic parameters
previously discussed.

• Sunk Cost:
• The exploration phase of the project and other project-related expenses are considered sunk costs, which are
included in the cash-flow model.

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2015-II
Cash Flow

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2015-II
Cash Flow

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2015-II
 Economic Sensitivity

• A sensitivity analysis has been completed using the cash-flow model based on changes in operating costs, capital
costs, and gold prices to investigate the sensitivity of:
• the undiscounted cash-flow,
• NPV net present value,
• Payback period, and
• IRR, Internal Rate of Return.

• The cash-flow model’s sensitivity to operating costs, capital costs, and gold price is presented.

• The pre-tax sensitivity of gold selling price, net present value, and internal rate of return to changes in revenue,
operating cost, and capital costs are shown, and Post-tax sensitivity charts are shown else.

• As typical with most precious-metals mining projects, the Project is most sensitive to changes in the revenue or
more specifically metal prices as shown in the slope of the revenue lines.

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2015-II
Economic Sensitivity

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Price Au = 1,300 US$/oz

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2015-II
Economic Sensitivity

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Economic Sensitivity

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Detail
Study Feasibility

Yanlui Velásquez Cárdenas

2015-II
1. Location
The Santa Rosa Gold Project is accessible from the city of Medellín,
which has an international airport, via paved Highway 25 north-northeast
through Copacabana and Don Matías for approximately 65km to a turn-off
located 12km south of Santa Rosa de Osos. From the turn-off to the east,
it is approximately 8km to the Red Eagle Mining camp on an unpaved
road

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2. Mineralization
Mineralization

• Hypogene gold mineralization

within the Santa Rosa Gold Project
is generally associated with the
shear zones developed in
homogeneous diorite country rock,
with higher grades occurring in the
associated sulfide-mineralized
quartz veins or as steep high-
grade quartz-sulfide veins.

• There are also related saprolitic

gold deposits (Figure 7.4) and
colluvial gold deposits, both of
which have been mined by
artisanal miners underground and
in hydraulically mined areas known
locally as “baticiones.” The shear
zones and veins are best exposed
in adits and baticiones.

Yanlui Velásquez Cárdenas

2015-II
 3. Deposit Type
• Gold mineralization in the Santa Rosa Gold Project
has characteristics in common with mesothermal
or orogenic and intrusion-hosted gold veins.

• Mineralization of these types consists commonly of

quartz and quartz-carbonate veins located in
moderately to steeply dipping, brittle-ductile shear
zones and locally in shallow-dipping extension
fractures.

• Veins commonly extend along strike and down dip

over very significant distances and occur alone or,
typically, in complex vein networks and shear zones.
Vein minerals are mostly quartz and carbonates with
minor native gold, pyrite, and base metals sulfides.
Veins are usually massive or ribbon-textured, but
vein breccias and drusy, crystalline quartz can also
occur. Wall-rock alteration is zoned and consists of
carbonate (often ankerite), sericite, and pyrite.
Volcano-plutonic Magmatic Arcs and Major
Intrusions of the Northern Andes

Yanlui Velásquez Cárdenas

2015-II
4. Metallurgical Test

In 2014 the metallurgical program for this Feasibility Study was oriented towards
samples that reflected the range of head grades expected in the underground
operation, namely 2 to 9 g Au/t.

This program has been conducted by McClelland Laboratories, Inc. in Sparks,

Nevada.

• Three process options have been tested in detail:

Whole ore cyanide leaching of finely ground ore in an agitated leach

circuit;
Initial gravity concentration of the coarse gold, followed by grinding and
agitated cyanide leaching of the combined gravity tailings; and
A fairly coarse primary grind (P80 of 125 microns), followed by flotation
of the sulfides. The resulting rougher concentrate is then reground to a
P80 of 20 microns, blended back into the flotation tailings, and the combined
product is cyanide leached in an agitated circuit.

Yanlui Velásquez Cárdenas

2015-II
5. Recovery Methods and Process
Plant Design
• An overall process plant flowsheet which includes grinding and flotation followed by concentrate
regrinding.
• The flotation tailings and reground concentrate are together leached in a CIL circuit. Cyanide in the CIL
tailings will be detoxified using the SO2 / Air process prior to the tailings being filtered. Part of the filtered
tailings will be dry stacked in a dry waste management facility (DWMF), the balance will be used as
backfill in the mine. Filtrate will be recycled back to the process plant to minimise the raw water
requirement.

• The process plant for the Santa Rosa Gold Project is based on a robust metallurgical flowsheet
designed for optimum recovery with minimum operating costs. The flowsheet is based upon unit
operations that are well proven in industry.

• The key project and ore specific criteria that the plant design must meet are:
The plant is designed for an initial throughput of 360,000 tpa with provision for future
expansion to at least 720,000 tpa;
Testwork shows that the ore is of medium hardness with average head grades over the life
of the project of 4.57 g/t gold and 8.5 g/t silver;
Mechanical availability for the process plant of 91.3%;
A level of automation to reduce the technical complexity of the plant with manual operation
where practical;
Equipment selection for reliability and ease of maintenance; and
Layout for ease of access to all equipment for operating and maintenance requirements
whilst maintaining a compact footprint that will minimise construction costs

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2015-II
5. Recovery Methods and Process
Plant Design

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2015-II
 6. Mineral Resources
Cut off grade
• 2012 : Open Pit: 0.3 g Au/t.
• 2013 : Open-pit:0.3g Au/t & Underground:1.2g Au/t.
• 2013: Underground: 1.2g Au/t

Tonnes and grade:

• 4,153 K Tonnes @ 3.59 g Au/t @ 133 K Ozs Au

Yanlui Velásquez Cárdenas

2015-II
• Mineral Resources
Gold Block Model Section 856500E Gold Block Model Section 857700
 7. Reserves Mineral
• Tonnes and grade:
• 2,424 K Tonnes @ 5.20 g Au/t @ 405 K Ozs Au

• Average minimum width is 3.0 meters

• Dilution 7.2% = 334 Tonnes

• Cut off grade:

• Oxides = 1.96 g Au/t.
• Mixed = 2.14 g Au/t .
• Sulfide = 1.20 g Au/t

• Price : 1,300 US$/oz Au

Reserves have been classified in order of increasing confidence into Proven and Probable categories to be in compliance with the
“CIM Definition Standards - For Mineral Resources and Mineral Reserves” (2014) and therefore Canadian National Instrument 43-101.

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2015-II
• Reserves Mineral

Yanlui Velásquez Cárdenas

2015-II
8. Parameters

Geotechnical Hydrological

• the quality for the hanging and foot •
walls is expected to be good to very
good with minimal support
requirements for 20 m spans or less.
• Occasional support in the form of
bolting and shotcrete may be needed
The mine design for pumping has been
conservatively sized for an initial inflow
of 5 L/sec, rising to 10 L/sec as the
operations increase with depth

Mining Method

• Underground mining
• The mining method selected is
Mechanized Shrinkage with
Delayed Fill (“MSDF”).

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2015-II
9. Mining Method: Mechanized
Shrinkage with Delayed Fill

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2015-II
9. Mining Method: Mechanized
Shrinkage with Delayed Fill

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2015-II
10.1 Mine Development Schedules

• A total of almost 28 km of development drifts over the mine life, and

averaging 3.5 km per year.
• The main decline will eventually be 4.4 km in length at a 14% gradient.

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10. Development and Production Schedules

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10.2. Mine Production Schedules

• Metallurgical recoveries and the resulting gold production from the process
plant are also shown.

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 11. Overall Capital Cost (M US$)

• The total estimated cost of the overall project (mine plus process plant) is $ 69.90 million

• The capital cost estimate includes all the direct and indirect costs and appropriate project estimating contingencies
for all the facilities required to bring the Santa Rosa Gold Project into production.

• The estimate does not include any allowances for escalation, exchange rate fluctuations or project risks
• The capital cost estimate has a predicted accuracy of +/- 15%.

Yanlui Velásquez Cárdenas

2015-II
 11. Overall Capital Cost (M US$)

11.1 Mine Capital Costs

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2015-II
 11. Overall Capital Cost (M US$)

11.2 Plant and Site Infrastructure Capital Costs

• Major plant and site infrastructure included in the capital costs consists of the following:
Process plant; 44 kV power line and switch yard; Access road; Ponds; Ancillary buildings; and
DWMF.
• The average contingency for the process plant capital costs is 11.2%.

• Working capital was calculated based on the projected plant operating costs for the first two months of
operations.
 12. Total Operating Costs
Total Operating Costs

• The total average operating cost is estimated to be:

• Mine : $37.36 per tonne, $265.61 per ounce of

gold produced.

• Plant : $24.11 per tonne of ore processed or $171.48 per ounce

• G&A: $ 9.68 per tonne
• Plant + G&A : $33.80 per tonne of ore processed or $240.35 per ounce of gold produced.

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2015-II
 12. Operating Costs
12.1 Mine Operating Costs

• The overall average mine operating cost is estimated to be $37.36 per tonne, or $265.61 per ounce of gold
produced.
• The accuracy of the mine operating cost estimate is expected to be within ± 15%.
• The operating costs estimated during pre-production have been included in the capital costs.

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 12. Operating Costs
12.2 Process Plant Operating Costs

• $24.11 per tonne of ore processed or $171.48 per ounce of gold produced.
• With inclusion of G&A costs of $9.68 per tonne, the total annual operating cost is $33.80 per tonne of ore processed
or $240.35 per ounce of gold produced.

• The operating cost estimate includes five major categories as defined below:
Process plant labour; Operating consumables; Power; Maintenance; and General and administration

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2015-II