Mr. Alex Black reports
RIO ALTO MINING LIMITED: LA ARENA GOLD OXIDE RESERVES INCREASED TO 1.08MM OZ AT AU PRICE OF $1,200
Rio Alto Mining Ltd. has completed updated oxide mineral resource and reserve estimates for its 100-per-cent-owned La Arena mine located in Peru. All resources and reserves described below are as of Dec. 31, 2013, and take into account the 261,232 ounces of gold stacked during 2013.
The updated oxide mineral resource and reserve estimate is limited to the Calaorco open-pit area and includes an adjacent gold colluvium zone an three nearby oxidized intrusive zones. An update of sulphide resources and reserves at La Arena will be estimated and published later this year, when a feasibility study on sulphide mining (phase II) is planned to be completed.
The highlight of the new estimate is an increase in oxide (that is, heap leachable) proven and probable reserves to 1.08 million ounces, comprising 78.2 million tonnes at an average grade of 0.43 gram per tonne gold. This reserve has an extremely low forecast LOM stripping ratio of 0.76:1, reserve, versus the 1.47:1 strip ratio in last year's reserve.
The proven and probable reserve is the minable portion of a pit-constrained oxide measured and indicated resource of 1.33 million ounces gold. The reserve estimation was performed based on an assumed gold price of $1,200 per ounce, with the resource constrained by a pit based on $1,400 per ounce gold (the comparable gold prices used for year-end 2012 resources/reserves were $1,400 and $1,800 per ounce, respectively).
Updated mining, processing, and general and administrative costs based on the company's actual results over the mine's operating history were used in the new estimate, as were metallurgical data collected over the course of 2013 for intrusive-hosted gold oxide material. This intrusive ore had previously been excluded from the reserve. The third-generation resource model this release is based on incorporates the results of mining to date. To this point actual ounces mined have been significantly greater than indicated by the resource model -- this new model is expected to give a more accurate estimate of in situ gold ounces.
Oxide gold mineralization still remains open in several areas, offering the opportunity for continuing growth in resources and reserves. Rio Alto is planning a 14,200-metre drill program in 2014 with a view to expanding the oxide resource base.
Rio Alto president and chief executive officer Alex Black commented: "We are extremely happy with the result of our 2013 geological and metallurgical programs. Even after stacking 261,232 ounces in 2013, our proven reserves grew by 452,232 ounces -- accounting for depletion this represents a 51-per-cent increase over our year-end 2013 reserve, and this is in spite of using materially lower assumed gold prices. Our planned 2014 drill program has the potential to continue this resource and reserve growth, further adding to the heap leach mine life at La Arena."
Technical details
The previous resource and reserve estimate for oxide mineralization were published in the La Arena project technical report with an effective date of Jan. 1, 2013, prepared on behalf of the company by Kirk Mining Consultants Pty. Ltd.
KEY PARAMETERS USED TO CONSTRAIN THE OXIDE RESOURCES AND RESERVES WITHIN
PIT SHELLS OPTIMIZED USING WHITTLE PIT OPTIMIZATION SOFTWARE
Jan. 1, 2014 January, 2013, report
Key input parameters for
oxide resources and
reserves pit
optimization Reserves Resources Reserves Resources
Gold price per oz $1,200/oz $1,400/oz $1,400/oz $1,800/oz
Payable proportion of
gold 0.999 0.999 0.999 0.999
Minimum government
royalty 1% 1% 1% 1%
Discount rate 8% 8% 8% 8%
Mining recovery 98% n/a 98% n/a
Dilution 5% n/a 5% n/a
Ore processing rate 13 Mtpa 13 Mtpa 13 Mtpa 13 Mtpa
Gold processing recovery
sediments 85% 85% 85% 85%
Gold processing recovery
intrusive 82% 82% n/a n/a
Mining cost per tonne of
material moved $2.99/t $2.99/t $2.50/t $2.50/t
Processing cost per
tonne of sediment ore $1.53/t $1.53/t $2.06/t $2.06/t
Processing cost per
tonne of intrusive ore $1.65/t $1.65/t n/a n/a
G&A cost per tonne of
ore mined $1.69/t $1.69/t $2.45/t $2.45/t
Sustaining capex $140,000 pa $140,000 pa $250,000 pa $250,000 pa
Oxide mineral resources
The updated oxide resource incorporates an additional 14,875 metres of reverse circulation drilling from a total of 338 drill holes when compared with the Jan. 1, 2013, resource estimate which, after mining depletion, has resulted in a marginal decrease in total oxide mineral resources.
The oxide resource is confined within an optimized undiscounted pit shell based on a gold price of $1,400 (U.S.) per ounce gold and anticipated metallurgical recovery, costs to mine, produce and sell potential metal production as well as estimated leach pad expansion costs.
The oxide resource estimate in the January, 2013, report was based upon a gold price of $1,800 (U.S.) per ounce gold. The gold oxide cut-off grade has decreased marginally to 0.07 gram per tonne gold from 0.1 gram per tonne gold despite a decrease in metal prices. This change is due to three main factors:
- A reduction of processing costs due in part to a planned change from
diesel generated power to grid power in August, 2014, and lower reagent
costs;
- A strip ratio of 0.76, which is significantly lower than the 1.47 strip
ratio of the oxide mineral reserves outlined in the January, 2013, report;
- The location of the new colluvium and oxide intrusive mineral resources
which are all near surface resulting in a lower cut-off grade in
comparison with deeper portions of the oxide mineral resource.
The oxide intrusive material and colluvium material were not included in the January, 2013, report due to a lack of metallurgical testwork on those material types at the time. Metallurgical testwork was completed on these two material types during 2013.
The third iteration of the resource block model has incorporated slightly revised high-grade and low-grade domains which have been justified from grade control trends observed from mining over the past 2-1/2 years. Grade composite lengths in the oxide domain have been increased to eight metres from six metres to reflect current minimum bench heights in the mine. Upper cuts have not been applied to the grade composites due to continued positive grade reconciliation.
RESOURCE
As mined (dry tonnes) Resource (January, 2013)
Au Au
Year Months Tonnes (g/t) Oz Tonnes (g/t) Oz
2011 April-June 551,098 0.54 9,538 384,382 0.46 5,656
2011 July-September 1,226,950 0.63 24,948 925,408 0.51 15,318
2011 October-December 1,885,704 1.14 69,061 1,879,133 0.85 51,484
---------- ---- ------- ---------- ---- -------
Subtotal 2011 3,663,751 0.88 103,548 3,188,922 0.71 72,458
2012 January-March 1,505,960 1.23 59,445 1,582,166 1.13 57,268
2012 April-June 1,820,213 1.05 61,221 1,814,378 1.21 70,344
2012 July-September 2,369,259 0.59 44,737 2,349,690 0.60 45,608
2012 October-December 2,571,532 0.63 51,725 3,105,078 0.58 57,569
---------- ---- ------- ---------- ---- -------
Subtotal 2012 8,266,965 0.82 217,128 8,851,312 0.81 230,789
2013 January-March 2,393,789 0.51 39,507 2,411,096 0.50 39,033
2013 April-June 3,034,844 0.65 63,055 2,419,517 0.59 46,019
2013 July-September 4,996,298 0.58 93,542 4,586,092 0.47 69,684
---------- ---- ------- ---------- ---- -------
Subtotal 2013 10,424,931 0.59 196,103 9,416,706 0.51 154,736
---------- ---- ------- ---------- ---- -------
Grand total 22,355,647 0.72 516,779 21,456,939 0.66 457,983
The updated oxide mineral resource estimate is summarized as follows:
- 100.2 million tonnes grading 0.41 gram per tonne gold in the measured and indicated categories containing 1,327,000 ounces of gold ounces, which after mining 261,232 ounces during the Jan. 1, 2013, to Jan. 1, 2014, period represents a decrease of 69,768 ounces (minus 4 per cent) from the oxide mineral resource estimate in the January, 2013, report.
Oxide mineral resources in the Calaorco pit area remain open along strike and at depth and as a result, the company has budgeted to complete a 14,200-metre RC drilling program at Calaorco during 2014 to test potential extensions to the oxide mineralization.
LA ARENA -- GOLD OXIDE MINERAL RESOURCES
(IN SITU AS AT JAN. 1, 2014)
WITHIN OPTIMIZED PIT SHELL, CUT-OFF GRADE 0.07 G/T AU
Material Tonnes Au Cu Ag Mo Au
Classification type (Mt) g/t % g/t ppm (000 oz)
Measured Sediments 1.8 0.43 0.01 0.46 5.95 25
Intrusive 0.3 0.38 0.26 0.36 25.46 3
Colluvium 0.0 0.00 0.00 0.00 0.00 0
----- ---- ---- ---- ----- -----
Measured Total 2.0 0.43 0.04 2.56 4.68 28
Indicated Sediments 71.9 0.45 0.01 0.54 4.66 1,045
Intrusive 24.1 0.30 0.11 0.41 20.40 231
Colluvium 2.2 0.34 0.01 0.15 4.40 24
----- ---- ---- ---- ----- -----
Indicated Total 98.2 .41 0.04 1.47 7.8 1,299
M+I Sediments 73.7 0.45 0.01 0.54 4.69 1,070
Intrusive 24.4 0.30 0.11 0.41 20.46 234
Colluvium 2.2 0.34 0.01 0.15 4.40 24
----- ---- ---- ---- ----- -----
M+I Total 100.2 0.41 0.04 1.49 7.81 1,327
Inferred Sediments 0.2 0.17 0.01 0.49 4.22 1
Intrusive 0.1 0.30 0.01 0.19 9.80 1
Colluvium 0.0 0.00 0.00 0.00 0.00 0
----- ---- ---- ---- ----- -----
Inferred Total 0.3 0.20 0.01 0.68 5.79 2
Ausenco Peru SAC has been engaged by the company to undertake a review of all relevant metallurgical data pertaining to leaching in the dump leach processing facilities and to prepare the relevant sections of a technical report to back up the updated oxide mineral resource and reserve estimate.
Metallurgical testwork has been undertaken predominantly in La Arena's on-site facilities, managed by Certimin SA, to assess the gold oxide intrusive material's leaching characteristics when blended with the sediment material. The current plan is to blend the new oxide intrusive material with sediments at a ratio of two parts sediments to one part oxide intrusive. The testwork focused on gold recovery, copper dissolution and cyanide consumption but also noted solution breakthrough time (indicative of initial percolation rate).
Since all previous column leach testing on the blend of oxide intrusive material with sediment material was conducted by the in-house Certimin-managed laboratory, quality assurance testwork was initiated, duplicating two column tests on site with two at SGS del Peru SAC to check the consistency and repeatability of the column tests.
From this testwork Ausenco concluded that a dump leach recovery of 82 per cent was appropriate for the blended material and that a sodium cyanide consumption of 0.2 kilogram per tonne and lime consumption of 1.5 kilograms per tonne were appropriate as input parameters for mineral resource and reserve estimation purposes at prefeasibility study level. Ausenco has recommended further investigation of the permeability characteristics of blends of oxide intrusive and sediment material, pilot-scale testing of bulk sample(s) under dump leach operational conditions (work already in progress), and improved tracking of samples and ore from mining blocks to metallurgical testing to dump leach cells to increase confidence in scaleup from test results to mineral reserve estimates.
Oxide mineral reserves
The previous reserve estimate for oxide mineralization was published in the January, 2013, report.
Oxide mineral reserves have been based on a pit design that has been derived from pit optimization, using Whittle software, of the new total oxide measured and indicated mineral resources. Included in the oxide mineral reserve estimate is low-grade stockpile material that has previously been mined and stockpiled for blending with oxide intrusive mineralization at a later date. The pit optimization input parameters are as for the mineral resources outlined above except that only measured and indicated resources are included and a gold price of $1,200 per ounce was assumed.
The updated oxide mineral reserve estimate is summarized as follows:
- 78.2 million tonnes grading 0.43 gram per tonne gold in the proven and probable categories containing 1,078,000 ounces of gold ounces, which after mining 261,232 ounces during the Jan. 1, 2013, to Jan. 1, 2014, period represents an increase of 452,232 ounces (plus 51 per cent) from the oxide mineral reserve estimate in the January, 2013, report (or a 22-per-cent increase from 887,000 ounces at Jan. 1, 2013, to 1,078,000 ounces at Jan. 1, 2014).
LA ARENA -- OXIDE MINERAL RESERVE
(IN SITU AS AT JAN. 1, 2014)
WITHIN PIT DESIGN, CUT OFF GRADE 0.07 G/T AU SEDIMENTS AND 0.10 G/T AU
INTRUSIVE
Material Tonnes Au Cu Ag Au
Classification type (Mt) g/t % g/t (000 oz)
Proven Sediments 1.4 0.45 0.01 0.44 20
Intrusive 0.2 0.38 0.26 0.34 3
Colluvium 0.00 0.00 0.00 0
LG stockpile 1.2 0.23 0.004 0.81 9
---- ---- ---- ---- -----
Proven Total 2.8 0.35 0.03 0.59 32
Probable Sediments 56.9 0.47 0.01 0.46 853
Intrusive 16.5 0.32 0.14 0.37 172
Colluvium 2.0 0.34 0.005 0.15 21
---- ---- ---- ---- -----
Probable Total 75.4 0.43 0.04 0.43 1,046
Proven and
probable Sediments 58.2 0.47 0.01 0.48 873
Intrusive 16.8 0.32 0.14 0.39 175
---- ---- ---- ---- -----
Colluvium
Stockpile LG stockpile 2.0 0.32 0.01 0.16 21
---- ---- ---- ---- -----
1.2 0.23 0.00 0.81 9
---- ---- ---- ---- -----
Proven and
probable Total 78.2 0.43 0.04 0.46 1,078
The updated reserve features a waste-to-ore ratio of 0.76:1 in comparison with a waste to ore ratio of 1.47:1 for the reserve stated in the January, 2013, report. The waste-to-ore ratio estimated for mining in 2014 is 0.87:1.
Guidance for 2014
For 2014 the company anticipates gold production of 190,000 to 210,000 ounces, roughly equivalent to production in 2013.
Adjusted operating costs for 2014 are forecasted to be in the range of $625 to $700 per ounce of gold sold.
For 2014 all-in sustaining costs -- including selling, general and administrative costs, exploration, and sustaining capital -- are forecast to fall within a range of $825 to $900 per ounce and all-in costs within a range of $1,000 to $1,100 per ounce for the year.
Phase II update
The focus of phase II development at La Arena will be sulphide mining operations producing a copper and gold concentrate, initially based on a starter pit with reserves containing between 30 million tonnes and 40 million tonnes of high-grade near-surface mineralization. The starter plant throughput rate of phase II is targeted at 18,000 tonnes per day.
On Jan. 6, 2014, the company announced that it had received formal notification from the Ministry of Energy and Mines of Peru that approval had been given for modifications to its environmental impact study for the La Arena project gold oxide mine. This EIA modification allows Rio Alto to apply for permits for a future phase II open-pit sulphide mine, construct an 18,000-tonne-per-day copper/gold concentrator, expand the current waste dump facilities to accommodate sulphide waste and to use the Calaorco pit for tailings deposition once open-pit oxide reserves are exhausted.
The metallurgical testwork program is in its final phase optimizing grind size and completing flotation testwork, which will be completed in three to four weeks. Process design is essentially fixed with only minor adjustments arising from recent testwork if deemed necessary. All principal mechanical equipment has been sized and quotations obtained for all major equipment. The plant location and basic layout have been confirmed, and design is progressing to satisfy both the requirements of the feasibility study and beneficiation concession application. The conceptual study for future tailings storage facility options has been completed as have trade-off studies for in-pit crushing and conveying, and plant throughput rate.
The objectives of the feasibility study will be to achieve an initial project capital cost as low as practicably possible in order to provide for capital payback in the shortest estimated time period and to utilize as much of the infrastructure of the existing gold oxide mine as possible.
Timing for the completion of the feasibility is constantly being reviewed and the current expectation is for technical work related to the study to be completed late in the second quarter or early in the third quarter, 2014.
National Instrument 43-101 and JORC compliant
The current mineral resource and mineral reserve estimates were prepared in conformity with National Instrument 43-101 Standards of Disclosure for Mineral Projects. These estimates will be incorporated in a National Instrument 43-101 technical report with an effective date of Jan. 1, 2014, to be filed on the company's SEDAR profile within 45 days of this press release.
The updated oxide mineral resource and mineral reserve estimates were prepared and classified in accordance with the guidelines set out in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves of December, 2004, as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. This resource and reserve classification is also in accordance with the classification standards of National Instrument 43-101 Standards for Disclosure for Mineral Projects, and the reporting classification standards on mineral resources and reserves of the Canadian Institute of Mining, Metallurgy and Petroleum.
Enrique Garay, MSc, PGeo (AIG member), vice-president, geology, of Rio Alto, is the qualified person (as defined by National Instrument 43-101) responsible for managing the company's exploration programs and disclosure of drilling results. Ian Dreyer, BAppSc (AusIMM 305241, CP), a qualified person (as defined by National Instrument 43-101), geology manager, MIC SAC, designed and reviewed the quality control and assurance program of the company, and prepared the resource estimates. Mr. Garay and Mr. Dreyer have read and verified the scientific and technical information related to the mineral resource estimate in this press release.
Marek Mroczek, PEng, senior mining/geology consultant, Mining Plus Canada Consulting Ltd., supervised the review of the reserve estimates. Mr. Mroczek is a qualified person as defined by National Instrument 43-101 and has read and verified the scientific and technical information related to the reserve estimate contained in this press release.
Greg Lane, FAusIMM, chief technical officer, Ausenco, supervised the review of metallurgical testwork used for the reserve estimates. Mr. Lane is a qualified person as defined by National Instrument 43-101, and has read and verified the scientific and technical information related to metallurgical data pertaining to leaching in the dump leach processing facilities for the mineral resource and reserve estimates contained in this press release.
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