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Falco Resources Ltd
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Falco releases NI 43-101 Horne 5 resource estimate

2016-01-25 06:41 ET - News Release

Mr. Luc Lessard reports

FALCO ANNOUNCES SIGNIFICANT INCREASE IN HORNE 5 RESOURCES

Falco Resources Ltd. has released an updated mineral resource estimate for its wholly owned Horne 5 gold project located in Rouyn-Noranda, Que. Gold-equivalent resources have increased significantly as a result of the update. The estimate combines the results of the 2015 surface confirmation drilling program and the historic drilling data collected by Noranda Inc. between 1924 and 1976. The majority of the Noranda drilling was conducted as radiating fan drilling on 15-metre spacing from 40 underground working levels developed throughout the deposit. New indicated and inferred resources have been estimated for the Horne 5 deposit. This new mineral resource estimate contains five high-grade zones.

Highlights (at a $65/tonne net-smelter-return cut-off):

  • Horne 5 currently hosts an indicated resource of 5,361,000 gold-equivalent ounces, including 3,418,232 ounces gold hosted in 58.3 million tonnes averaging 2.86 g/t AuEq (1.82 g/t gold, 15.60 g/t silver, 0.20 per cent copper and 1.00 per cent zinc).
  • Horne 5 also currently hosts an inferred resource of 1,254,000 ounces AuEq, including 854,534 ounces Au hosted in 12.7 million tonnes averaging 3.08 g/t AuEq (2.10 g/t Au, 26.26 g/t Ag, 0.22 per cent Cu and 0.57 per cent Zn).
  • The indicated resources represent 81 per cent of the total resources. The recently completed drilling program confirmed Au, Cu and Zn grades in historical drill holes, and provided the data to upgrade a large portion of the inferred resource into the indicated category.
  • The significant increase in indicated resources together with the increase in global resources provide further confidence in the quality and predictability of Horne 5 as the project moves toward preliminary economic assessment and feasibility study stages.
  • An initial preliminary economic assessment (PEA) using the updated Horne 5 resource has been commenced and is planned to be completed by the end of the second calendar quarter of 2016.
  • Continuing work on the PEA is focusing on refining the mining method, mining rate and production costs. Continuing work on rock mechanics (using information from drill core collected during the confirmation drilling program) was used to determine stope dimensions. New parameters from this work in progress were used for the calculation of the cut-off grade of $65/tonne.
  • The confirmation drilling program results also confirmed silver grades from the historical metallurgical testwork done by Noranda, and silver values were included in the mineral resource estimate. The historical metallurgical testing was done on 54 lots from more than 75,000 metres of core drilling (representing 2,112 drill holes), coming from an area of 920 m vertical and 730 m horizontal in the Horne 5 deposit.

Luc Lessard, president and chief executive officer, stated: "We are very pleased with the significant increase in resources at our Horne 5 project. In 2015, we conducted a successful drill program and made substantial progress at the project. With the release of today's updated resource, another milestone has been reached, as we have now outlined a prospective large bulk-tonnage underground resource. Our ongoing PEA and future feasibility work will be directed towards outlining the economic criteria necessary to see the Horne 5 deposit become Canada's next significant new gold mine."

Horne 5 resource estimate

The Horne 5 resource estimate is based on 4,384 underground drill holes (305,788 m) drilled by Noranda between 1924 and 1976, and 18 new confirmation drill holes (17,300 m) drilled by the company in 2015. The resource estimate also includes silver assays from exhaustive metallurgical testwork completed by Noranda (comprising 2,112 drill holes representing 75,540 m) grouped in 54 lots.

Falco's confirmation drill holes were collared from surface. They successfully confirmed previously drilled areas between 650 m and 2,035 m below surface. The historic Noranda holes were collared at depths ranging from 600 m to 2,300 m below surface across a strike length of up to 1,000 m. The majority of drilling was conducted as radiating fan drilling on 15 m spacing from 40 underground working levels developed throughout the deposit. The 15 m spacing is significantly closer than standard drill spacing used in resource estimation work today providing a very high level of confidence in the data. Falco sampled at one m intervals, Noranda dominantly sampled at three m core lengths (which homogenizes individual higher-grade results), generating the more than 87,000 assays that were used in the 2015 resource estimate.

                HORNE 5 DEPOSIT -- MINERAL RESOURCE ESTIMATE

Resource class   Cut-off   Tonnes     AuEq      Au      Ag      Cu      Zn
                    (NSR)      (M)    (g/t)   (g/t)   (g/t)     (%)     (%)

Indicated            >50     82.2     2.53    1.59   14.49    0.18    0.90
                     >55     74.1     2.64    1.66   14.87    0.19    0.94
                     >60     66.0     2.74    1.74   15.26    0.19    0.97
                     >65     58.3     2.86    1.82   15.60    0.20    1.00
                     >70     51.1     2.98    1.91   15.93    0.21    1.02
                     >75     44.2     3.11    2.01   16.20    0.22    1.04
                     >80     38.0     3.25    2.12   16.46    0.23    1.06
                     >85     32.3     3.39    2.25   16.69    0.24    1.07
                     >90     27.5     3.54    2.37   16.88    0.25    1.08
                     >95     23.3     3.70    2.50   17.04    0.27    1.09
                    >100     19.7     3.86    2.64   17.25    0.28    1.09
Inferred             >50     19.2     2.62    1.72   22.47    0.21    0.56
                     >55     16.6     2.78    1.85   23.78    0.21    0.57
                     >60     14.5     2.92    1.97   24.99    0.21    0.57
                     >65     12.7     3.08    2.10   26.26    0.22    0.57
                     >70     10.9     3.25    2.25   27.60    0.23    0.55
                     >75      9.1     3.47    2.46   28.48    0.24    0.53
                     >80      7.6     3.71    2.69   28.92    0.25    0.50
                     >85      6.4     3.94    2.91   29.77    0.26    0.47
                     >90      5.4     4.21    3.15   30.82    0.27    0.46
                     >95      4.8     4.42    3.35   31.48    0.27    0.45
                    >100      4.3     4.60    3.51   32.28    0.28    0.45

Resource class    Contained   Contained  Contained  Contained    Contained
                       AuEq          Au         Ag         Cu           Zn
                       (Moz)       (Moz)      (Moz)      (Mlb)        (Mlb)

Indicated             6.694       4.212     38.293      328.1      1,638.4
                      6.273       3.959     35.397      306.2      1,531.8
                      5.823       3.691     32.378      283.1      1,412.1
                      5.361       3.418     29.273      260.4      1,284.8
                      4.893       3.142     26.163      237.7      1,152.6
                      4.421       2.865     23.048      215.2      1,017.0
                      3.962       2.592     20.086      193.4        886.7
                      3.525       2.332     17.331      173.0        761.7
                      3.129       2.095     14.902      154.0        652.4
                      2.775       1.878     12.780      136.8        558.6
                      2.452       1.679     10.948      121.1        474.3
Inferred              1.616       1.060     13.841       86.6        237.2
                      1.483       0.985     12.692       76.6        208.6
                      1.367       0.920     11.688       68.6        183.0
                      1.254       0.855     10.705       61.7        158.1
                      1.139       0.788      9.670       54.7        133.1
                      1.013       0.716      8.307       47.5        106.1
                      0.904       0.655      7.055       41.5         83.4
                      0.814       0.601      6.146       36.4         67.1
                      0.733       0.549      5.372       32.0         54.9
                      0.678       0.514      4.835       28.9         47.4
                      0.636       0.485      4.460       26.6         42.6

Resource estimate notes:

  • The effective date of the resource estimate is Jan. 8, 2016. The independent and qualified persons for the mineral resource estimate as required by National Instrument 43-101 are Carl Pelletier, BSc, PGeo, and Dr. Vincent Jourdain, PEng, PhD, both employees of InnovExplo Inc.
  • Mineral resources are not mineral reserves and have not demonstrated economic viability.
  • While the results are presented undiluted and in situ, the reported mineral resources are considered by the qualified persons to have reasonable prospects for economic extraction.
  • These estimates include four low-grade gold-bearing mineralized zones.
  • The principal low-grade gold-bearing mineralized zone includes five high-grade gold-bearing zones, one high-grade copper-bearing zone, one high-grade zinc-bearing zone and two high-grade silver-bearing zones.
  • Resources were compiled at NSR cut-offs of $50, $55, $60, $65, $70, $75, $80, $85, $90, $95 and $100 per tonne. The official base-case resource is reported at a $65-per-tonne NSR cut-off.
  • The appropriate NSR cut-off will vary depending on prevailing economic and operational parameters to be determined.
  • NSR estimates are based on the following assumptions: exchange rate of $1.27/$1 (U.S.), metal prices of gold $1,165 (U.S.)/ounce, silver $15.77 (U.S.)/ounce, copper $2.53 (U.S.)/pound and zinc 89 U.S. cents/pound (one-year trailing average as of Dec. 14, 2015). Net recoveries are 84.0 per cent for gold, 75.3 per cent for silver, 71.8 per cent for zinc and 66.5 per cent for copper. Smelting cost (including transportation) is $7.73 per tonne.
  • Gold-equivalent calculations assume these same metal prices.
  • Inferred resources are separate from indicated resources.
  • The quantity and grade of reported inferred resources in this estimate are uncertain in nature, and there has not been sufficient work to define these inferred resources as indicated or measured resources. It is uncertain if further work will result in upgrading these resources to an indicated or measured mineral resource category.

Resource modelling notes:

  • Densities within ENV_A were estimated from Noranda drill hole iron assay data and Falco density data using a three-pass ID2 interpolation method. Limited density data were available for zones ENV_B to D and a fixed density of 2.88 tonnes/cubic metre was assumed for these zones which represent the median of the available data.
  • Compositing was done on drill hole sections falling within the mineralized zones (composite equals three metres).
  • The resource was estimated using Geovia GEMS 6.7. The estimate is based on 4,411 diamond drill holes (323,087 metres). For silver the estimates also uses the results of an exhaustive metallurgical test comprising 2,112 diamond drill holes assayed for silver over a total length of 75,540 m. A minimum true thickness of seven m was applied, using the grade of the adjacent material when assayed, or a value of zero when not assayed.
  • Only the silver interpolation in the inferred resources does not use the material when not assayed.
  • The estimate was based on a 3-D block model (five m by five m by five m blocks). Within ENV_A wireframes of high-grade zones were used as hard boundaries to constrain the interpolation of gold, silver, copper, zinc and density into the block model. Interpolation parameters were derived based on geostatistical analysis conducted on three m composited drill hole data. Block grades have been estimated using inverse distance squared (ID2) interpolation method, and the mineral resources have been classified based on proximity to sample data and the continuity of mineralization in accordance with Canadian Institute of Mining, Metallurgy and Petroleum best practices.
  • Capping of high-grade gold values was done on raw assay data and established on a per-zone basis: HG_A: 35 g/t, HG_B: 35 g/t, HG_C: 25 g/t, HG_D: 35 g/t, HG_E: 25 g/t, ENV_A: 35 g/t, ENV_B: 25 g/t, ENV_C: 25 g/t and ENV_D: 25 g/t, and for high-grade silver: SG_HG: 100 g/t, HG_D: 165 g/t, ENV_A_SG_low: 110 g/t, ENV_B: 100 g/t, ENV_C: 100 g/t and ENV_D: 100 g/t. No upper capping was applied to copper and zinc data.
  • Tonnage estimates were rounded to the nearest hundred tonnes. Any discrepancies in the totals are due to rounding effects. Rounding practice follows the recommendations set out in NI 43-101.
  • CIM definitions and guidelines were followed in estimating mineral resources.
  • InnovExplo is not aware of any known environmental, permitting, legal, title-related, taxation, socio-political, marketing or other relevant issue that could materially affect the mineral resource estimate.
  • The mineral resources presented herein are categorized as indicated and inferred based on geological and grade continuity. A maximum distance to the closest composite of 25 m was used for indicated resources. The average distance to the nearest composite is 8.3 m for the indicated resources and 35.2 m for the inferred resources.

Modelled zones

For the purpose of the mineral resource estimate, four mineralized envelopes (ENV_A, ENV_B, ENV_C and ENV_D) were identified, defined and modelled from 600 m to 2,600 m depth. The deposit is vertical with a width of 500 m to 800 m and a thickness varying from seven m to 120 m. The principal envelope (ENV_A) consists of a disseminated to massive sulphide body hosted by a rhyolite unit. The ENV_A interpretation takes into account the gold (approximate cut-off grade of 0.5 g/t Au), copper and zinc assays, the specific gravity which correlates precisely with the presence of sulphides and the geological mapping of underground workings which locates the disseminated and massive sulphide facies. ENV_A shows zonation in gold, copper and zinc, as well as a zonation in the sulphide content. ENV_B, ENV_C and ENV_D consist of low-grade gold-bearing zones defined using an approximate cut-off grade of 0.5 g/t Au. ENV_B and ENV_C are concordant to ENV_A and located north of it, while ENV_D is located at depth and is slightly discordant to ENV_A.

High-grade zones

Within ENV_A, high-grade zones were defined for gold (approximate cut-off grade of 2.5 g/t Au), copper (approximate cut-off grade of 0.2 per cent Cu), zinc (approximate cut-off grade of 0.75 per cent Zn) and specific gravity (approximate cut-off grade of 3.5 t/cubic m). Wireframes of high-grade zones were used as hard boundaries to constrain the interpolation of gold, silver, copper, zinc and density into the block model.

There is no established correlation between the current high-grade zone nomenclature and historical gold-rich lenses as defined by Noranda, which were based on a higher gold cut-off of approximately six g/t Au.

           HORNE 5 DEPOSIT --  MINERAL RESOURCE ESTIMATE PER ZONE

Resource class         Zone  Tonnes     AuEq      Au      Ag      Cu      Zn
                                 (M)    (g/t)   (g/t)   (g/t)     (%)     (%)

Indicated             ENV_A    36.6     2.59    1.51   15.93    0.17    1.15
                      ENV_B     0.1     2.23    2.13       -    0.06    0.02
                      ENV_C     0.1     2.75    2.65       -    0.06    0.03
                      ENV_D       -        -       -       -       -       -
                       HG_A     6.6     3.12    2.15   15.71    0.12    1.09
                       HG_B    10.9     3.10    2.15   15.48    0.30    0.54
                       HG_C     2.2     3.79    3.17    8.95    0.24    0.28
                       HG_D     1.8     5.48    3.79   21.30    0.46    1.36
                       HG_E     0.4     3.30    2.60   11.82    0.32    0.13
Inferred              ENV_A    11.8     3.10    2.08   27.89    0.23    0.59
                      ENV_B       -        -       -       -       -       -
                      ENV_C       -        -       -       -       -       -
                      ENV_D     0.9     2.70    2.36    4.09    0.12    0.19
                       HG_A       -        -       -       -       -       -
                       HG_B       -        -       -       -       -       -
                       HG_C       -        -       -       -       -       -
                       HG_D       -        -       -       -       -       -
                       HG_E       -        -       -       -       -       -

Resource class      Contained  Contained  Contained  Contained  Contained
                         AuEq         Au         Ag         Cu         Zn
                         (Moz)      (Moz)      (Moz)      (Mlb)      (Mlb)

Indicated               3.053      1.780     18.768      141.2      931.5
                        0.010      0.010          -        0.2        0.1
                        0.011      0.011          -        0.2        0.1
                            -          -          -          -          -
                        0.664      0.458      3.345       18.0      159.2
                        1.083      0.754      5.416       71.9      130.6
                        0.263      0.220      0.621       11.3       13.1
                        0.312      0.216      1.210       18.0       53.1
                        0.047      0.037      0.167        3.1        1.2
Inferred                1.179      0.789     10.593       59.3      154.6
                            -          -          -          -          -
                            -          -          -          -          -
                        0.075      0.066      0.114        2.4        3.6
                            -          -          -          -          -
                            -          -          -          -          -
                            -          -          -          -          -
                            -          -          -          -          -
                            -          -          -          -          -

Resource distribution by level

As previously disclosed in the Nov. 6, 2015, press release, the company conducted a preliminary assessment of the existing infrastructure at the Horne 5 project and recognized that the existing Quemont No. 2 shaft could be used as its main production shaft. The Quemont No. 2 shaft will need to be rehabilitated to current production standards, however it will not have to be widened to accommodate larger skips. The Quemont No. 2 shaft has a depth of 1,200 m (level 33) and will have to be dewatered. The company estimates that 44 per cent of the indicated mineral resources is located between level 17 and level 33, which are accessible with the current shaft depth.

             HORNE 5 DEPOSIT -- MINERAL RESOURCE ESTIMATE PER LEVEL

Resource    Elevation        AuEq  Tonnes   AuEq     Au      Ag    Cu     Zn
class           range  proportion      (M)  (g/t)  (g/t)   (g/t)   (%)    (%)

Indicated     Lvl. 17-
              lvl. 33      44.30%    26.8   2.76   1.68   16.84  0.17   1.13
              Lvl. 33-
              lvl. 49      47.00%    27.5   2.85   1.88   15.07  0.21   0.87
              Lvl. 49-
               bottom       8.70%     4.1   3.59   2.39   11.03  0.35   1.02
Inferred      Lvl. 17-
              lvl. 33       0.10%     0.0   2.58   1.61   10.42  0.40   0.45
              Lvl. 33-
              lvl. 49       7.00%     1.1   2.44   1.55   5.12   0.16   1.14
              Lvl. 49-
               bottom      92.90%    11.5   3.14   2.15   28.34  0.23   0.51

Resource class  Contained   Contained    Contained   Contained     Contained
                     AuEq          Au           Ag          Cu            Zn
                     (Moz)       (Moz)        (Moz)       (Mlb)         (Mlb)

Indicated           2.374       1.446       14.498       101.7         667.7
                    2.521       1.661       13.340       127.5         525.8
                    0.467       0.310        1.435        31.1          91.2
Inferred            0.001       0.001        0.006         0.1           0.2
                    0.088       0.056        0.185         3.8          28.2
                    1.165       0.798       10.515        57.7         129.8

Density model

A specific gravity model was based on 34,337 iron assays and 3,191 density measurements. The method for density calculation from iron assays was developed by Noranda. The high-density portion of ENV_A shows an average density of 3.68 t/cubic m. The low-density portion ENV_A shows an average density of 3.23 t/cubic m. Limited density data were available for zones ENV_B to D and a fixed density of 2.88 t/cubic m was assumed for these zones, which represent the median of the available data.

Low mining dilution

As it advances toward the release of the initial PEA, the company has conducted extensive work in regard to the mining methods, backfill type and consequent resource dilution. The company expects to use transverse longhole as the primary mining method and will favour the minimization of dilution to resource recovery. The company believes the resource dilution will be below 4 per cent.

Qualified person

Mr. Pelletier (PGeo, Geo, BSc) and Dr. Jourdain (PEng, PhD) are the qualified persons as defined by National Instrument 43-101 for the mineral resource estimate data in this release as related to the technical information related to the 2014 Horne 5 project resource estimate, and they have reviewed and verified the technical information contained herein. Mr. Pelletier and Dr. Jourdain are consulting geologists with InnovExplo and fulfill the requirements to be qualified persons for the purposes of NI 43-101.

Claude Bernier, exploration manager (PGeo, Eng), is the qualified person for this release as defined by National Instrument 43-101, and has reviewed and verified the technical information contained herein. Mr. Bernier is an employee of Falco and is non-independent.

The scientific and technical information regarding the dilution evaluation and engineering set out in this news release has been approved by Francois Vezina, director, mining development, of Osisko Mining Group. Mr. Vezina is an Eng with the Ordre des ingenieurs du Quebec and PEng with the Professional Engineers of Ontario, and is a qualified person as defined by NI 43-101.

The scientific and technical information regarding the cut-off evaluation set out in this news release has been approved by Francois Girard, director, InnovExplo. Mr. Girard is an Eng with the Ordre des ingenieurs du Quebec and is a qualified person as defined by NI 43-101.

Quality assurance/quality control

Falco has implemented a strict quality control program to comply with best practices in the sampling and analysis of drill core. As part of its QA/QC program, Falco inserts certified external mineralized standards. In the mineralized zones, each shipment comprises 27 samples. Every shipment is composed of 23 samples, a standard, a blank, a pulp duplicate and a reject duplicate placed randomly every 15th sample to test the laboratory analysis methods and precision for each shipment of samples. Blanks and standards are inserted within the normal sample number sequence. Assay results and certificates of analysis are interpreted and reported on a regular basis. If anomalies are detected, the laboratory is advised and the entire batch of samples is reassayed. In non-mineralized zones, every shipment is composed of 27 samples, which includes a standard and a blank. In non-mineralized zones, if anomalies are detected, the laboratory is advised, but the batch of samples is not necessarily reassayed.

We seek Safe Harbor.

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