Mr. Joseph Conway reports
PRIMERO REPORTS 2014 YEAR-END MINERAL RESERVES AND MINERAL RESOURCES AND ANNOUNCES NEW HIGH-GRADE VEIN DISCOVERY AT SAN DIMAS
Primero Mining Corp. has released its 2014 year-end mineral reserves and mineral resources, as well as the discovery of a new high-grade vein intersected by existing infrastructure at its San Dimas mine located in Durango, Mexico.
(Please note that all dollar amounts in this news release are expressed in U.S. dollars unless otherwise indicated.)
Highlights:
- Mineral reserves impacted by increase in cut-off grades: Primero's 2014 year-end gold mineral reserves declined by 9 per cent from 2013 to 1.9 million ounces of gold, mainly as a result of higher cut-off grades applied at Black Fox and San Dimas, combined with the impact of previously disclosed decline in ounces in the Black Fox open pit.
- Improved underground grade profile: Primero's focus on delivering high-quality, high-margin underground ounces has resulted in a 4-per-cent increase, to 5.7 grams per tonne, in gold mineral reserve grade at its platform San Dimas mine in Mexico, as well as a 19-per-cent increase in underground gold mineral reserve grade to 7.5 grams per tonne at its Black Fox mine, located near Timmins, Ont.
- Measured and indicated mineral resources maintained: Primero has increased 2014 year-end gold and silver measured and indicated mineral resources by 1 per cent and 4 per cent, respectively, over 2013 year-end to include 3.2 million ounces of gold and 82.5 million ounces of silver.
- New high-grade vein at San Dimas: Discovery of the Jessica vein in the Central block, channel samples average 10.4 grams per tonne gold and 1,606 grams per tonne silver over 1.4 metres along 98 metres of exposed vein.
- Victoria vein further defined: Drilling has further defined the Victoria vein as two narrower veins, recent intercepts include 49.7 grams per tonne gold and 270 grams per tonne silver over 1.1 metres (VIC14_324).
"Our exploration program continues to deliver strong results," stated Joseph F. Conway, chief executive officer. "In 2014 we were successful at substantially replacing our depletion, not including the open pit at Black Fox. At our platform San Dimas mine, we have consistently discovered new high-grade veins each year. This has resulted in a steady increase in its gold reserves and also its average gold reserve grade, by 62 per cent and 27 per cent, respectively, since 2011. Today's announcement of the discovery of a high-grade Jessica vein under the volcanic capping that covers the northern portion of the San Dimas property, is significant as it confirms the prospectivity of the entire 22,500-hectare San Dimas property, notably the northern and eastern areas. The location of the Jessica vein is also important as it is connected to existing infrastructure. The company has already developed along 98 metres of the vein and will include production from this vein in the 2015 mine plan as well as its 2015 year-end reserves and resources. Primero's continued exploration success at San Dimas led to the current expansion of the mill to 3,000 tonnes per day. With the mine and mill currently operating in excess of the existing nameplate capacity of 2,500 tonnes per day, the company expects to increase production in 2015 to between 175,000 and 185,000 gold equivalent ounces. The Black Fox mine began an optimization program following its acquisition in March, 2014. Delineation drilling in the open pit identified fewer ounces than previously expected, while drilling at depth in the underground produced results that exceeded our expectations. We have already proven mineral resources down to at least 800 metres below surface, 300 metres deeper than when we acquired it. Exploration drilling at the nearby Grey Fox property resulted in a 20-per-cent increase in contained ounces in measured and indicated resources and gives us further confidence that this will be an additional ore source for the Black Fox mill."
The company's 2015 $19-million exploration program is focused on delineation in the first half of the year. Assuming success, the company may approve additional exploration expenditures for the second half of 2015. The 2015 exploration program currently comprises 130,000 metres of drilling and 1,350 metres of exploration drifting.
Mineral reserves and mineral resources
The company completed its 2014 year-end mineral resource and mineral reserve estimation for San Dimas and Black Fox internally and retained AMC Mining Consultants (Canada) Ltd. for the Grey Fox mineral resource estimation.
The company elected to use metal prices of $1,200 per troy ounce of gold and $18 per ounce of silver and a foreign exchange ratio of 13 Mexican pesos per $1 for its San Dimas mine mineral reserve and mineral resource estimations. This resulted in increasing the mineral reserve cut-off grade from 2.7 grams per tonne gold equivalent to 2.9 grams per tonne gold equivalent. Following a two-year study into the average bulk density at the San Dimas mine the bulk density used in the 2014 estimation was lowered to 2.6 tonnes per cubic metre from 2.7 tonnes per cubic metre, resulting in a reduction of approximately 31,000 ounces of gold in the mineral reserve estimate. In addition, further drilling in 2014 of the Victoria vein resulted in the vein being reinterpreted as two narrower veins during the creation of the 2014 block model. As a result, the company was not able to fully replace depletion due to 2014 production leading to a reduction of approximately 27,000 ounces in the Victoria vein mineral reserve estimate.
The company's San Dimas mineral reserves and associated mineral resources were estimated using a block modelling approach with ordinary kriging interpolation. The remaining veins outside of mineral reserves were estimated using a polygonal method and included in inferred resources. The mineral reserves and associated mineral resources were constrained in 57 individual geological models (40 individual geological models in 2013) based on wireframes of the various veins. These wireframes were modelled along the vein contacts, and were defined by gold and silver grades, structural geology, quartz veining and mineral alteration. Grade estimation was performed on three-metre-long-by-three-metre-high-by-0.5-metre-wide blocks. Grade capping was applied for some veins supported by statistical analysis. To convert mineral resources to mineral reserves, mining dilution was added and mining recovery factors were applied on an individual vein basis and respecting mining methodology. For the block-modelled veins, measured and indicated mineral resources were defined by combining several criteria such as a minimum of four drill holes within 15 metres and 30 metres, respectively, whereas inferred mineral resources were estimated with a minimum of two drill holes within 45 metres. The company continues to utilize an external laboratory for all drill samples at San Dimas.
The company elected to use a gold price of $1,200 per troy ounce and a foreign exchange ratio of $1.10 (Canadian) per $1 at its Black Fox mine. This resulted in increasing the underground mineral reserve cut-off grade from 3.4 grams per tonne to 3.7 grams per tonne, causing a reduction of approximately 11,000 ounces of gold in the mineral reserve estimate and partially contributing to the 19-per-cent increase in the underground gold mineral reserve grade to 7.5 grams per tonne. After operating the Black Fox mine for nearly 12 months, the company elected to apply more conservative mining envelopes to current mineral resources which resulted in a reduction in mineral reserves. However, throughout the year the company plans to individually evaluate certain remnant areas which were excluded from the 2014 mineral reserve calculation for potential addition to the mineral reserve estimate and mine plan next year.
As previously disclosed, throughout 2014 production from the Black Fox open pit was systematically below the average 2013 mineral reserve grade. Mining through the year and the reconciliation of the open pit highlighted that the high-grade regions of the pit were not as continuous as predicted by the 2013 block model. As a result, the company completed a close-spaced reverse circulation drilling program at the open pit to incorporate the results in its 2014 year-end mineral reserve estimation. This resulted in a 112,900-ounce reduction in open-pit gold mineral reserve ounces after depletion during 2014.
The company's Black Fox and Grey Fox mineral reserves and associated mineral resources were estimated using a block modelling approach with inverse distance squared and ordinary kriging interpolation respectively. For Black Fox grade estimation was performed on three-metre-long-by-three-metre-high-by-three-metre-wide blocks. Grade capping was applied supported by statistical analysis. Indicated mineral resources were defined by combining several criteria such as a minimum of two drill holes with the closest being within 20 metres. For Grey Fox grade estimation was performed on five-metre-long-by-five-metre-high-by-five-metre-wide blocks and a bulk density of 2.9 tonnes per cubic metre. Grade capping was applied supported by statistical analysis. Indicated mineral resources were defined by combining several criteria such as continuation of geology and mineralization and location of drilling.
TOTAL MINERAL RESERVES AND MINERAL RESOURCES AS AT DEC. 31, 2014
Classification Property Tonnage Gold Silver Contained Contained
(million grade grade gold silver
tonnes) (g/t) (g/t) (000 (000
ounces) ounces)
Mineral reserves
Proven and probable San Dimas 4.5 5.7 352 818 50,510
Proven and probable Black Fox 3.0 4.0 393
Proven and probable Cerro 32.2 0.7 15 712 15,335
----- ------
Total proven and
probable 1,923 65,845
Mineral resources
Measured and indicated San Dimas 4.6 6.6 415 970 60,700
Measured and indicated Black Fox 3.6 5.3 608
Measured and indicated Grey Fox 4.7 4.4 668
Measured and indicated Cerro 47.9 0.6 13 923 20,546
Measured and indicated Ventanas 0.2 2.5 258 12 1,286
----- ------
Total measured and
indicated 3,181 82,536
Inferred resources San Dimas 6.5 3.8 293 786 61,310
Inferred resources Black Fox 0.3 8.3 68
Inferred resources Grey Fox 1.3 4.2 174
Inferred resources Ventanas 0.2 2.3 412 17 3,039
----- ------
Total inferred
resources 1,045 64,350
BLACK FOX MINERAL RESERVES BREAKDOWN AS AT DEC. 31, 2014
Classification Category Tonnage Gold grade Contained gold
(million tonnes) (g/t) (000 ounces)
Mineral reserves
Proven and probable Open pit 0.9 2.2 61
Proven and probable Underground 1.2 7.5 300
Proven and probable Stockpile 0.9 1.1 31
Total Black Fox --- --- ---
proven and probable 3.0 4.0 393
Notes:
1. Assumed gold price of $1,200 per troy ounce and silver price of $18 per troy
ounce.
2. For the reserves, San Dimas cut-off grade of 2.94 g/t AuEq based on total
operating cost of $110.06 per tonne. Metal supply contract obligations have been
referenced in determining overall vein reserve estimate viability. Black Fox
open-pit cut-off grade of 0.9 g/t and underground cut-off grade of 3.7 g/t.
3. Assumed processing recovery factors at San Dimas for gold of 97 per cent and
silver of 94 per cent and 94 per cent for gold at Black Fox.
4. Exchange rate assumed is 13 Mexican pesos/$1 and $1.10 (Canadian)/$1.
5. The San Dimas mineral reserve estimate was prepared under the supervision of
Clifford Lafleur, PEng, director of technical services, Primero, and a qualified
person for the purposes of National Instrument 43-101. The Black Fox mineral
reserve estimate was prepared under the supervision of Mr. Lafleur and Karl
Dessureault, PEng, chief mine engineer, Black Fox, Primero, and a qualified
person for the purposes of National Instrument 43-101.
6. Mineral resources are total and include those resources converted to mineral
reserves except Cerro del Gallo mineral resources which are calculated exclusive
of mineral reserves.
7. For the resources, San Dimas cut-off grade of two g/t AuEq was applied. Black
Fox open-pit cut-off grade of 0.9 g/t gold and underground cut-off grade of 3.4
g/t were applied. Grey Fox open-pit cut-off grade of 0.9 g/t gold and
underground cut-off grade of three g/t were applied.
8. At San Dimas a constant bulk density of 2.6 tonnes per cubic metre has been
used.
9. The mineral resource estimates for San Dimas and Black Fox were prepared
under the supervision of Dr. Harold Brisson PhD, Eng, resource manager of
Primero, a qualified person for the purposes of National Instrument 43-101. The
mineral resource estimate for Grey Fox was prepared by Rodney Webster, MAusIMM,
MAIG, of AMC Mining Consultants (Canada) Ltd., a qualified person for the
purposes of National Instrument 43-101.
As a simple sensitivity exercise, prices of $1,300 per ounce for gold and $20 per ounce for silver were applied to the final San Dimas mineral reserve estimate, giving numbers of the order of 4.8 million tonnes at 5.4 grams per tonne gold and 340 grams per tonne silver, representing approximately 830,000 ounces of gold and 51 million ounces of silver. Using the same gold price of $1,300 per ounce applied to the final Black Fox mineral reserve estimate, resulted in numbers of the order of 3.2 million tonnes at four grams per tonne gold, representing approximately 404,000 ounces of gold.
New high-grade vein discovered at San Dimas
Historically, geologists at San Dimas had not proven the continuity of the epithermal vein systems under the volcanic (rhyolite) capping that exists over a large portion of the northern and eastern portions of the San Dimas property. This volcanic capping consists of barren material and prevents surface expression of the vein systems. The volcanic capping is up to 1.5 kilometres thick, and as a result drilling from surface is not an ideal exploration tool. In the past, exploration has been conducted by means of exploration drifting through exposed "geological windows" into the favourable horizon, created in areas of considerable erosion. As a result the company has always included exploration drifting through the favourable horizon as a significant part of its exploration program.
In December, 2014, exploration drifting 2.5 kilometres north of the Roberta vein in the Central block, which is still currently the largest producing block of the San Dimas mine, encountered a new high-grade vein (the Jessica vein).
The Jessica vein exists in a previously completely unexplored area of the San Dimas property and demonstrates that the epithermal vein system continues under the volcanic capping. This confirms the northern and eastern areas of the San Dimas property remain highly prospective despite the volcanic capping.
The company has completed 28 channel samples of the Jessica vein, resulting in an average gold grade of 10.4 grams per tonne and average silver grade of 1,606 grams per tonne over 1.4 metres. The company has also commenced a drilling program from two drilling bays south of the Jessica vein to test its continuity as the vein currently remains open 1,800 metres to the eastern Guamuchil fault. The vein has been exposed in tunnels for approximately 100 metres laterally and diamond drill assays are pending for mineralized intercepts noted approximately 60 metres below Jessica's current outline. The company will include drill results from the Jessica vein in its 2015 mineral reserve and mineral resource estimation.
The company's exploration program at San Dimas also continues to expand existing veins, with recent drill results not included in the 2014 mineral reserve and mineral resource estimation.
RECENT SAN DIMAS DRILL RESULTS
Area Drill hole From (m) To (m) Grade (g/t) Est. true
Gold Silver width (m)
Santa Rita (Magdalena) MAG14_001 209.8 211.3 3.3 202 1.0
Santa Rita (Magdalena) MAG14_003 159.3 160.6 2.4 1,363 1.1
Santa Rita (Magdalena) MAG14_004 189.6 191.5 22.9 1,894 1.5
Santa Rita (Magdalena) MAG15_006 205.1 206.4 5.2 423 1.1
Santa Rita (Magdalena) MAG15_007 189.6 191.3 5.0 202 1.3
Santa Rita (Nancy) NAN14_001 70.3 70.9 28.7 3,663 0.6
Santa Rita (Nancy) NAN14_002 77.0 77.7 9.5 1,562 0.6
Santa Rita (Nancy) NAN14_003 75.7 78.3 12.4 2,547 1.7
Santa Rita (Nancy) NAN14_004 82.5 83.3 7.2 1,176 0.7
Santa Rita (Nancy) NAN14_006 91.2 92.5 2.6 299 0.9
Central block (Santa SG14_020 128.2 128.7 10.1 888 0.4
Gertrudis)
Central block (Santa SG14_024 121.8 123.4 5.6 625 1.4
Gertrudis)
Central block (Santa SG15_026 138.5 140.1 10.7 1,023 1.1
Gertrudis)
Central block (Santa SG15_029 132.0 132.6 6.2 688 0.5
Gertrudis)
Central block (Santa SG15_029 135.7 136.7 2.2 244 0.9
Gertrudis)
Sinaloa graben VIC14_324 336.0 337.2 49.7 270 1.1
(Victoria)
Sinaloa graben VIC14_326 295.9 297.5 2.6 56 1.3
(Victoria)
Sinaloa graben VIC14_327 159.1 162.4 8.2 40 3.1
(Victoria)
Sinaloa graben VIC14_328 139.5 142.9 13.5 213 3.1
(Victoria)
Sinaloa graben (Lilith) CEL14_208 280.4 281.0 6.3 505 0.6
Sinaloa graben (Lilith) CEL14_209 317.8 318.7 3.9 120 0.8
Drilling at San Dimas was conducted by Primero's exploration team. Gabriel Voicu, PGeo, vice-president, geology and exploration, reviewed the technical exploration information in this news release as the qualified person for the purposes of National Instrument 43-101 for the company. All drill hole samples are one-half core and analyses reported herein were performed in the ISO-certified independent laboratory SGS Servicios Minerales in Durango, Mexico, using fire assay with atomic absorption finish or gravimetric finish for values over 10 grams per tonne gold. Intercepts cited represent true widths and drilling is generally intersecting interpreted mineralized zones at a high angle. Primero's quality control program includes systematic insertion of blanks, standard reference material and 5 per cent of rejects are reassayed to ensure laboratory accuracy. Generally, in a block of 20 samples one will be a standard and one will be a blank.
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