El Cubo
The El Cubo – Las Torres Mine Complex
Property
The El Cubo – Las Torres Mine Complex is located in the village of El Cubo, approximately 10-kilometres east of the city of Guanajuato, the capital city of the State Guanajuato, Mexico. Guanajuato City is approximately 275-kilometres northwest of Mexico City.
Mexgold holds a 100% interest in the El Cubo Mine, consisting of 58 exploitation and exploration concessions that cover 8,500-hectares. The Company further increased its land holding in this area in October 2004, when Mexgold entered into a lease agreement with Industrias Peñoles, S.A. de C.V. for the Las Torres Mine, a group of four working mines. The Las Torres Mine is immediately adjacent to the El Cubo Mine, and consists of 50 exploitation concessions encompassing 6,400-hectares.
History
The Guanajuato Mining District was discovered in 1548, and is one of Mexico’s largest gold and silver producers. Historic reports cite district production of 4-million ounces of gold and 1.2-billion ounces of silver. The El Cubo Mine and the adjacent Peregrina Mine account for a significant percentage of the gold that has been produced from the district. The El Cubo Mine, the most important gold producer in the district, was discovered in the late 1700’s and has been in continuous operation for over 200 years. Historic production grades at El Cubo are estimated at 10 to 50 grams per tonne gold and 150 to 1,000 grams per tonne silver.
The Las Torres Mine and Mill Complex consist of a group of four working mines: Cedros, Peregrina, Apolo and Sirena. Each mine has been maintained on a care and maintenance basis, and no special measures are required to resume operations. This property has been a prolific gold and silver producer for many years, especially the Peregrina Mine.
By unifying El Cubo and Las Torres into a single mining operations, encompassing more than 14,000-hectares, Mexgold has effectively consolidated the vast majority of the Guanajuato Gold-silver District, one of the most productive silver districts in the world.
Mine Operations
The El Cubo Mine operates as a multi-level underground mine with access ramps for mobile equipment and two vertical shafts for the hoisting of ore. Mexgold has introduced a number of changes to the mining methods utilized at the mine in effort to reduce mining costs and lower dilution. Shrinkage stoping has been implemented in some areas of the mine, and as the miners become more experienced in this method, grade improvement and cost reductions should become apparent. Mexgold has also modified the cut and fill method utilized in other areas of the mine to improve mining efficiencies and lower dilution.
In addition to improvements in grade control and efficiencies, these changes have also resulted in a significant increase in mine production. In the month of November 2005, El Cubo produced 3,890 ounces of gold and 147,237 ounces of silver. This represents a 75% increase in production levels since November 2004. The mine is now operating at production levels not seen since the early 1980’s. These results are encouraging and management remains confident of achieving the Company’s near term production rate objective of 100,000 gold equivalent ounces per year.
Exploration
Mexgold’s exploration program at the El Cubo – Las Torres Mine Complex has been focused on two key objectives: 1) to increase production within the current El Cubo mine, and; 2) to expand the resource base in areas outside of the current mine area. Initially, increasing mine production was the first priority, and approximately 70% of the Company’s resources were allocated to this task. As mining efficiencies have improved and production increased, Mexgold has been able to shift emphasis to exploration within the historic Guanajuato District. This increase in district-wide exploration has been enhanced by the Las Torres property acquisition, which has provided Mexgold access to almost the entire Guanajuato District.
To date, three significant targets have been developed outside of the main El Cubo mine complex; the La Loca vein complex, the Phoenix, and the Veta Madre bulk tonnage project. These three targets represent areas outside of the current mine area and have been identified by positive exploration results as areas with significant potential to increase mineable resources on the Mexgold property.
The La Loca Vein
The La Loca target is a northwest trending vein complex consisting of a main southwesterly dipping vein with horse-tail splays in the hanging wall. When initial drilling returned significant grade intersections, the La Loca became the key focus of the 2005 exploration program. The current ore shoot, as defined by 100-metre by 100-metre drill spacing is 200-metres by 700-metres with a vertical extent of over 400- metres. Drilling indicates that a second ore shoot may exist to the southeast on the structure. The unmined portion of this vein has now been traced at surface for over 2.5-kilometres.
The established ore shoot, currently under development is being accessed from the main El Cubo mine on the fourth and fifth levels and from the Las Torres-Peregrine haulage ways on the eighth and fourteenth levels. Ventilation raises have been completed and the La Loca vein is scheduled to be a significant producer in the coming year.
The Phoenix Target Area
Following completion of the Peñoles agreement, a data review and target definition program was initiated. During the course of this data review, it became apparent that a significant vein swarm was present to the southeast of the main Peregrine mine, hosting both bulk tonnage mineralization and high grade gold and silver veins, typical of the Guanajuato Mining District. It was also recognized that the San Cosme vein, the principle vein within this area, has developed significant high grade splay veins.
This area, termed the Phoenix, had been the site of significant historic surface mining activity. In the 1920’s apparent pit wall failure in the near vertical open cut (150 by 300-metres) resulted in the relocation of all mining activities in this area of the District approximately 3.5-kilometres northwest, to the current location of the Peregrine Mine.
Due to the positive results of initial drilling, a decline ramp has been collared on the southern side of the open cut and additional exploration will be conducted from underground drill stations.
The Veta Madre Bulk Tonnage Project
Peñoles’ Cedros mine and milling complex was an underground operation with a floatation processing plant. As such, prior exploration efforts were focused on underground operations with a grade cut off sufficient to provide a profit after underground mining and traditional mill costs were applied. During the course of the data review it was determined that a moderate grade bulk tonnage open pit heap leach target might be present along an 800-metre strike extension of the Veta Madre.
The mineralized intervals from exploration drilling have been tested by Kappes, Cassiday & Associates (KCA) of Reno, Nevada, for cyanide solubility and column testwork to determine the economic viability of heap leach processing. Samples form the Phoenix area mineralization and lower grade ores from the El Cubo veins have also been submitted for column testwork. The purpose of this work is to determine the viability of a fine crush heap leach process. If this processing technique proves to be economically viable, the El Cubo operations could be expanded at a relatively low capital cost resulting in a reduction of operating costs and allowing for the expansion of the underground production capacity without the addition of more milling capacity.
El Cubo-Las Torres Proven & Probable Reserves
Gold equivalent values are based on 58.7 grams of silver = 1 gram of gold, calculated on a gold price of US $505 and a silver price of US $8.60. Dilution is 50% at zero grade. 95% extraction anticipated. Proven & Probable reserves stated above are a subset of Measured & Indicated resources contained in the table below.
El Cubo-Las Torres Measured & Indicated Resources
Gold equivalent values are based on 58.7 grams of silver = 1 gram of gold, calculated on a gold price of US $505 and a silver price of US $8.60. Proven & Probable reserves contained in Table 2 are a subset of Measured & Indicated resources stated above.
El Cubo-Las Torres Inferred Resources
Gold equivalent values are based on 58.7 grams of silver = 1 gram of gold, calculated on a gold price of US $505 and a silver price of US $8.60. The full Technical Report on the El Cubo Gold-Silver Mine, dated April 17, 2006, prepared by Glenn R. Clark, P.Eng. and Glenn R. Clark & Associates Ltd. is available at www.sedar.com .
