View Report - Lexam VG Gold Inc.

Transcription

V G G o ld C o r p .
Fuller Project
Preliminary Economic Assessment
March 2008
VETRIN
Mine Planners Ltd.
R. D. Moran P. Eng.
P.A. Bevan P. Eng.
Consulting Mining
Geologist
J. R. Doran P. Eng.
VETRIN
Mine Planners Ltd.
TABLE OF CONTENTS
Section 1.0 SUMMARY……………………………………………………………...…
INTRODUCTION:
PROPERTY DESCRIPTION AND LOCATION:
LOCAL INFRASTRUCTURE AND RESOURCES:
HISTORIC DRILLING:
GEOLOGICAL SETTING:
DEPOSIT TYPES:
DATA VERIFICATION:
MINERAL PROCESSING:
MINERAL RESOURCE ESTIMATES:
ECONOMIC ANALYSIS:
RECOMMENDATIONS:
Section 2.0 TERMS OF REFERENCE
Section 3.0 RELIANCE ON OTHER EXPERTS
Section 4.0 PROJECT BACKGROUND INFORMATION
Section 5.0 GEOLOGICAL SETTING
Section 6.0 EXPLORATION DRILLING
Section 7.0 ASSAY QUALITY CONTROLS
Section 8.0 MINERAL PROCESSING
Section 9.0 HW and CW ZONE RESOURCES
Section 10.0 PERMITTING, SOCIAL CONSULTATION & ENVIRONMENTAL
COMPLIANCE
Section 11.0 PROJECT BUDGET & ECONOMICS
Section 12.0 CONCLUSIONS
Section 13.0 RECOMMENDATIONS
Section 14.0 REFERENCES
Section 15.0 APPENDIX
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List of Tables
Table 1.1 - Mining Resource Summary
Table 1.2 - LOM Cash Flow
Table 4.1- Claim List
Table 9.1- Undiluted Resource Estimate @.075 oz cut-off
Table 9.2- Stope Block Tons & Grade Summary
Table 11.1- Closure Bond, Surface plant & Mine Dewatering Budget
Table 11.2- Unit Mining Costs
Table 11.3- Mining Cost Summary
Table 11.4- Internal rate of Return
Table 11.5- Cash Flow Sensitivity Analysis
Table 11.6- 2008 – 2013 Cash Flow Forecast
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List of Figures
Figure 1.1- Regional Location Map
Figure 1.2- Fuller Project Location in the Timmins Gold Camp
Figure 4.1- Timmins Mining Camp Gold Production
Figure 4.2- Fuller Property & VG Gold Corp. Adjoining Property
Figure 4.3- MNDM Land Tenure
Figure 5.1- Regional Geology
Figure 5.2- Property Geology
Figure 9.1- Hanging Wall Zone Long Section
Figure 9.2- Contact Zone Long Section
Figure 11.1- Fuller Project –Location & Surroundings
Figure 11.2- 375 Haulage GA
Figure 11.3- 650 Haulage GA
Figure 11.4- 500 Sill GA
Figure 11.5 150 Sill GA
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1.0 SUMMARY
Introduction:
The Fuller Project is a proposed underground mining program which will extract 824,400 tons of ore
in order to recover 153,970 ounces of gold bullion. Phase I of the mine plan expands the existing
ramp access and lateral development to the 650 foot level in order to mine 476,000 tons while Phase
II of the plan involves deepening of the ramp to the 950 foot horizon and associated lateral work to
extract an additional 348,400 tons.
The overall activities will consist of dewatering, mine rehab, surface plant procurement and setup,
22,000 feet of lateral and vertical development and shrinkage mining of multiple ore blocks. The
waste produced during this project will be stockpiled on site. Ore grade material will be trucked via
highway haulage equipment to a local mill for processing under a custom milling agreement. The
tailings will be stored in the custom mill’s existing tailings pond and will be treated and monitored
by the custom miller.
Exploration on the property began in 1910 through to the 1920’s and 30’s resulting in a small scale
mining operation in 1940. Belmoral Mines completed 10,000 feet of underground development work
during the period from 1986 to 1989. VG Gold Corp.’s direct exploration activity began in 1996 in
the form of over 120,000 feet of diamond drilling from 1996 to 2007. Wardrop prepared the NI 43101 compliant mineral resource estimate in May of 2006. Access to this report can be achieved by
viewing VG Gold’s press releases on the Sedar.com website. The mineral resources outlined in this
report were reviewed with the assistance of Peter Bevan, P. Eng., an independent consulting
geologist with over 25 years of mine operations, exploration and property evaluation experience.
From this review, ore grade mining blocks where delineated and volumes and grade calculated.
These mining resources then became the basis for the overall mining plan and budget.
VG Gold Corp. has also advanced the permitting process up to and including, submission of an
application for a C of A to discharge process water, and is in the final stage of fulfilling the
requirements in order to submit a closure plan for approval. Public consultations have been held to
respond to and address their issues. The writer has been informed by VG Gold personnel that
consultations with the First Nations have taken place.
Mr. Tom Meredith, President of VG Gold Corp., has engaged Vetrin Mine Planners Ltd. (VMPL) to
prepare a preliminary economic assessment study for the Fuller deposit using the resources above
the 950’ level elevation.
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Property Description & Location:
The Fuller project is located within the city limits of Timmins Ontario which is located approximately
700 kms. north of Toronto, Ontario (figure 1.1). The Fuller property is on the south-central boundary
of Tisdale Township, approximately 3.5 miles southeast of the Timmins city centre.
VG Gold holds 100% interest in the Fuller property. The Fuller property consists of 14 patented
mining claims covering an area of about 207.22 hectares in Tisdale and Deloro Townships within the
Porcupine Mining Division. The claims comprise parts of nine separate surveyed lots and five unsurveyed lots. An inclined shaft excavated in 1920’s and a ramp-decline excavated in the 1980's are
collared on a single patented claim, called the “Fuller claim” (P13189). VG Gold owns both the
surface and mineral rights of the Fuller claim. The Fuller claim is the only claim that is not subject to
net profits interest (NPI). VG Gold also owns the mineral rights to surrounding properties; of which
50 claims are subject to an NPI with The Summit Organization, Inc amounting to a 10 % NPI
royalty on all tons mined within the 50 claims. This study does not analyse whether any part of the
mining resource to the 950 level falls outside the Fuller claim.
Figure 1.1
Regional Map Timmins Ontario
Timmins
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Local Infrastructure and Resources:
The Timmins area is well serviced by mine contracting and mine equipment suppliers. Several
underground gold mines (Hoyle Pond & Dome) are active under the Porcupine Joint Venture between
Kinross and Goldcorp. Xstrata and Liberty Resources are operating base metal mines for nickel, zinc
and copper and an open pit over the former Pamour mine is also active through the Porcupine Joint
Venture group.
Figure 1.2 illustrates the density of past mining activity around the project site.
Figure 1.2
Fuller Project Location in the Timmins Gold Camp
VG Gold Corp.
Fuller Project
Paymaster
Mine
1915 – 1966
1,192,206 oz.
City of Timmins
Aunor Mine
Buffalo
Ankerite/March
Mine
1926 -1953
Delnite Mine 1940 – 1984
1,019,130 oz.
2,502,214 oz.
1937-1964
920,404 oz.
VG Gold Corp.
Buffalo Ankerite
South Pit Project
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Historic Exploration:
A 228-foot inclined shaft (the “Edwards shaft”) was sunk some time after 1924. In 1940-1941
Nakhodas Mining Company Limited (“Nakhodas”) developed 2,100 feet of lateral workings at the
160 foot level, and mined 44,028 tons grading 0.149 oz/t Au (recovered) above the level in four
stopes. Nakhodas also drilled at least 10,919 feet of surface drilling in 41 drill holes (S 1 to S41).
In the late 1930's, Hollinger Consolidated Gold Mines conducted a 14,000 foot drilling program in
25 holes on the claims in Tisdale Township.
In the early 1950’s the Buffalo Ankerite mine explored the apparent down plunge onto their property
of the north limb of the Fuller zone from their #5 Shaft. This work was done on the 1,550 ft. and
2,550 ft. levels and records indicate the removal of 14,000 tons grading 0.21 ounces per ton. The
Buffalo Ankerite mine suspended operations in 1953.
Geological Setting:
Geology mapping in Tisdale Township depicts the Property as being underlain by a generally eastwest trending assemblage of massive and pillowed mafic metavolcanic flows with minor variolitic
flows. These have been traced onto the adjacent Goldcorp’s (formerly Placer Dome) Paymaster mine
and Dome mine properties to the east. To the west the units are traceable into complex fold
structures; part of the package is believed to be folded to the south around the South Tisdale
anticline, while the northerly part of the package appears to trend onto the Hollinger mine property
(Ferguson and others, 1968).
Deposit Type:
Gold mineralization on the VG Gold property belongs to the structurally controlled Archean lode
gold class of deposits. Structurally hosted, low-sulphide, lode gold vein systems in metamorphic
terrains from around the world possess many characteristics in common, spatially and through time;
they constitute a single class of epigenetic precious metal deposits, formed during accretionary
tectonics or continental delamitation.
Data Verification:
Wardrop carried out an internal validation from the original drill hole logs and the drill hole database
on 45 (5%) of the 880 drill holes in the total database. Data verification was completed on collar coordinates, end of hole depth, down-the-hole survey measurements, from and to footage
measurements of geology and assay sampling intervals, lithological unit and gold grades that were
compiled from hand written drill logs into an ACCESS database.
Most errors were insignificant and related to mistakes in transcription. Details of the verification are
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set out in Table 14.1 of the May 2006 Wardrop NI 43-101 report. The digitizing of drawings and
maps were validated on an on-going basis, with information being visually checked while importing
the digitized areas to Gemcom geological software. The data verification had an error rate lower then
less than 1%.
Mineral Processing:
At the time of this report VG Gold Corp. had not pursued any metallurgical testing on the Fuller
material. Records of the milling during the 1988 exploration program are not available for review.
Data recovered previously while evaluating VG Gold’s Buffalo Ankerite Project established a
historic figure for mill recoveries in the economic model.
Production statistics from the Ontario Department of Mines annual reports from the 1940’s indicate
that gold recoveries above 92% using the Merrill Crowe metallurgical process was the norm for the
Buffalo Ankerite, the property directly to the south of the Fuller claim. The potential custom mill
that is being considered for this project is a Merrill Crowe operation built in the late 1980’s.
Establishing milling characteristics such as energy requirements, retention times, and filtration rates
will be beneficial in establishing a base line for a custom milling agreement. Barring the discovery
of technical reports from the past, the option of sending core samples to a qualified lab would be
recommended to establish a base line for a custom milling agreement.
Mining Resource Estimate:
Ore polygons greater then 0.10 where grouped into practical mining blocks or stopes. In some cases
lower grade material was added to the stope profile to account for actual mining practices where the
use of gravity flow of material has to be designed into the stope profiles. These lower grade portions
have been factored into the overall grade calculation.
After accounting for 15% external dilution, a minimum mining width of 5 feet was used for volume
and grade estimates. Stope sizes ranged from 16,000 to 40,000 tons and in some cases carried
through to several haulage levels. There was no accounting for sill pillars or stope backfilling which
can occur during an actual mining operation.
Table 1.1
Mining Resource Summary to the 950’ Elevation – 15 % Diluted Tons and Grade
Total Diluted Tons &
Grade
Tons
Grade
Ounces
824,420
0.203
167,678
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Economic Analysis:
For the purpose of this evaluation, a 750 $US gold price and an exchange rate of 1.0 CDN was used
to establish a base price of $750 / oz. CDN for the revenue calculation. No inflation factor has been
included in the production costs. The cost of capital and corporate taxation has not been factored into
this evaluation.
Table 1.2 provides the LOM cumulative cash flow of the project. A detailed cost and revenue stream
is contained in Section 11, Table 11.6. Total recovered ounces for the project stands at 153,790 using
a mill recovery of 92%, which produces a recovered grade of 0.196 ounce per ton. The project
achieves a positive cash flow in year three in this model and generates a gross value of $13 million.
Total cost per ounce is estimated at $664.83 CDN. The calculated capital and operating cost per ounce
is $161.14 and $503.69 respectively. A daily ore production rate of 500 tons per day was used to
produce the development and mining schedule. Milling of the ore would be batched through a custom
mill in 15,000 ton monthly lots.
Table 1.2
LOM Cash Flow in (000’s) $CDN
CUMMULATIVE CASH FLOW
CASH FLOW AFTER CAPEX
UNITS
YEAR
2008
TOTAL
2009
TOTAL
2010
TOTAL
2011
TOTAL
2012
TOTAL
2013
PROJECT TOTAL
-$3,611
-$10,911
-$9,321
-$2,901
$5,004
$13,112
$13,112
Recommendations:
The economic model demonstrates a healthy IRR return of 28% using the parameters specified. The
Fuller deposit’s advanced nature in terms of completed diamond drilling and underground
development provides a major lead time advantage in achieving positive cash flow by the third year
of production. Vetrin Mine Planners Ltd. (VMPL) recommends that VG Gold Corp. proceed with
permitting and procurement of a milling agreement which are critical components to the project
going forward. All other data is available to proceed to a full feasibility study in order to optimize
and firm up the production plan. The short and long term benefits of the alternative mining methods
outlined in Section 13 can be evaluated and if warranted be incorporated in this study.
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2.0 TERMS OF REFERENCE
The Fuller property located in Timmins, Ontario contains historic underground mine production and
underground exploration workings dating back to 1924 in the form of the 228 foot deep “Edwards
Shaft” and a decline ramp to the 650 foot level dating from the 1980’s.
Mr. Tom Meredith, President of VG Gold Corp., has secured the services of Vetrin Mine Planners
Ltd. to complete a preliminary economic assessment for the mining of the Fuller Property’s
resources. A mining resource estimate has been prepared by Mr. Peter Bevan, P.Eng., an
independent consulting geologist.
All information contained in this report was compiled and gathered by VG Gold Corp. from recent
and past 43-101 compliant exploration drilling, and from past production data and studies completed
by others.
The Qualified Persons who contributed to this report include Mr. Peter Bevan, P.Eng., Mr. Rodney
Doran P.Eng., and Mr. Ronald Moran P.Eng. All three individuals have visited the project site as
recently as April 2007. The physical conditions of the project location were studied in order to locate
the following; ore stockpile, waste stockpile and settling pond & surface plant locations. For the
purpose of this study the ore will be trucked and milled via a custom milling agreement with a local
mill facility.
This study includes inferred mineral resources which are defined as being too speculative, to be
counted on as having a positive economic impact on the project.
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3.0
RELIANCE ON OTHER EXPERTS
The authors of this Technical Report have reviewed and analyzed data provided by VG Gold Corp.
and the technical team listed in Section 15.1 and have drawn their own conclusions therefrom,
augmented by its direct field examination. Vetrin has not carried out any independent exploration
work, drilled any holes or carried out any sampling and assaying. However, the presence of gold in
the local rocks is substantiated by the previous exploration and historic development work
completed on the property.
The authors have relied upon the data presented by VG Gold Corp. and from the feasibility technical
team in formulating its opinion, although all reasonable diligence in checking, confirming and
validating data was exercised. Vetrin accepts in good faith that VG Gold Corp. and the members of
the feasibility technical team, not working under Vetrin’s direct supervision, disclosed all relevant
data during the development and preparation of the feasibility study.
The various agreements under which VG Gold Corp. holds title to the mineral lands for this project
have not been investigated or confirmed by Vetrin and Vetrin offers no opinion as to the validity of
the mineral title claims. The description of the property, and ownership thereof, lease payments,
royalties, etc. as set out in this report, are provided for general information purposes only.
The description of the geology, mineralization, exploration and resource estimate included in the
Preliminary Economic Assessment (PEA) study and this report are based on the NI 43-101
Technical Report completed by Wardrop in May of 2006 and referred to as “Mineral Resource
Estimate of the Fuller Gold Property”. The location and volume calculations of the mining blocks
used in this study were compiled by the author with the assistance of P. Bevan, P. Eng.
All currency amounts are stated in Canadian dollars.
Quantities are stated solely in Imperial Units, due to the historical and current database existing in
Imperial Units, unless otherwise specified.
Vetrin Mine Planners Ltd. is pleased to acknowledge the helpful cooperation of VG Gold Corp.’s
management and the following consultants, Peter Bevan, P. Eng., Rodney Doran, P. Eng., and Ken
Guy, P.Geo., all of whom made available and all data requested, and responded promptly, openly
and helpfully to all questions, queries and requests for material.
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4.0 PROJECT BACKROUND INFORMATION
4.1 Property Description and Location
The Fuller property is located in the heart of the Timmins gold mining district, about three
kilometres southeast of Timmins (Figure 4.1). A paved road to Timmins, locally referred to as the
“Timmins Back Road”, crosses the northern part of the property. The dormant underground
workings on the Fuller claim are accessible by gravel covered side-roads. The southeastern portion
of the property is undeveloped, but there are roads within two kilometres of any point. There is an
electrical power line to the Fuller underground workings, an old warehouse building and a small core
shack building.
Figure 4.1
Timmins Mining Camp Gold Production
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4.1.2 Claims
VG Gold holds 100% interest in the Fuller property. The Fuller property consists of 14 patented
mining claims covering an area of about 207.22 hectares in Tisdale and Deloro Townships within the
Porcupine Mining Division. The claims comprise parts of nine separate surveyed lots and five unsurveyed lots as shown in Figure 4.2 and Figure 4.3, and as outlined in Table 4.1. An inclined shaft
excavated in 1920’s and a ramp-decline excavated in the 1980's are collared on a single patented
claim, called the “Fuller claim” (P13189). VG Gold owns both the surface and mineral rights of the
Fuller claim. The Fuller claim is the only claim that is not subject to net profits interest (NPI).
Table 4.1
Claim List
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Figure 4.2
Fuller Property & VG Gold Corp. Adjoining Properties
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Figure 4.3
MNDM Land Tenure Map
Fuller claim
Dobie claim
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5.0 GEOLOGICAL SETTING
(The following material has been extracted by the author from the NI 43-101 report by Wardrop
Engineering, dated May 3rd. 2006. This report can be read in full by downloading it from
www.sedar.ca under VG Gold Corp’s May 5th. 2006 news release)
5.0.1
Regional Geology
The geology of Tisdale Township and the northern part of Deloro Township is shown in Figure 5.1.
The Timmins area is underlain principally by Archean-aged supracrustal rocks of the southern
Abitibi greenstone belt. These rocks are subdivided into two major assemblages: the Deloro and
Tisdale groups. The Deloro group, approximately 4,500 to 5,000 metres in thickness, consists of a
lower volcanic formation of ultramafic rocks and diorite, a middle volcanic member of calc-alkaline
basalt and andesite with minor pyroclastic rocks, and an upper volcanic member consisting mainly
of calc-alkaline felsic pyroclastic rocks. Iron formation is common at or near the top of the sequence
(Pyke, 1982). In the stratigraphic reassignment of Jackson and Fyon (1991), the “Deloro
assemblage” consists only of the middle volcanic member, and the “Eldorado assemblage” consists
of the upper volcanic member.
The Tisdale group, estimated to be up to 7,000 metres thick, consists of a 300 to 3,000 metre thick
lower volcanic formation of komatiitic and tholeiitic basalt flows, a middle volcanic formation of
tholeiitic basalt, and an upper volcanic formation consisting dominantly of felsic calc-alkaline
pyroclastic rocks (Pyke, 1982). Jackson and Fyon (1991) include only the lower two formations in
the “Tisdale assemblage”, and the upper formation in the “Krist assemblage”.
A roughly 3,000 metre thick sequence of clastic sedimentary rocks (turbidites), known as the
Porcupine group was deposited from the time of the upper Deloro group through the period of
deposition of the Tisdale group (Pyke, 1982). Jackson and Fyon (1991) have included in the
“Porcupine assemblage” only those rocks within the Porcupine syncline.
Intrusive rocks in the district include sill-like bodies of ultramafic rocks intruded into the Deloro
group; they may be related to the overlying Tisdale group ultramafic volcanic rocks. There are many
small epizonal quartz-feldspar porphyry intrusions in the Porcupine district. Pyke (1982) notes that
many of them occur within a restricted stratigraphic interval, and they may therefore be subvolcanic
intrusions or volcanic domes; they tend to coalesce at depth, however, suggesting a deep-seated
intrusive origin (Jackson and Fyon, 1991). Most have been subjected to intense deformation. There
is also a strong spatial and possible genetic link between gold mineralization and porphyries. There
are northeast and north trending diabase dykes of early to late Precambrian age.
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Figure 5.1 Regional Geology
(not to scale)
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5.0.2 Regional Structures
The Porcupine-Destor fault is a major structural zone, which can probably be traced for a total
distance of 440 kilometres. It is at least 150 metres wide, shows evidence of left-lateral
displacement, and is offset by younger, brittle faults. On the north side of the fault zone, there have
been at least two periods of folding, consisting of a north trending series of folds and folds with an
east-northeast axis such as the Porcupine syncline. Hattori and Hodgson (1991) have interpreted five
periods of deformation; the Porcupine Destor fault zone and the Porcupine syncline are thought to be
relatively old.
5.1 GEOLOGY of the PROPERTY
5.1.1 General Setting
In the 1980's, VG Gold and Belmoral mapped the Fuller claim and immediately adjacent areas.
Wardrop is unaware of any recent detailed mapping of the main areas of interest. The simplified
geology of the Property is shown in Figure 5.2.
The most recent mapping available is by the Ontario Department of Mines (Ferguson, 1959 a,b;
Carlson, 1967; Ferguson and others, 1968).
Geology mapping in Tisdale Township depicts the Property as being underlain by a generally eastwest trending assemblage of massive and pillowed mafic metavolcanic flows with minor variolitic
flows. These have been traced onto the adjacent Placer Dome’s Paymaster mine and Dome mine
properties to the east. To the west the units are traceable into complex fold structures; part of the
package is believed to be folded to the south around the South Tisdale anticline, while the northerly
part of the package appears to trend onto the Hollinger mine property (Ferguson and others, 1968).
It has long been thought that the structure from the Edwards shaft to the Buffalo Ankerite south zone
is dominated by an S-shaped fold pattern expressed by the contact between an assemblage of largely
massive to pillowed metavolcanic flows on the west, and talc-chlorite schist (meta-ultramafic rocks)
with lesser mafic volcanic rock to the east and south (see Figure 5.2). The mineralization on the VG
Gold property occurs stratigraphically above what appears to be the contact between the older
ultramafic lower formation and the basaltic middle formation of the Tisdale group. The area south of
the Porcupine Destor fault is underlain by metasedimentary rocks (slate and argillite), rhyodacite and
other metamorphosed felsic volcanic rocks (sericitic schist), mafic metavolcanic flows and
agglomerate.
The geology is best known in the immediate area of the Fuller deposit in and around the VG Gold
ramp where the most thorough geological data has been collected in recent years.
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Figure 5.2 Property Geology
(not to scale)
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The ramp was put down in the vicinity of a proposed hinge of an interpreted easterly plunging, local
synclinal fold (the “Fuller syncline”). In a general south to north direction, the succession of rocks
includes talc-chlorite schist (metamorphosed ultramafic rocks), quartzfeldspar porphyry, pillowed
amygdaloidal basaltic flows, massive basaltic flows, and a series of alternating units of massive,
pillowed and amygdaloidal volcanic rocks (see Figure 5.2).
The porphyry is interpreted to have been intruded prior to folding. Hydro thermally altered volcanic
rocks, including a strongly altered unit with more than 50% quartz flooding, green mica and pyrite
mineralization, are spatially associated with the porphyry; there are also large folded zones of highly
carbonate altered volcanic rocks in contact with the porphyry stocks.
Although the concept of an easterly plunging local fold (the Fuller syncline) in the ramp area has
been used since at least the early 1980's, there is some doubt regarding its validity. In the 1980's VG
Gold interpreted a fold axis apparently plunging at 40 degrees (°) to 50° to the east, based on the
north limb of the “syncline” dipping about 70° to the south (to a depth of about 500 feet in the
vicinity of the Fuller deposit) and the western limb (around the “nose” of the fold) dipping about 50°
to the east. It should be noted, however, that a dip of at least 62° (probably about 70°) is apparent in
the Contact Zone through the Edwards shaft just north of the interpreted fold axis (see Figure 7.2).
Drilling well west of the projected theoretical fold axis at depth (1,550 to 2,550 foot levels) has
failed to identify any sign of a major fold within a few hundred feet of the Imperial shaft. There is
little doubt that the north limb of the Fuller Deposit is broadly folded from a roughly east-west strike
in its eastern portions, to roughly southwest in its western, presently delineated portions. The trend
may eventually turn to the south and southeast, and be connected to the southeast trending limb of
the large scale “S” fold on which the north and south workings of the Buffalo Ankerite deposit are
located. The mineralization on the east-west trending north limb can be alternately interpreted to be
offset by an as yet unidentified fault.
At depth, below the VG Gold ramp-decline between the Buffalo Ankerite 1,550 foot and 2,550 foot
levels, the north limb appears to dip steeply to the north. Older ultramafic units structurally overlie
younger rocks in the area of the ramp-decline, suggesting that the stratigraphic sequence is
overturned in upper levels.
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5.1.2 Deposit Type
The following section has been extracted from ACA Howe 2004 Report.
Gold mineralization on the VG Gold property belongs to the structurally controlled Archean lode
gold class of deposits. Structurally hosted, low-sulphide, lode gold vein systems in metamorphic
terrains from around the world possess many characteristics in common, spatially and through time;
they constitute a single class of epigenetic precious metal deposits, formed during accretionary
tectonics or continental delamination.
The observation that a large proportion of lode gold deposits in Archean cratons formed between
2.75 and 2.62 Ga (Barley et al., 1998) is instrumental in formulating a depositional model. However,
the gold endowment of individual Late Archean granite-greenstone belts is highly variable. For
example, most of Canada's world-class lode gold deposits occur within a small region of the 2.752.68-Ga Abitibi sub-province (Robert and Poulsen, 1997).
Gold production from this area represents approximately 5,000 tons of the total 8,000 tons extracted
from the entire Superior Province. In contrast, the dominantly Late Archean Wabigoon sub province
lacks major gold deposits. Any deposit model must account for this apparent discrepancy.
The majority of lode gold deposits formed proximal to regional terrain-boundary structures that
acted as vertically extensive hydrothermal plumbing systems. Major mining camps are sited near
deflections, strike slip or dilational jogs on the major structures. In detail, most deposits are situated
in second or third order splays, or fault intersections that define domains of low mean stress and
correspondingly high fluid fluxes. Accordingly, the mineralization and associated alteration is most
intense in these flanking domains. The largest lode gold mining camps are in terrains that possess
greenschist facies hydrothermal alteration assemblages developed in cyclic ductile to brittle
deformation. Smaller deposits are present in amphibolite to granulite facies terrains characterized by
amphibolite to granulite facies alteration assemblages, ductile shear zones, and ductilely deformed
veins (McCuaig and Kerrich, 1998).
In order to formulate a workable exploration model for this class of deposit it has been assumed that
most, if not all, Archean lode gold deposits are fundamentally similar. Based on this premise,
researchers and field geologists have assembled data from many individual deposits and mining
camps into a composite depositional/genetic lode gold model. Inherent characteristics common to
most lode gold deposits are their occurrence within regional scale linear composite shear systems,
their apparently similar late Archean age, and their spatial association with a late Archean suite of
felsic intrusions. Form and distribution of gold mineralization and associated wall rock alteration,
however, show a high degree of variability from one deposit to another.
Research during the past several decades has focused on understanding the fundamental
characteristics of lode gold deposits and has therefore focused on topics such as the tectonic
framework of the mineralizing systems, the relative and absolute age of gold emplacement, the tenor
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of mineralizing fluids, the interaction of ore-bearing fluids with host lithologies, and the nature of
local structural controls on ground preparation and gold emplacement. Much of the basic data, both
empirical and theoretical has come from deposits within the Canadian Superior Province and most
specifically from those deposits in the Abitibi sub-province. Although the deposits of the district
have been extensively studied, little consensus has emerged regarding several key points of district
geology. In particular, the interrelationships among early mineralizing events, felsic porphyry
emplacement, and formation of the exploited ores remain contentious.
The Superior Province is the largest exposed Archean craton in the world, and has accounted for
more gold production than any other Archean craton, with more than 55 million ounces produced to
date.
The Abitibi belt is the most prolific gold-producing greenstone terrain in the Superior Province: the
Timmins (Porcupine) camp alone has contributed in excess of 51 million ounces of gold, far greater
than production from the Kalgoorlie camp in Western Australia, or from the Homestake deposits in
South Dakota. Characteristically the largest gold deposits of the district are spatially associated with,
but not in, porphyries similar to those exposed at the Dome mine. This association has led to
considerable speculation regarding the genetic relationship of felsic porphyry emplacement to ore
formation. The results of a study on the various generations of gold mineralization in the Porcupine
Camp by Gray (2001) indicates that although some gold was deposited during a copper goldmolybdenum (Cu-Au-Mo) event temporally linked to porphyry emplacement, most of the gold was
emplaced significantly later than the porphyries. The documentation of at least three broad periods
of gold emplacement, two of which were pre-metamorphic, is permissive and supportive of genetic
hypotheses that invoke metamorphogenic remobilization of Au from earlier formed deposits. Lowsulfide quartz gold deposits of all ages constitute a coherent group in terms of geological
characteristics, chemistry of ore-fluids, and occurrence in accretionary tectonic environments
(Hodgson 1993). The origin of these deposits must be linked to convergent margin processes
accompanying the generation of major volumes of syn- to post- tectonic felsic intrusions.
The genesis of the ore fluids is more complex than a simple dewatering of oceanic crust and
sediments. The evidence points toward deposit formation late in the evolution of a convergent
continental margin. The origin of the fluid is complex. From the evidence, it can be concluded that
the ore fluid is a product of deep crustal prograde metamorphism. Input of CO2 from the mantle is
not necessary, and the field data speaks against this idea. The deposits are associated with deep
transcrustal faults that are characterized by carbonation, thus implying that the primary fluid
reservoirs are deep and large.
Virtually all lode gold deposits are hosted in metamorphosed terrains, and this feature is arguably
one of the most significant unifying characteristics. On this basis and from the structural style of the
host terrains it can be argued that many lode gold provinces are an integral part of the development
of high-temperature, low-pressure type subduction- accretion complexes.
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5.1.3 Mineralization
The following section has been extracted from ACA Howe 2004 Report.
The bulk of the more than 60 million ounces of gold production in the Porcupine district in the
Timmins area has been from well-known deposits in Tisdale Township north of the PorcupineDestor fault zone. These include the producing Dome Mine (more than 12 million ounces) and the
past-producing Hollinger (19.35 million ounces), McIntyre (10.36 million ounces), Coniaurum (1.11
million ounces), Paymaster (1.19 million ounces) and Preston East Dome mines (1.54 million
ounces). In the northern part of Deloro Township are the former Buffalo Ankerite (1.0 million
ounces), Aunor (2.5 million ounces) and Delnite (0.92 million ounces) mines, as well as one of the
Paymaster shafts on the Placer Dome property. Most of the production has been from deposits,
which occur within or immediately adjacent to the Tisdale group. The average historical
underground-recovered grade of Timmins area deposits has been about 0.25 oz/t Au. The Dome
mine is currently producing from an open pit (the “superpit”) at a grade of about 0.07 oz/t Au, as
well as underground operations at a grade of about 0.13 oz/t Au.
Within the district, gold mineralization occurs as quartz-carbonate vein (lode) type and as sulphiderich zones (disseminated-type). A common feature of all gold deposits is carbonate-rich rocks
(Karvinen, 1982). Most of the lode-type mineralization occurs in and adjacent to shear-hosted quartz
veins or small veins associated with fold closures. Mineralized veins are associated with alteration
zones consisting of chlorite, dolomite, ankerite, sericite and green mica. Stock work stringers and
veins occurring within or at the margins of porphyry bodies have comprised a relatively small but
locally important source of gold ore (Jackson and Fyon, 1991), such as at the Preston East Dome
mine (Hawley and Hart, 1948) and the #2 and #3 shaft area on the Paymaster property (Longley and
Lazier, 1948). Disseminated type mineralization is exemplified by the Bell Creek deposit in Hoyle
Township. Copper and molybdenum were also produced from a disseminated sulphide and veinlets
ore body in the Pearl Lake porphyry intrusion within the McIntyre mine property.
Mineralization consists of the native element and in fine-grained pyrite, concentrated along sericitic
wall rock selvages. There are other sulfides in ore mineralization, but pyrite dominates; tellurides are
uncommon. The gold:silver ratio in the district varies from 1:6 to 1:10.
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6.0 EXPLORATION DRILLING
6.1 Historical Drilling
The current VG Gold property has a long history of exploration and limited gold production. Since
1910, periodic surface exploration, underground and limited production has been carried out on the
Fuller deposit on the Fuller claim. A 228-foot inclined shaft (the “Edwards shaft”), was sunk some
time after 1924. In 1940-1941 Nakhodas Mining Company Limited (“Nakhodas”) developed 2,100
feet of lateral workings at the 160 foot level, and mined 44,028 tons grading 0.149 oz/t Au
(recovered) above the level in four stopes. The rock was processed in the Faymar mill in Deloro
Township (Ferguson, 1968). The mill was destroyed by fire in 1942, and was not rebuilt. In addition
to 83 underground drill holes, Nakhodas also drilled at least 10,919 feet of surface drilling in 41 drill
holes (S 1 to S41).
In the late 1930's, Hollinger Consolidated Gold Mines conducted a 14,000 foot drilling program in
25 holes on the claims in Tisdale Township, previously referred to as the “Tisdale Ankerite claims”
(Ferguson and others, 1968). Drilling was also done by Pamour (Noranda Explorations Ltd.) in 1974
to 1976. One of these drill holes deviated onto the (then) single VG Gold claim, and intersected three
well-mineralized zones at a depth of about 500 feet, encouraging VG Gold to drill beneath the 160
foot level (Vedron, 1979).
In 1985, VG Gold consolidated the Fuller and Dobie claim, which together hosts the Fuller property.
Exploration work from 1986 to 1989 focused on the area of the synclinal structure previously mined
from the inclined Edwards shaft.
Exploration conducted by VG Gold on the Fuller property was a 1996-98, multi-phase drilling
program. The initial phases of the program began on July 22, 1997 and were completed on March
25, 1998. During this program holes VG 97-64 through VG 98-78 were completed producing a total
of 20,993 feet of BQ drill core in 15 holes. An additional phase of drilling was completed during
November 1998. Holes VG 98-79 through VG 98-83 were completed during this phase generating a
total of 3,164 feet of BQ drill core in five holes.
The purpose of the overall program was twofold: i) to locate and define the on-strike and down dip
continuation of the gold bearing horizons within the Fuller deposit between 1,600 feet and 2,500 feet
below surface, and ii) to investigate the probability of additional gold zones proximal to the VG
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Gold underground workings as well as confirm the wide mineralized zone intersected along the
south limb- 375 foot level where pervasive gold values were detected in drifting and in bazooka
holes.
Following their optioning of the property in 2001, Placer Dome carried out both field exploration
and office database management activities on the Fuller property including the VG Gold’s North
target area and the Paymaster 31 Zone Extension in the main Fuller area.
The following is a summary of the 2002 exploration activities conducted by Placer Dome (CLA)
Limited - Dome Mine and the Porcupine Joint Venture on the Vedron (now VG Gold) property
option in 2002.
All the underground and surface diamond drill hole logs available from the Fuller deposit were recoded to Dome Mine terminology, which includes lithology, assays, alteration, percent sulphides and
percent veining. The down hole surveys and X, Y, Z drill hole collar co-ordinates for these holes
were converted to the Dome Mine co-ordinate system.
Validation of the drill holes was checked from plots including the Fuller-Dobie level plans. The
diamond drill hole database was created in Access and imported into Vulcan for 3-D modeling.
Initial field activities in early 2002 involved a surface diamond-drilling program on the North VG
Gold target. The four holes, 2,050.4 metre (6,727 foot) drill program was carried out between
January 16th and February 19th, 2002. It was designed to test along the highly prospective Central
and Vipond Series contact for gold mineralization, focusing on the strong sericite/ankerite alteration,
increased pyrite content and coincident gravity high anomaly in the hanging wall of the contact zone.
The North VG Gold target geology is the structurally controlled North VG Gold Shear and the
“Paymaster 18 Vein Shear” between the Central and Vipond series mafic volcanic units.
The Paymaster 31 Zone Extension surface diamond drill program was carried out on the VG Gold
portion of the South Tisdale Anticline (“STA”) project between April 7th and May 10th, 2002. The
five hole, 2,032.7 metre (6,669.0 foot) drill program was designed to test: i) a porphyry trend with
associated gold values intersected in hole VG98-82, and ii) the western strike projection of the 31
Vein structure on 150 m (500 ft) step-outs between –3500E and – 4500E (Dome co-ordinates). Holes
were also designed to test the up-plunge potential of the porphyry trend defined by underground
exploration on the Paymaster 2575 (Dome 3493 elevation) and 4075 levels (Dome 2007 elevation).
Eight core samples from the 31 Zone, along with selective geochemical data, were submitted for
petrographic analysis, gold mineralogy and interpretation.
6.2 1998 - 2007 EXPLORATION
During 2006 and 2007, VG Gold drilled 11 drill holes targeting the Fuller zones plus, a Buffalo
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Ankerite deep hole which was collar on the Fuller property, with the following results.
6.2.1 Fuller Green Carb Zone
Five holes, totaling 937 metres, were drilled to test for extensions of the Green Carb Zones 1
and 2 of the Vedron Fuller deposit. The drill holes tested for extensions of the Green Carb
zone within 50 metres of the existing ramp and underground workings, 50 to 100 metres
along strike from historic green carb zone intersects. Every hole intersected gold
mineralization within or adjacent to the fuchsite and ankerite altered Quartz Feldspar
porphyry, host rock to the Fuller Green Carb zone mineralization. Assays include 9.22 grams
Au per tonne over 1.22 metres within a wider zone of 3.17 grams Au per tonne over 9.14
metres including 5.08 grams Au per tonne over 4.88 metres – hole VG-06-99 and 10.32
grams Au per tonne over 0.98 metres – hole VG-06-102.
6.2.2 Fuller North
Four holes, totaling 1,243 metres, were drilled to test for new mineralized zones to the north
of the Fuller deposit and the known mineralization on the Vedron property. The drill holes
tested for strike extensions of known mineralization and historic mining on the
Goldcorp/Kinross PJV owned Paymaster property to the east. The holes intersected wide
widths of favourable alteration and mineralization, but gold values were low, 1.6 grams Au
per tonne over 3.2 metres including 3.43 grams Au per tonne over 1.19 metres – hole VG0696. Historic underground drilling between 300 metres deep and 1,500 metres deep near the
east boundary with the Paymaster property had intersected values over 30 grams Au per
tonne. The shallow Vedron drilling reported here failed to repeat the high grade assays but
was successful in intersecting wide zones of alteration and mineralization with anomalous
gold at shallow depths.
6.2.3 Fuller ML Zone
Two holes, 358 metres were drilled to test for extensions of the ML Zone of the Vedron
Fuller deposit. The ML zone has not been included in the 43-101 compliant resource of the
Fuller deposit. The ML zone likely represents the extension of the more extensively drilled
Green Carb Zones that are located on the east side of the fold from the Fuller deposit
underground workings.
Exploration data is very sparse on the western extensions of the Fuller deposit situated on the
west side of the fold. Historic interpretation of the Fuller deposit was that of a single fold,
however evidence existed that in fact the Fuller deposit was an “S” fold with the stratigraphy
and mineralization extending to the west rather than trending southeast. Earlier exploration
had just begun to confirm this. Drill Holes VG-06- 104 and 105 confirmed the existence of
the Fuller zones with wide intersections of fuchsite ankerite alteration corresponding to the
extension of the Green Carb 1 and 2 Zones. Near surface assays include 2.08 grams Au per
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tonne over 4.54 metres and 3.09 grams Au per tonne over 3.51 metres.
6.2.4 Hole VG-07-106
This was a deep hole collared north of the Fuller zone, targeted on a postulated depth
extension of the Buffalo Ankerite South zone at a depth of 3500 to 4000 feet below surface.
The hole passed below and to the east of the Fuller fold nose and therefore did not intersect
the Fuller stratigraphic package.
6.3 Vedron Drilling 2004
In the summer of 2004, VG Gold completed a total of seven diamond drill holes, totaling 4356.4
feet. The purpose of the program was to test some of the targets recommended in the 2004 ACA
Howe technical report, including the east Paymaster boundary area and the south to southeast
extension of Contact Zone mineralization on the south limb of the “Fuller syncline” towards the
Buffalo Ankerite 5 shaft area. Assay results, in general, were mixed. Several mineralized /carbonate
altered zones were intersected, but gold assay results associated with these altered zones were
predominantly not anomalous. The best assays returned included: from VG04-90 (east property
boundary area), 0.036 ounces per ton Au/5.3 feet at 681.7 feet, 0.031 ounces per ton/7.1 feet at 714.9
feet, and 0.103 ounces per ton/1.5 feet at 744.1 feet; from VG04-92 (infill drill hole testing contact
zone), 0.134 ounces per ton/7.9 feet including 0.348 ounces per ton/1.3 feet at 966.7 feet and 0.084
ounces per ton/5.3 feet at 983.1 feet.
6.4 Placer Dome Drilling 2002
The North VG Gold surface diamond drill program was carried out between January 16th and
February 19th , 2002. The four holes, 2,050.4 metre (6,727 foot) drill program was designed to test
along the highly prospective Central and Vipond Series contact for gold mineralization, focusing on
the strong sericite/ankerite alteration, increased pyrite content and a coincident gravity high anomaly
in the hanging wall of the contact zone.
According to the interpretation of Placer Dome the general geology in the VG Gold North area
consists of east west trending Tisdale Group rocks of the “Vipond and Central Series”. This is a
sequence of Fe-rich tholeiitic massive, pillowed and amygdaloidal flows. All units are sub-vertical to
steeply dipping to the north. Felsic to intermediate porphyries and late northwest trending diabase
dykes intrude the rocks. The North VG Gold target geology is the structurally controlled North VG
Gold Shear and the “Paymaster 18 Vein Shear” between the Central and Vipond series mafic
volcanic units. The Vipond Series mafic volcanic units, which form the hanging wall, are strongly
sericite-ankerite altered with elevated pyrite content. The strongest alteration in this area has an
associated gravity high anomaly. Historical drilling has located gold intercepts along the contact of
193 grams per tonne gold over 0.2 metres, to the west and 8.6 grams per tonne gold over 0.2 metres;
6.9 grams per tonne gold over 0.4 metres to the east.
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The Paymaster 31 Zone Extension surface diamond drill program was carried out on the VG Gold
portion of the South Tisdale Anticline project between April 7th, and May 10th, 2002. The five hole,
2,032.7 metre (6,669.0 foot) drill program was designed to test: 1) a porphyry trend with associated
gold values intersected in hole VG98-82, and 2) the western strike projection of the 31 Vein
structure on 150 metre (500 foot) step-outs between -3500E and - 4500E (Dome co-ordinates). Holes
were also designed to test the up-plunge potential of the porphyry trend defined by underground
exploration on the Paymaster 2575 and 4075 levels.
The drill program intersected a number of wide intervals of encouraging 31 Zone style alteration and
sulphide mineralization, but only scattered gold values in the 1.7 to 3.4 grams per tonne gold range
were returned. Eight core samples from the 31 Zone, along with selective geochemical data, were
submitted for petrographic analysis, gold mineralogy and interpretation.
According to Placer Dome (Gliddon, 2003) the petrography and geochemistry are interpreted to
suggest gold mineralization on the projected trend of the 31 Zone structure on the Vedron property
has syn-volcanic and lode gold characteristics (low gold/silver ratios <1, high base metals – copper,
lead, zinc, high arsenic, potassium metasomatism and sodium depletion), whereas the Simpson Lake
(along trend to the east on Placer Dome property) samples have lode gold characteristics with
intense deformation, carbonate-sericitetourmaline alteration, K metasomatism, gold/silver ratios
between 1 and 10 (average 5) and low base metals (copper, lead, zinc).
6.5 Holes VG-07-107 to 110
Four holes were targeted to follow up on 2 holes drilled in 1988, testing the south west edge of the
ultramafic, between the Buffalo Ankerite North zone and the Fuller deposit. Historic holes S88-118
and 119 had intersected gold values in this gap between the 2 mineralized zones. Hole S88-119
intersected 0.11opt/10 ft, and S88-118 returned values of 0.10opt/3.6 ft, as well anomalous gold
assays. Four holes, 3286.3 feet, were drilled to follow up on historic results and to test the gap area.
Results were negative with no significant assays.
6.5 1996 to 1998 Program
In 1996 VG Gold (then called Vedron Gold) completed the Phase 1 diamond drill program on the
property. A total of 105,772 feet of BQ diamond drill core were completed in 63 holes: VG96-01 to
VG96-63.
Kuehnbaum (1997) recommended in his report, following the historical resource estimate by Bevan
(1997), that additional drilling be conducted on main Fuller deposit area and high priority adjacent
targets. The purpose was to locate and define the on-strike and down dip continuation of the gold
bearing horizons within the Fuller deposit between 1,600 feet and 2,500 feet below surface.
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VG Gold acted on the recommendations and instigated a result driven, multi-phase drill coring
program on July 22nd, 1997 consisting of holes spaced about 400 feet apart, horizontally, on three
tiers at the 1,800 foot, 2,100 foot and 2,500 foot levels. This phase of the program was completed in
late October 1997. This program was successful in defining additional mineralization on the Fuller
below the 1600 foot level.
The second phase of the drilling program began on March 17th, 1998 and was completed on March
25, 1998. A total of 4,000 feet of BQ drill core was obtained in seven holes (VG 98- 72 to VG 9878). This phase of drilling was specifically designed to investigate the probability of additional gold
zones proximal to the Fuller underground workings as well as confirm the wide mineralized zone
intersected along the south limb -375 foot level where pervasive gold values were detected in
drifting and in bazooka (compressed air short-hole [30-90 metres] drill rig) holes.
A final phase of near surface drilling totaling 3,164 feet of BQ drill core in 6 holes (VG 98- 79 to
VG 98-83) was completed during November 1998. This drilling was successful in establishing the
continuation of mineralization near to surface.
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7.0 ASSAY QUALITY CONTROL
7.0.1 Sampling Method and Approach
Ken Lapierre, VG Gold’s Contract Geologist, was in charge of exploration during the 1996-98 drill
campaign. Sampling procedures and protocols as well as a Quality Assurance/Quality Control
(QA/QC) were not described and/or documented in detail in previous internal VG Gold reports or
memoranda. However, upon further review of the original Fuller drill logs, it is reported in the Howe
report that they have reconstructed the sampling procedures and protocols utilized by VG Gold
during the 1997-98 drill programs. The sampling procedures and protocols are described below.
Upon the completion of the geological core logging of a diamond drill hole, VG Gold’s geologist
then identified the section(s) of core that would be sampled and analyzed for gold. Once the
mineralized sections for sampling were identified, VG Gold’s geologist would measure and mark out
the sample intervals onto the uncut core and record the individual sample intervals onto the
geological log sheet. All of the drill core sections were sampled according to lithological and/or
alteration boundaries and vein(s) width.
However, the maximum sample interval did not exceed 5.0 feet in length. The sections of core to be
sampled were split, half-core sampled for assay and the remainder was then stored in core boxes. All
of the sections of sampled core were cut using a manual core splitter.
7.0.2 Sampling Method and Procedures for the 2004 and 2006-2007 Drill Program
In 2004, the procedure was similar to the one in 1996-98. The drilling crew delivered the sealed core
boxes to the core shack at Fuller site. The boxes were opened by VG Gold Geologist Blair Needham.
The core was logged and sampled by Blair. The samples were shipped for analysis to Expert
Laboratory in Rouyn Noranda, Quebec. In 2006-2007 VG Gold used similar sampling methods and
procedures as outlined previously.
7.0.2 Sample Preparation, Analyses and Security
In preparing samples for cutting/shipping, the geologist along with core technician both play a
crucial role in the quality control of samples submitted for assays. A double check is conducted by
comparing the sample tags with those identified by the geologist and any discrepancies are found
before samples are sent to the laboratory.
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During VG Gold’s 1997-98 drill program the sample preparation and analytical work was carried by
Swastika Labs of Kirkland Lake, Ontario. Samples collected from VG Gold drill holes VG97 and
VG98 were shipped to Swastika for analysis. All of the core samples were crushed to 70% -2
millimetres (mm) and 250 grams (g) were then collected, pulverized to 85% < 75 microns (µm) in a
ring mill. The pulverized sample was then split utilizing a riffle splitter. After each sample was
crushed and pulverized, both the jaw crusher and ring mill were then “washed” with a blank quartz
wash in order to avoid sample contamination/smearing.
Each sample was analyzed for gold using a one ton (30 g) fire assay with an AAS finish. The
Swastika one assay ton (30 g) fire assay/Atomic Absorption Spectroscopy (AAS) method has a
lower detection limit of 0.003 opt Au. Swastika routinely ran random check assays for each sample
batch. However, when the lab was notified of possible samples containing high values of gold for the
core samples, Swastika carried out a fire assay/AAS method (with repeat in places) as well as fire
assay/gravimetric analysis for samples > 0.50 oz/t Au. Swastika did not provide VG Gold with its
internal QA/QC data during the analysis period.
During VG Gold’s 2004 drill program the sample preparation and analytical work was carried by
Expert Laboratories of Rouyn Noranda, Quebec. A copy of the “Certificate of Laboratory
Proficiency” and assay results employed by the laboratory is included in Appendix B of this report.
Wardrop recommends that VG Gold incorporate a QA/QC program in future drilling using blind
duplicates, blanks and standards.
7.0.3 Data Verification
Shahé Naccashian, Wardrop’s Geologist visited the Fuller Property site from April 18th, to April
20th, 2006. This visit is intended to fulfill the NI 43-101 requirement of a site visit by the Qualified
Person for the May 2006 report. At the site, Shahé was accompanied by VG Gold’s Consulting
Geologist, Ken Guy.
7.0.4 Assays
Wardrop carried out an internal validation from the original drill hole logs and the drill hole database
on 45 (5%) of the 880 drill holes in the total database. Data verification was completed on collar coordinates, end of hole depth, down-the-hole survey measurements, from and to footage
measurements of geology and assay sampling intervals, lithological unit and gold grades that were
compiled from hand written drill logs into an ACCESS database.
Most errors were insignificant and related to mistakes in transcription. Details of the verification are
set out in Table 14.1. The digitizing of drawings and maps were validated on an on-going basis, with
information being visually checked while importing the digitized areas to Gemcom geological
software. The data verification had less than 1% of errors.
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7.0.5 Core Review
At Fuller site, VG Gold has a core shack building. All the mineralized zones are stored inside this
building. Almost all of the split core of VG96, VG97, VG98 and VG04 mineralized sections are
preserved. The building is secured and padlocked by VG Gold. The remainder of the core is crosspiled outside on palettes. The labels on the core boxes are deteriorating. Wardrop recommends that
VG Gold go through the core and label all the boxes.
Wardrop carried out a geological core review on lithology, mineralization and sampling, checking
against drill logs on the following drill holes: VG04-90, VG04-91, VG04-92, VG04-93, and VG0494. In addition to the five drill holes from the 2004 drill campaign, Wardrop checked mineralized
sections of holes:
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8.0 MINERAL PROCESSING
8.0.1 Historic Mill Recoveries
In the early 1940’s, mineral processing and metallurgical testing was completed during the mine
operation by Nakhodas Mining Company. This information is not available for review by Wardrop.
At the time of this report VG Gold Corp. has not pursued any metallurgical testing on the Fuller
Zones. A study dated June 2007 of an adjoining property, titled “Preliminary Economic Assessment
of the Buffalo Ankerite South Zone”, published historic milling data in Section 8 of the report. The
historic milling data suggests a recovery in the 92% range, using the Merrill Crowe system, was
achieved.
This recovery rate is an accepted target in today’s mining industry and for the purpose of this
economic model a gold recovery rate of 92% has been used. A potential custom milling source is a
Merrill Crowe mill built in the late 1980’s.
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9.0 FULLER PROJECT – MINING RESOURCES ESTIMATE
Section 17 of the Wardrop 43-101 report for the Fuller property; details the various calculation
methods, modeling parameters, and validation procedures used to calculate the mineral resources on
the Fuller property. The data in Table 9.1 summarizes the “Wardrop 43-101” calculation of the
indicated and inferred resources using a .075 ounce per ton cut off grade.
Table 9.1
Undiluted Resource Estimate @ .075 oz cut off
Indicated Resources:
1,533,489 tons grading 0.162 oz. Au/ton
Containing 248,000 oz. gold
Inferred Resources:
Total :
The author reviewed the resource data compiled within the NI 43-101 report and with the assistance of
Peter Bevan, P. Eng, developed tonnages and grades for mining blocks above the 950’ Level elevation.
The mining blocks, also referred to as stope limits, were identified using the following criteria:
-
Include ore polygons that exceeded 0.100 oz. in grade over a minimum true width of 4 ft.
Join polygons that follow historic plunge directions of the ore shoots.
Sub-divide the ore shoots into practical mining block sizes in order to create a consistent
mill feed.
The spacing of the 4 existing levels also influenced the vertical stope limits. These mining blocks
became the bases for the development and production plan outlined in Section 11 and drove the
mining cost estimates also contained in Section 11.
Figures 9.1 and 9.2 illustrate the stope block limits developed to the 650’ level for the CZ and HW
zones.
These stope block volumes are summarized, along with 4 other “secondary” mineralized zones, in
Table 9.2 using a mining dilution factor of 15 % applied to the final calculations.
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Table 9.2
VG Gold Corp. - Fuller Project - Mining Resources
Stope Block Tons & Grade Summary
above the 950 Level
Contact Zone
Hanging Wall Zone
Secondary Zones
Contact Zone - 650 Level to Surface
Hanging Wall Zone - 650 Level to Surface
Indicated Secondary Zones - 950 Level to Surface
Indicated
tons
321 Stope
351 Stope
361 Stope
102 Stope
103 Stope
15% diluted tons & grade
36,691
14,377
24,453
45,316
72,918
grade contained ounces
0.218
0.260
0.199
0.139
0.163
8,000
3,744
4,876
6,304
11,899
sub-total 193,755 0.292
222,818 0.156
34,823
34,823
Contact Zone - 800 Level to 650 Level
tons
321 Stope
351 Stope
361 Stope
401 Stope
281 Stope
341 Stope
14,658
1,001
10,442
49,385
10,533
11,086
sub-total 97,105 0.292
111,671 0.254
28,393
28,393
Contact Zone - 950 Level to 800 Level
3,884
145
3,080
15,754
4,276
1,253
tons
320 Stope
350 Stope
360 Stope
320 HW #1
320 HW #2
South Limb of HW **** 650 - 275 Level
320 Stope
350 Stope
360 Stope
176,666
203,166 0.194
39,423
39,423
9,141
19,323
8,929
As per Wardrop Block Model
sub-total 37,393
43,002
0.207
0.180
F1
GC1
CZ1
INT
6,660
5,970
107,279
43,446
diluted
0.179
0.329
0.143
0.153
1,192
1,964
15,341
6,647
163,355
187,858 0.134
25,144
25,144
6,660
5,970
36,013
38,314
0.179
0.329
0.152
0.173
1,192
1,964
5,474
6,628
86,957
100,000 0.153
15,258
15,258
By Selective Mining Assume
0.326
0.182
0.140
2,980
3,517
1,250
100 % of F1
100 % of GC1
33 % of CZ1
100 % of INT
0.301
0.336
0.155
0.209
0.443
5,632
5,297
1,482
129
3,171
sub-total 51,814
59,586
0.303
0.264
15,711
15,711
tons
320 Stope
350 Stope
360 Stope
7,747
7,747
32,395
29,076
11,726
0.366
0.433
0.160
11,857
12,590
1,876
sub-total 73,197
84,177
0.360
0.313
26,323
26,323
diluted-short diluted
394,075 0.200
12,518
5,950
9,339
1,720
1,141
8,755
tons
Total CZ above 950 Level
0.221
0.160
0.219
0.187
0.156
0.206
tons
Hanging Wall Zone - 950 Haulage Level to 800 Level
18,711
15,764
9,563
618
7,158
tons
49,269
32,426
37,140
8,000
7,331
42,500
Hanging Wall Zone - 800 to 650 Level
0.265
0.145
0.295
0.319
0.406
0.113
321 Stope
401 Stope
361 Stope
281 Stope
341 Stope
tons
78,927
tons
Total HW above 950 Level
330,345 0.222
73,492
Total Secondary Zones
above 950 Level
**** from Wardrop Block Model
tons
100,000 0.153
15,258
tons
Total Mining Resource
824,420 0.203
167,678
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Figure 9.1
Long Section to the 650 Level showing the North Limb of the Hanging Wall Zone (HW)
Undiluted Mining Block Tonnage & Grades
375-360 Stope Block
30,976 tons @ .276
650-360 Stope Block
5,329 tons @ .148
650-320 Stope Block
49,269 tons @ .221
650-350 Stope Block
32,426 tons @ .160
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Figure 9.2
Long Section to the 650 Level showing the North Limb of the Contact Zone (CZ)
Undiluted Mining Block Tonnage & Grade
375-361 Stope Block
14,128 tons @ .193
375-321 Stope Block
10,515 tons @ .187
500-321 Stope Block
6,370 tons @ .180
650-321 Stope Block
18,979 tons @ .258
650-351 Stope Block
14,377 tons @ .260
650-361 Stope Block
9,775 tons @ .213
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10.0 PERMITTING, SOCIAL CONSULTATION
AND ENVIRONMENTAL COMPLIANCE
10.0.1 Overview and Approach
The permitting, social consultation and environmental compliance are some of the risk factors of any
project. The following sections outline some of the environmental and social considerations for the
Fuller Mine. Permitting requirements and potential risks associated with the permitting and social
consultation for this project are identified. The location of the project and the extent of the nine
patented mining claims that comprise the Fuller Mine project are illustrated in the following
drawing:
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10.0.2 Environmental Baseline Studies
The Fuller Mine project is located within the boundaries of the City of Timmins and adjacent to a
residential housing cluster of approximately twenty-six homes. One of the homes, the original Mine
Manager’s home is located on Cook Road some 210 metres from the Fuller Mine Portal. The mine
site location is classified as AW (Agricultural Wilderness) by the City planning department. The
residences located along Cook Road, Gold Mine Road and Ankerite Road are classified as
Residential. The mine is accessed from Gold Mine Road that joins Timmins and South Porcupine. A
secondary gated access that is only used infrequently is located off of Cook Road. Access to the
mine site is gained by a single lane approximately 800 metre long gravel road that joins Gold Mine
Road adjacent to the paved entrance to the Buffalo Ankerite property via Shaw Creek Road.
The average annual temperature at the site is 1.3 degrees C with average extremes ranging from
minus 17.3C in January to a high of plus 17.3 C in July. The total annual precipitation is in the order
of 839 mm with approximately 68 percent of the precipitation as rain. The project is located within
the southern limit of the Boreal – Predominantly Forest Region of Canada. The principal tree species
in this area include white and black spruce, balsam fir, jack pine, white birch and trembling aspen.
Tree species composition will vary according to soil types and topographic position. Large wildlife
species include bear, moose and wolf. Various fish species are present in lakes and streams in the
area including northern pike, walleye, small mouth bass and non-sport fish.
A cursory aquatic environmental baseline study was completed in late 2006 by B. Z. Environmental
Consulting of Timmins, Ontario. This study provides the basis for the environmental considerations
in the permitting that will be filed for the mine including the Ministry of Environment’s Certificate
of Approval for the mine water discharge and the Ministry of Northern Development and Mines’
Closure Plan. During negotiations with government regulators regarding effluent limits and
discharge points we have learned there is a possibility that additional background studies including
the determination of resident fish populations will be required.
10.1
SOCIAL BASELINE STUDIES
10.1.1 First Nations
Meaningful communication and consultation with First Nations are essential elements to develop
and operate a mine in Ontario. It has been determined that three native groups may have an interest
in the Buffalo Ankerite project. These groups include the Mattagami, Matachewan and Wahgoshig
First Nations. Letters detailing the project plans were sent out to all of the listed groups providing a
30 day notification of interest period.
Following no apparent interest in the project follow up telephone calls were made that discovered
that all groups were interested in learning more about the project. Formal consultation was held with
all of the groups at which time support for the project was asked in the form of a letter of support in
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return for the offer of employment opportunities for qualified personnel. To date no letters of support
have been received.
10.1.2 Archaeology and Heritage Resources
Mining activities and site disturbances at the Fuller Mine took place during the early part of the
twentieth century and again in the 1980’s when the mine was converted to a trackless operation.
Since the Fuller Mine project will be a continuation of previous underground mining activities, it is
not expected that future activities will significantly alter the existing disturbed mining footprint or
further disturb the land surface. These facts together with the geographical (not close to a navigable
waterway) and insignificant topographic features of the mine location (not a height of land) lead us
to conclude that an archaeological or heritage investigation would not be required.
10.1.3 Socio-economics
The project is located within the City of Timmins Limits, population 43,000. The Fuller Mine is
located south of Schumacher, east of Timmins proper and southwest of South Porcupine.
Approximately twenty-six home owners are located in the old Fuller Mine town site (locally known
as McDonald Hill), located on the north side of Gold Mine Road. Two homes on Cook Road, one
being the old Mine Managers’ residence are situated more than two hundred metres from the
existing mine portal. The closest homes located along Gold Mine Road and along Ankerite Road are
all more than 300 metres from the mine portal.
Section 3.2.3 of the City of Timmins official plan (January 1998) states that mining activities are
prohibited within 150 metres of any residence, cottage, lodge, other human habitation, public park or
commercial intensive or linear recreational facility. A draft of the new proposed Official Plan – City
of Timmins adopts the separation distances established by the Ontario Ministry of the Environment
(MOE) Guidelines. The current MOE minimum separation distance for mining activities is now one
thousand (1000) metres. If the closest point of reception (i.e. a residence) is closer than the minimum
required separation distance further assessment is required. Therefore in the case of the Fuller Mine
additional site specific assessment requirements apply which will include an acoustic assessment
report and a vibration assessment report. There is a risk associated with these additional assessments
in that the required mitigating measures may be costly and in the worst case the application may be
refused.
Based on public meetings and correspondence with local residents there is local concern with noise,
vibration and visibility of this project. Some active resistance to the advancement of this project
based on these concerns is a possibility.
Timmins is a mining community with more than ten operating and historic mines located within the
city boundaries. The general public recognizes the present and past mining activity and is generally
receptive to new mining activity. There is a risk that the residents in the area may view the project
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and its associated effects as an infringement on their quality of life and a threat to their property
values. A plan to address the mitigation of known resident’s concerns is being developed.
Due to the proximity of the proposed mine to the residences, blasting times and the hours of ore and
waste hauling may be restricted.
10.2
CONSULTATION AND PERMITTING
10.2.1 Consultation
An inter-ministerial meeting, as required under the Mining Act was held jointly for both the Fuller
and Davidson Tisdale Mines. This meeting was attended by government representatives of all
Provincial and Municipal agencies having an interest in the development of these mines.
A public meeting, as required under the Mining Act was jointly held for both the Fuller and
Davidson Tisdale Mines. In addition residence concerns were aired at a pubic meeting that was held
primarily for the Buffalo Ankerite project. A citizen’s liaison committee for the Fuller Mine has
been established and correspondence has been exchanged addressing their concerns. This
consultation process is ongoing in an effort to alleviate the expressed level of concern.
10.2.2 Permitting
The environmental approval and permitting process under the Ontario Environmental Protection Act
and the Ontario Water Resources Act is the critical path in obtaining permits for the operation of the
Buffalo Ankerite project.
The Ontario Mining Act requires that the company submit a certified Closure Plan along with
adequate financial assurance to complete closure activities to legislated standards. According to
legislation certified Closure Plans are filed (approved) within 45 day of submission however, plans
judged to be incomplete are returned to the Company and must be resubmitted, subject to the
standard timelines of 45 days, upon completion of the revisions. No mining may proceed without
receipt of notice that the submitted Closure Plan has been filed.
Any potential for fish habitat alteration or destruction from the Fuller project will be assessed by the
Department of Fisheries and Oceans under provisions of the Federal Fisheries Act.
Since the property is located within the boundaries of the City of Timmins the city noise bylaw will
apply to mining activities such as drilling, blasting, crushing and hauling.
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Any building construction on site will require a Building Permit issued by the City of Timmins. The
City of Timmins will not issue a building permit until a Mine Closure Plan for the proposed open pit
has been filed (approved) by the Director of Mine Rehabilitation.
We anticipate that the ongoing permitting process will take another four to six months; however, this
process may be extended due to availability and demand on the reviewers and the complexity of
issues that may arise from the reviews. There is difficulty in establishing mutually acceptable
effluent limits in headwater areas such as the Fuller Mine due to the policies of the MOE.
Headwater areas lead to more stringent discharge requirements due to the lack of dilution. At the
Fuller site the background water quality has returned to an almost pristine condition which MOE
policies do not allow much alteration to the local environment.
There is a risk that protests by adjacent home owners may delay the granting of approvals by the
regulating agencies particularly given the non compliance with the standard separation distances for
mines and residences. Persistent objectors have the capacity to delay the project for an indefinite
period of time.
10.3
REHABILITATION AND CLOSURE
Financial assurance will have to be submitted with the Closure Plan to cover the costs of securing
the present and planned shafts, raises and mine portal. These costs will also have to include
monitoring and rehabilitating the mine site, and long term post closure environmental monitoring.
Submission of financial assurance will likely be required in the form of a liquid security (cash or
letter of credit).
The objectives of the mine site rehabilitation and closure are to return the land to compatibility with
surrounding land uses. Rehabilitation is anticipated to be carried out progressively following an
adaptive management approach. A crown pillar has been identified on the site and will have to be
assessed for long term stability. There is a possibility the crown pillar area may require fencing in
perpetuity. Other rehabilitation measures required for the property will be installation of concrete
shaft caps on existing openings, removal of buildings, leveling of the concrete foundations that
currently exist on the site, contouring of waste rock piles, backfilling of the waste water pond and
general site re-vegetation. These rehabilitation measures are estimated to cost less than $300,000.
Recent testing of the existing mine rock and observations of the historic tailings and waste rock
exposure show no potential for acid generation.
10.4
WASTE AND WATER MANAGEMENT
The mine ore will be shipped offsite for processing therefore storage and management of tailings
will not be an issue. Waste rock stockpiles will have to be re-sloped, covered with overburden and
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vegetated. Drainage from the waste rock piles will have to be managed to prevent erosion of the
rehabilitation works.
No landfills will be established on site. All mine garbage will be hauled offsite for disposal at
licensed facilities.
Proposed water management systems will form the basis of the necessary approval instruments.
Waste assimilation challenges may be presented by the headwater location and design low flows in
the receiving waters made up of Davidson Creek and the South Porcupine River. Waste load
allocation considerations may also be an issue due to proposed and existing discharges to these
receiving waters.
10.5 TAILINGS
All of the ore produced will be hauled offsite to a custom mill. Unless the Closure Plan and the
Certificate of Approval of the custom mill presently specify milling from the Fuller project,
amendments to these approval instruments to include milling of this ore will be required.
10.6 INFRASTRUCTURE
Given the past production history and proximity to service structures electric power and access to the
site is readily available.
An electric supply is available at the site, however the capacity is not known at the time of writing of
this report. Should development work determine that the existing electrical infrastructure is
inadequate, then sufficient power is expected to be available to the site by upgrading the existing
facilities.
The mine is accessed from the Back Road or Gold Mine Road that joins Timmins and South
Porcupine. Access to the mine site is gained by the single lane gravel service road that is located
opposite the paved Shaw Creek Road to the Buffalo Ankerite site. A secondary gated access that is
only used infrequently is located off of Cook Road.
11.0 MINE PLAN & BUDGET
11.1 Infrastructure
The project is located in the heart of the Timmins mining camp containing paved access roads, power
lines, communications and mine service industries in the immediate area. The Fuller Project is located
immediately to the north of VG Gold’s Buffalo Ankerite property, off the original road between
Timmins and South Porcupine. Currently, gold mining is taking place to the immediate east of the
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Fuller property by the Goldcorp /Kinross joint venture at the Dome Mine, and further east, at the
Hoyle Pond operation. The Dome Mine has returned to its roots as an underground operation after
reaching the economic depth with the open pit started in the mid 1990’s. The Timmins camp also has a
history of base metal mines. Currently there are 3 active producers in the form of the Kidd Creek,
zinc/copper mine, and the Redstone and Montcalm nickel operations.
Mining equipment and mining material suppliers are well established within Timmins and also to the
south in the Sudbury Nickel Camp. Various surface and underground development and construction
contractors have their offices and shops established within the Timmins, Sudbury and North Bay
triangle.
The site was very active during the mid to late 1980’s at which time a surface plant was constructed
and underground development consisting of roughly 4,500 feet of haulage ramp to the 550 foot level
was driven, combined with 2,500 feet of lateral ore drifting on three levels. At today’s costs, this work
would represent in the order of $15 million worth of pre-production and production development
already in place on the property. The surface plant from the 1980’s included an overland power line
and substation. This infrastructure will have to be re-certified by Hydro One and in the case of the
substation, completely rebuilt and certified. The other remaining structures from that era consist of a
small shop or warehouse building, a capped ventilation shaft and waste pads and or cleared lay-down
areas where previous structures or material storage sites existed.
Figure 11.1 illustrates where the property is relative to past producers and the proximity of local roads
and residences. The Buffalo Ankerite Mine, located to the immediate south, closed down in 1953 due
to rising costs and a fixed gold price. Unlike other surrounding mines which produced into the 1960’s,
apparently the foreign-owned Buffalo Ankerite operation did not qualify for the Canadian gold mine
subsidy which took effect in the early 1950’s.
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Figure 11.1
Fuller Project – Location and Surroundings
VG Gold’s – Fuller Project
Paymaster
Mine
1915 – 1966
1,192,206 oz.
Buffalo
Ankerite/March
Mine
1926 -1953
Delnite
Mine
1,019,130 oz.
1937-1964
Aunor Mine
920,404 oz.
1940 – 1984
2,502,214 oz.
VG Gold’s
South Pit Project
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11.2 Project Schedule
Progress on permitting and addressing the potential social concerns of the nearby residents is ongoing. The lead time required to receive an approved closure plan is the one activity that is out of an
operator’s direct control. The economic study evaluates the mining of a total of 824,000 tons at a
maximum annual rate of 180,000 tons per year. The actual mining of this volume will require 4.6
years to complete, plus the initial first year of plant set up and mine dewatering. The mining method
used will be the standard shrinkage stoping method which will provide the best control over the final
mining grade. This method has low productivity rates which are off-set by lowering underground
haulage costs, surface trucking and custom milling charges. The ore zone geometries, such as vein
width, vein dip angle and host rock competencies adapt to the shrinkage mining method. At full
production an average mining rate of 500 tons per day has been used for budgeting and cash flow
calculations. Development crews will provide 80 to 100 tons per day with the remaining tonnage
coming from stope swell muck and eventually free pull from the stopes. The multiple zones and preexistence of roughly 7000 feet of ramp and sill development will provide a variety of options, above
the 550 level, to reach a production rate of 500 tons per day.
11.3 Surface Plant Budget
The surface plant and dewatering budget is itemized below in Table 11.1. A contingency of 20% has
been added to cover potential mandates from city ordinances such as sound damping equipment and or
sound barriers for surface fans and compressors, fencing of the plant site, power line upgrade and
other security or environmental upgrades.
For the purpose of projecting cash flow requirements the surface plant and mine dewatering has been
scheduled to take up all of the first year’s activity with ideally the planning and equipment
procurement occurring during the first and second quarter, followed by a spring construction startup
and dewatering and mine rehab to follow in the 3rd and 4th quarters.
11.4 Pre-Production Capital & Operating Costs
The resources above the 650’ level were reviewed in detail and a conservative mining plan was
developed using the standard haulage, draw point and service raise development approach. Stope sizes
ranged from 16,000 to a maximum of 40,000 tons in volume. Production rates within the stope were
set at 25 tons per man-shift and a development rate of 14 feet per day per heading was used to
calculate labour and consumable costs. The capital costs of the underground mobile equipment are
rolled into the development and production costs in the form of rental or lease purchase amounts.
Maintenance costs are included in the development and production costs in the form of hourly
operating rates for each type of equipment needed for each activity.
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Table 11.1
Closure Bond, Surface Plant & Mine Dewatering Budget
Closure Bond
Pre-Eng/Geol.- Mine
Pre-Engineering - Electrical
Site Prep.
Mine Office
Eng./Geology Office
Eng./Geol Office Equip
Compressor Building/Shop Extension
Mine dry
Compressors
Settling Ponds
Pump House + pipe line
Grout Pump
Mine Dewatering
Mine Rehab
Surface Fan Install
Surface Fans
Propane Farm
Fuel Tank
1500 kva Sub Station
Surface Electrical Distribution
U/G Electrical (cable, portable subs, etc.)
U/G pumps (pumps & pump line to surface)
Toyotas/Man carriers
$375,000
$227,500
$39,000
$27,300
$39,000
$39,000
$26,000
$76,000
$260,000
$195,000
$65,000
$10,400
$45,500
$292,500
$104,000
$16,250
$68,250
$13,000
$13,000
$169,000
$390,000
$292,500
$135,200
$91,000
Sub-Total
20 % Contingency
TOTAL
$3,009,400
$601,880
$3,611,280
Pre-production capital includes all lateral and vertical development, either in ore or waste, which is
required to actually bring an ore block to the point where stoping can begin. The extension of the main
ramp to the 950’ level is scheduled for early in year 2 of the actual start of mining. The scheduling of
the 950’ ramp extension as soon as possible allows for production tonnage from the 800’ and 950’
levels while at the same time tonnage is available from 500’ and 650’ levels thereby smoothing out the
demands on the size and number of trucks.
Project costs where developed assuming a Mining Contractor would be involved with the project.
There is a “Contractor’s” fee added into the cost per foot and cost per ton calculations. VG Gold will
provide the project administration, engineering and geology while the Contractor supplies direct
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supervision, maintenance and mining labour. The underground equipment fleet is also supplied by the
Contractor on a rental basis throughout the project.
For a project of this duration the ownership of the equipment and or a final buyout of the equipment
would normally be factored into the tender document. For this study, no residual value of the surface
plant or underground fleet has been factored into the final cash flow model.
Daily labour costs for VG Gold and Contractor staff have been estimated at $3,366 and $6,493 per day
respectively. An additional VG Gold cost of $233 per day for office supplies and fire assay charges
has been budgeted for the duration of the project. A third party contract for definition diamond drilling
in the amount of $84,000 per year has also been included into the operating budget for VG Gold’s
staff.
Examples of direct unit costs for the mining cycle are illustrated in Table 11.2 below. Activities 1
through 4 include direct mining labour, maintenance labour, mining consumables, equipment parts and
consumables, and equipment rentals. Item 5, Mine Services, contains daily overheads such as the daily
VG Gold and Contractor staff costs, plus other indirect costs such as underground construction, power
and propane charges. These unit rates are calculated using the feet per day and tons per man-shift rates
outlined above in the opening paragraph of section 11.3.
Unit Mining Costs - Table 11.2
Item
1
2
3
4
5
Activity
Ramp Development
Haulage & Sill Development
Stope Mining
Underground Trucking
Mine Services
$ / Foot
$ 820.96
$ 820.96
$/Ton
$36.47
$10.86
$27.32
Figures 11.2 through to 11.5 are several illustrations of development general arrangements used to
produce the budgeted advance for the Fuller project. The mine plan for the zones above the 650’ level
where designed in some detail to establish an “ore tons per foot of advance” factor which was then
used to produce development and production costs for the resources from the 650’ to 950’ level.
11.5 VG Gold Labour
Project supervision and technical support by VG Gold employed staff is accounted for in the cash flow
model under “VG Gold Overheads”. Within these costs, are staff salaries, assaying, and consumable
costs associated with the day to day operations of a mine plant alone with a 5% administration cost on
every staff work-hour.
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11.6 Trucking
Local rock trucking firms; (i.e. Transport Norwest, Savard, etc.) are well established in the Timmins
camp and are now actively hauling run of mine rock to the “Kidd Creek ( Estrata) mill and smelter
complex or to the Estrata (Kidd Mine site) on a daily basis. For the purpose of this study a rate of
$4.75 per dry ton was used to evaluate the loading and trucking cost to a potential custom milling
source.
11.7 Milling
A custom milling cost of $27.50 per short dry ton was used for this study. This number is within the
range that would be expected for a mill of this size and would include the operators’ markup. The rate
also includes a VG Gold milling representative on site to oversee the day to day quality controls
required for a successful medium term milling agreement.
Mining Cost Summary - Table 11.3
Activity
Plant Capital
Pre-Production Capital
Production Mining
Surface Trucking
Milling
Total
LOM Costs
$ 3,611,000
$ 21,200,000
$ 50,966,000
$ 3,916,000
$ 22,672,000
$ 102,364,000
$/Ton
$ 4.38
$ 25.72
$ 61.82
$ 4.75
$ 27.50
$ 124.17
11.8 ECONOMIC ANAYLSIS
11.8 .1 Economic Parameters
For the purpose of this evaluation, a 750 US$ gold price and an exchange rate of 1.00 CDN was used
to establish a base price of $750 / oz. CDN for the revenue calculation. No inflation factor has been
included in the production costs. The cost of capital and corporate taxation has not been factored into
this evaluation.
Given the above assumptions, the project cash flows deliver a 28% internal rate of return. If
revenues were based on $900 per oz., the IRR increases to 78%.
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Table 11 .4
Internal Rate of Return Calc.
VG Gold Corp.
Internal Rate of Return (IRR) - Fuller Project
Jan. 2008
Project Costs
Value
Capital Costs
Mine Operating Costs
Revenue
$24,811,280
$77,553,189
115,476,509
Interest rate
6.25%
Expenses
Term in
years
0
1
2
3
4
5
Capital Costs
Operating Costs
$3,611,280
$11,900,000
$9,407,000
$6,690,000
$16,932,600
$1,860,000
$16,932,600
$375,000
$16,932,600
$375,000
$17,348,389
Income
Total
$3,611,280
$21,307,000
$23,622,600
$18,792,600
$17,307,600
$17,723,389
Gold Sales @
$750/0z.
Forward Sales
$14,007,000
$25,212,600
$25,212,600
$25,212,600
$25,831,709
Total
$14,007,000
$25,212,600
$25,212,600
$25,212,600
$25,831,709
Cash flows
($3,611,280)
($7,300,000)
$1,590,000
$6,420,000
$7,905,000
$8,108,320
$13,112,040
IRR =
28.10%
Table 11.5
Cash Flow Sensitivity Analysis
$30,000
$25,000
$24,660
$20,867
(CDN $000)
$20,000
$18,886
$16,990
$15,593
$15,000
$14,353
$13,112
$11,871
$10,000
$10,631
$9,234
$7,338
$5,357
$5,000
$
$1,564
1
2
3
4
5
90%
95%
100%
105%
110%
Gold Price
$1,564
$7,338
$13,112
$18,886
$24,660
Exchange Rate
$1,564
$7,338
$13,112
$18,886
$24,660
Operating Costs
$20,867
$16,990
$13,112
$9,234
$5,357
Capital Costs
$15,593
$14,353
$13,112
$11,871
$10,631
x
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Table 11.5 illustrates the impact that a change of a plus or minus 10% in revenue and costs will have
to the cash flow model of $750 CDN.
The chart demonstrates that the gold price and exchange rate have the largest impact on the projects
profitability followed by fluctuations in operating costs. Other factors that are within the control of
the operator will have significant impacts as well. A 1% variance in mill recoveries will influence
the cash flow by over $1.2 million CDN in this model or a mining grade variance of 1 % will also
add or subtract $1.2 million from the bottom line.
Table 11.7 provides the year by year breakdown of the cost versus revenue stream for the project.
The project is expected to recover 153,696 ounces, at a mill recovery rate of 92%. The model
becomes cash flow positive in the 3rd year of operation. Using the parameters outlined above the
project generates revenue of over $13 M.
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Mine Planners Ltd.
12.0 CONCLUSIONS
Ramp access and lateral development down to the 950’ level are roughly 60% completed due to the
advanced exploration activities started in the mid 1980’s. The existence of this development work is
the major contributor toward the project achieving a positive cash flow by the third year of production
at a $750 CDN gold price.
The site’s location within the heart of the Timmins mining camp provides several advantages. The
presence of a skilled work force and equipment suppliers and also of custom milling capacity within
the camp will fulfill the major requirements needed for this mining project to proceed.
In summary, the logistical and economic conditions currently exist for this deposit to be economically
viable. Section 13 contains several recommendations for more in depth studies which may have a
positive impact on operating costs and production schedules.
VETRIN
Mine Planners Ltd.
13.0 RECOMMENDATIONS
The budget was developed using a conventional ramp access and shrinkage stope mining approach
with haulage and draw point extraction drifts on the 375, 650, 800 and 950 levels. The following
recommendations are suggestions for further in-depth studies of production alternatives which may
either lower the operating costs or ensure that production schedules are met. The trade off will be the
requirement for additional up-front capital.
13.1 Truck Haulage versus Hoisting:
The budgeted figure for hauling the 824,000 tons to surface is in the order of $8.4 million. This
number includes labour, truck rentals, truck maintenance and fuel. An alternative to ramp haul
trucking would be to excavate and construct a small scale hoist and skip arrangement. The basic
configuration would be a single drum hoist combined with 3 to 4 ton skip in a two compartment shaft.
The shaft would have a profile of less than 100 square feet in order to use a raise climber to complete
the excavation and install the shaft timber and man-way sets. The head frame would be a portable prefabricated unit with a side chute dumping the ore into a rock box which would then be loaded into
surface trucks. An example of the use of this configuration would be the former Bond Gold operation
west of Pickle Lake, Ontario.
The Bond Gold operation reached 1600 feet in several phases, using this method in combination with a
fleet of two 15 ton trucks which hauled to the shaft at a rate of 425 tons per day.
The budget contains $400,000 for lateral development and raise work required to establish a second
exit from the mine between the 950 and 500 foot levels. These funds can be pooled with the haulage
budget of $8.4 million in evaluating the capital and operating cost comparisons of the two ore haulage
methods.
Pros: Lower operating costs as the project goes deeper
Multiple use infrastructure (escape-way, ore handling & possible vent shaft)
16 to 20 hours per day dedicated to ore and waste handling
Lowers diesel equipment numbers, lowers ventilation volumes, lowers winter heating costs
Improves the economics of mining below 950 level
Potential of utilizing off-peak power rates
Cons: Increases up-front capital requirements
Requires more lead time to fabricate head-frame and source hoist
Would require amendment to closure plan
VETRIN
Mine Planners Ltd.
13.2 Intermediate Levels:
The current level intervals are at the 150’, 275’, 325’ and 500’ elevations with future sill and
extraction levels planned for the 650’, 800’ and 950’ horizons. An alternative approach would be to
develop intermediate levels early in the project schedule between the 150’ and 500’ elevations in
order to divide the mining blocks up into smaller volumes. The extraction cycle of the shrinkage
mining method requires that roughly 66 % of the mining costs are not recovered until the complete
ore block is mined. By creating smaller blocks the cycling rate from development through to milling
would be shortened, resulting in a more predictable project schedule.
The increase in ore development footage would impact slightly on consumable costs only. Budgeted
labour productivities for ore development and stope production are virtually the same on a tons per
man-shift basis.
This strategy would also have a positive impact on grade control, and would also open up the option
of using remote control mucking equipment in order to minimize waste development of haulageways and draw points. The shortened level spacing may also lessen the need for Alimak raise
equipment and raise crews to establish service raises into the stopes.
The option of bulk mining portions of zones that fit the width and dip geometries necessary for this
mining method would also be an alternative available with tighter level intervals.
VETRIN
Mine Planners Ltd.
14.0 REFERENCES
1.
Wardrop doc # 15861101000-rep-L0001-00
“Mineral Resource Estimate of the Fuller Gold Property”
2.
3.
4.
Google Earth , 48 deg. 27 ‘ 45” N, 81deg. 17’ 44” W
“P. Bevan”
______________________
Peter Bevan, P. Eng.
“Rodney Doran”
______________________
Rodney Doran, P. Eng.
March 2008
__________________
Date
March. 2008
__________________
Date
VETRIN
Mine Planners Ltd.
15. APPENDIX
15.0.1 Certificate for Peter Bevan
As a co-author of this report entitled “Preliminary Economic Assessment for the Fuller Project”, I, Peter Bevan do here by certify that:
1.
I am an independent consulting mining geologist, and carried out this assignment for, VG Gold Corp., Suite 520, 65 Queen
St. West, Toronto, Ontario M5H 2M5, tel. (416) 368-0099, fax (416) 368-1539.
2.
I hold the following academic qualifications:
B.Sc. Mining Geology and Associate ship from the Royal School of Mines in London, England in 1960.
3.
I am a registered Professional Engineer in the Province of Ontario since 1973 with specialization in development and
production. I am a member of:
(a)
The Canadian Institute of Mining, Metallurgy and Petroleum (Life Member)
(b)
The Prospectors and Developers Association of Canada
4.
I have worked as a geologist in the minerals industry for 47 years since my graduation from university, the last 25 years as a
consultant.
5.
I am responsible for the preparation of in part or whole of Section 9 of this report;
6.
I have had no prior involvement with the properties that are the subject of the Technical Report, in the estimation of
resources in 2006-07.
7.
I am not aware of any material fact, or material change with respect to the subject matter of the Technical Report that is not
reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.
8.
I am independent of VG Gold Corp. (the issuer) applying all the tests in section 1.4 of National Instrument 43-101.
9.
I consent to the filing of the report with any Canadian stock exchange or securities regulatory authority, and any publication
by them of the report.
Dated this 1st day of March., 2008.
“Peter Bevan”
Peter Bevan
VETRIN
Mine Planners Ltd.
15.0.2
Certificate for Ronald Moran
As a co-author of portions of this report titled “Preliminary Economic Assessment for the Fuller Project”, I, Ron Moran, do certify
that:
1.
I am principal owner of Vetrin Mine Planners and carried out this assignment for:
VG Gold Corp. Suite 520, 65 Queen St. West, Toronto, Ontario M5H 2M5. tel. (416) 368-0099 fax. (416) 368-1539
2.
I hold the following academic qualifications: B.Sc. Mine Engineering, Michigan Technological University, 1980;
3.
I am a Professional Engineer registered with the Professional Engineers for the Province of Ontario (registration number
90243288);
4.
I have worked in the minerals industry for over 25 years;
5.
I am responsible for the preparation in part or whole of Sections 1.0, 2.0, 3,0 ,11.0, 12.0 &13.0;
6.
I do by reason of education, experience and professional registration; fulfill the requirements of a Qualified Person as
defined in NI 43-101. My work experience includes over 25 years as a mine engineer and planner in the base metals and
gold sector of the industry and most recently as an independent consultant.
7.
I have visited the Fuller Project Site;
8.
I am independent of the parties involved in the transaction for which this report is required, as defined in Section a.4 of NI43 101;
9.
I have had no prior involvement with the mineral properties in question;
10.
I have read NI 43-101 and portions of this report for which I am responsible and which have been prepared in compliance
with the instrument;
11.
As of the date of this certificate 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 this report not misleading;
Dated this 1st day of Feb. 2008.
“Ronald Moran”
Ronald Moran, P. Eng.
VETRIN
Mine Planners Ltd.
15.0.3
Certificate J. R. Doran, P. Eng.
As a co-author of portions of this report titled “Preliminary Economic Assessment for the Fuller Project”, I, J.R.Doran, do certify that:
1.
I am a Senior Mining Engineer with B. H. Martin Consultants Ltd., and carried out this assignment for VG Gold Corp.,
Suite 520, 65 Queen St. West, Toronto, On M5H 2M5, tel. (416) 368-0099, fax (416) 368-1539;
2.
This certificate applies to the Permitting, Social Consultation & Environmental Compliance sections of the technical report
titled “Preliminary Economic Assessment Fuller Project” prepared for Vetrin Mine Planners Ltd.
3.
I hold the following academic qualifications;
B.S. Mining Engineering from South Dakota School of Mines & Technology, and B.S. Engineering Administration
Michigan Technological University.
4.
I am a Professional Engineer registered with the Professional Engineers of Ontario (registration number 11936010);
5.
I have worked in the mineral industry for more than thirty-five years;
6.
I am responsible for the preparation of Section 10, titled Permitting, Social Consultation and Environmental Compliance of
this report;
7.
I have visited the Fuller Project Site;
8.
I am independent of the parties involved in the transaction for which this report is required,
9.
I have had no prior involvement with the mineral property or the issuer.
10.
I have read NI 43-101 and portions of this report for which I am responsible and which have been prepared in compliance
with the instrument;
11.
As of the date of this certificate, I am not aware of any material fact, or change in reported information, in connection with
the subject property, not reported or considered by me, the omission of which makes this report misleading.
12.
I consent to the filing of the report with any Canadian stock exchange or securities regulatory authority, and any publication
by them of the report.
Dated this 1st day of March, 2008.
“J.R. Doran”
J.R. Doran, P, Eng.

View Report - Lexam VG Gold Inc.

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