PERU/COLUMBIA

Latin leaders

olombia is a significant producer of gold, nickel, emeralds, petroleum and natural gas as well as the Latin American coal producer. It ranked the fourth gold producer in Latin America after Peru, Brazil and Chile. Colombian Mines Corp, which is acquiring, exploring, and advancing mineral properties with near-term resource and mine development potential, says “Colombia is recognised as one of the most prospective, yet under-explored countries in the world. [It] provides an attractive blend of gold, copper and silver deposit discovery potential within a pro-mining business atmosphere.” Last June Fitch Ratings raised Colombia to investment grade, becoming the third Wall Street agency to elevate the country this year to the coveted status, opening the door to a broader range of investors. "The administration of President Juan Manuel Santos has moved forward an extensive reform agenda to bolster the credibility and predictability of public finances and enhance the country's growth trajectory," Fitch said. Last year Standard & Poor's and Moody's also lifted Colombia to investment grade. Sunward Resources (one of the very active juniors) notes that Colombia's history has been one of many cultures, with evidence of human occupation for over 13,000 years. Many Andean and Caribbean cultures inhabited the region before the arrival of the Spanish in the 1500s. The Spanish arrived along the coastal areas of Colombia and the country became Spain's main source of gold; Cartagena and Bogota were founded by mid-century. Colombia has a total area of approximately 1,138,910 km2 with an estimated population of around 47 million. The nation is bordered by Venezuela, Brazil, Peru, Ecuador and Panama,

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and has coastline along both the Caribbean Sea and Pacific Ocean. The country’s geography consists of the Caribbean and Pacific lowlands, the eastern Amazon lowlands that extend to its borders with Brazil and Venezuela, and the western third of Colombia which is crossed by three rugged and rocky parallel ranges of the Andes Mountains, namely the Eastern, Central, and Western Cordilleras, with the highest point some 5,775 m above sea level. These elevations are the source of the most significant rivers in Colombia including the Cauca, Magdalena and Putumayo. The Cauca and Magdalena (which flow northward) separate the three principal Andean mountain ranges, draining into the Caribbean Sea. The project area of Titiribi is close to the Cauca River, providing transport possibilities. Colombia can be divided into four geographic regions: the Andean highlands, consisting of the three Andean ranges and intervening valley lowlands; the Caribbean coastal lowlands; the Pacific coastal lowlands (separated from the Caribbean lowlands by swamps at the base of the Isthmus of Panama) and Eastern Colombia, a great plain that lies to the east of the Andes including the Amazon portion of the country. The majority of the population is concentrated in the Andean highlands and valleys. The Andean region is

Investor-friendly countries will grow fastest in 2012; Peru and Colombia (along with Chile) are the leaders in Latin America, both are expected to see growth of 4.5% or more this year, according to the International Monetary Fund

Exploration camp at Hudbay Minerals’ Constancia project the centre of national political and economic power, with most of the country's population in large cities, including Bogota, Medellin, and Cali, the three most populous. The Cauca Valley and the Antioquia highlands are perhaps the most dynamic centres of economic activity and growth. The climate is tropical but annual precipitation is variable. Climatic differences are related to altitude and the displacement of the inter-tropical convergence zone between the two

PERU/COLUMBIA Sunward Resources Titiribi drilling operations

major air masses from which the northeast and southeast trade winds originate. The climate of the tropical rainforest in the Amazon region, the northern Pacific coast, and the central Magdalena valley is marked by an annual rainfall of over 2,500 mm and annual average temperatures above 23°C. Sunward Resources’ most advanced project at Titiribi is located within the mid-Cauca Gold Belt, which is developed along the Romeral Fault system. The project is located in the Municipality of Titiribi, in the Department of Antioquia, only 70 km west-southwest of the second largest city in Colombia, Medellin. It is a large porphyry gold-copper project hosting an NI 43-101 compliant Indicated mineral resource

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of 2.2 Moz gold within 142.94 Mt grading 0.480 g/t Au and 0.148% Cu, in the Cerro Vetas and Chisperos prospects, using a 0.3 g/t Au cutoff. The Titiribi project also hosts an Inferred resource of 6.08 Moz gold within 372.7 Mt grading 0.507 g/t Au and 0.078% Cu, using the same cutoff grade. The technical report was prepared by Behre Dolbear and is filed on SEDAR. The Behre Dolbear study supports further development drilling at Cerro Vetas, stating that "exploration potential to expand the known resources at Cerro Vetas is excellent." "The Behre Dolbear Report clearly demonstrates that Titiribi is emerging as one of the most significant gold projects in the world," said Colin Andrew, Sunward's Chief Executive Officer, in September last year. "Through last year's drilling, we have managed not only to vastly increase the amount of gold resource but also significantly improve the confidence level

for the endowment. Considering that Cerro Vetas and Chisperos-Virgen are only two of several mineralised zones present on the property, Sunward believes there is significant potential to further expand the mineral resources at Titiribi." Some 11 drill rigs are currently operating at Titiribi, with the goal of expanding the mentioned NI 43-101 compliant Indicated Mineral Resource of 2.2 Moz. Over 80,000 m of drilling have so far been completed. The last resource calculation was based on drilling up to and including drillholes CV044 (for the Cerro Vetas zone) and CP013 along with VR008 (Chisperos/Virgen zones). Since the completion of the previous resource calculation, over 20 additional drillholes have been completed in the Cerro Vetas and Chisperos/Virgen zones and an updated resource is expected in the first half of 2012. However, so far key results from Cerro Vetas include the discovery of a “significant, higher-grade zone” with over 2 g/t of gold. This includes drillhole CV058 with 38.1 m grading 3.02 g/t gold and 0.50% copper.

King coal There are some 75 mining companies working in Colombia and the country is perhaps best known for its coal mining. It is the fourth largest exporter in the global coal market. Cerrejón (Anglo, BHP Billiton and Xstrata) is the biggest player - an integrated mining and

PERU/COLUMBIA transport complex in La Guajira, a department in the north. It includes a thermal coal open-pit mine that produces 32 Mt/y, a railroad that is 150 km long, and a maritime port able to receive ships of up to 180,000 t dead weight. The company employs 10,000 people, of which over 99% are Colombian nationals. It is the largest private exporter and one of the most important tax payers in Colombia. It achieved its predicted export target for 2011 with total coal exports of 32,032,303 t. During the late 1980s, Drummond acquired the mining rights to significant coal reserves located in northern Colombia. Development commenced in the early 1990s. The Drummond Colombian operation includes the Mina Pribbenow and El Descanso open-pit coal mines located in the Cesar Coal Basin near La Loma; Puerto Drummond, a deep-water ocean port on the Caribbean Sea near Santa Marta; and coal transportation and handling facilities. Heavy investment in production infrastructure over the last few years has allowed Drummond to grow shipments of Colombian coal from 1 Mt in 1995 to 24 Mt in 2010. Enabling this growth has been the innovative use of a conveyance system and apron feeders to move coal and overburden at its mines. Last October Drummond Co finalised a partnership agreement with a subsidiary of Itochu Corp. Drummond now owns 80% and Itochu 20% of Drummond International, which

owns and operates the Colombian coal mining operations and transportation infrastructure previously owned 100% by Drummond. New entrants in the coal sector include New Age Exploration (NAE), which had a successful 2011 acquiring rights to five coal concessions, three coking coal concessions in Central Colombia and two thermal coal, located in the world-class Cesar Basin. The Terranova project in Central Colombia is NAE’s most advanced project. As part of Terranova Stage 1, NAE has entered into a binding agreement with the operators and owners of the Terranova hard

coking mine to undertake the mechanisation and expansion of the operation with production targeted to commence in January 2013. A maiden JORC Resource estimate of 3.6 Mt medium volatile hard coking coal (1.6 Mt measured and indicated, 2 Mt inferred) is sufficient to underpin an anticipated initial increase in saleable coal production of 350,000 t/y. Terranova Stage 2 involves the development of nearby coking coal concessions with production targeted to commence in 2014, which will use the wash plant, equipment and infrastructure developed as part of Terranova Stage 1.

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PERU/COLUMBIA Colombia Energy Resources (CERX) owns nine coal mining concessions covering over 10,000 ha containing multiple seams of mineable metallurgical coal. There are active mining operations at its Ruku concession. CERX has completed a feasibility study for development of a 200,000 t/y coking coal facility. It intends to develop this facility for processing of coal produced from its mines. Both Cerrejón and Drummond are part of what is known as the Sector de la Minería a Gran Escala (Large-Scale Mining Sector SMGE), which covers formal mining dedicated to the exploration and mining of mineral resources that has considerable reserves and is responsible for a good part of a country’s mineral production and exports. The other companies in the SMGE sector are Anglo American, AngloGold Ashanti, Cerromatoso, Colombia Natural Resources, Drummond, Gran Colombia Gold, Greystar, Minas Paz del Río (iron ore), Mineros, (a mainly alluvial gold producer of some 120,000 oz/y) MPX Colombia, Prodeco, and Vale. SMGE drives the economic development of Colombia by generating supply chains, acquiring goods and services, building infrastructure, local business creation, and the creation of quality jobs. Over the first 10 years of this century, SMGE supplied more than 20 billion pesos to the Colombian government as income tax, royalties, compensation, non-fiscal contributions, and energy contributions, amongst others. In 2009, the GDP of the mining sector represented 2.35% of the total GDP. To June of 2010, mineral exports represented 24.8% of the country’s exports. In 2009, 43% of the total Direct Foreign Investment was in mines, a growth of 78% between 2008 and 2009. Over the five years after that, SMGE foresees an investment of almost $8,355 million in project development and expansion in the framework of sustainable

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Future site plan for Buriticá, Continental Gold's 100%-owned, 29,329-ha, flagship project; an emerging, high-grade gold district 75 km northwest from Medellín. It is accessible by paved road and has excellent infrastructure with power and water readily available. The project is located approximately 2 km south of the town of Buriticá in a district that was an important gold producing area during the Spanish colonial period when it hosted several small artisanal mining operations exploiting narrow high grade veins, alluvial and colluvial deposits. Extensive areas of superficial weathered material are believed to have been worked by hydraulic methods, and small high grade veins were worked underground for gold and silver

responsible mining. BHP Billiton’s Cerro Matoso nickel operation is one of the largest hard rock mining operations and combines a lateritic nickel mine with a lowcost ferronickel smelter. It is the world’s secondlargest producer of ferronickel and boasts some of the lowest costs. The smelter produces highpurity, low-carbon ferronickel granules. Cerro Matoso has begun studies on options to expand production, including a heap leaching operation.

Golden promise In 2010 Colombia produced 53 t of gold, of which the mining industry on a large scale, i.e. large firms, produced just 5.4 t. The rest is small and medium scale mining, including informal

and illegal. Production in 2011 was between 57 and 58 t, with the participation of large-scale mining at about 10%. This year production is expected to be some 62 t, with 15% of that coming from the large-scale sector. Gran Colombia Gold is currently the largest underground gold and silver producer in Colombia with five underground mines in operation. In addition, Gran Colombia is also advancing a gold and silver project at Marmato. The aim is to develop a large modern, mechanised mine. Gran Colombia will complete a prefeasibility study at the end of March that will consider several options. These include an open pit, an underground mine and a combination of the two. The Marmato project contains 10 Moz of gold in the Measured and Indicated categories and an additional 2.4 Moz in the Inferred category at a cutoff grade of 0.3 g/t Au. In addition, there are an estimated 64 Moz of silver in the Measured and Indicated categories and a further 11 Moz Inferred. Gran Colombia says the country “has a total recorded production of some 80 Moz; 75% of this production came from the Department of Antioquia and Caldas, with the Marmato project located near the border between the two. There is also an underground gold mine located within the Zona Baja of the Marmato property. The underground operation has been producing intermittently since 1900, with recent production of 25,000 oz in 2000 from a mill throughput of 800 t/d at an average grade of 3.5 g/t gold. Its Segovia operations comprise four operating underground mines: Providencia, El Silencio, Sandra k and Carla, with a total strike length of 5.7 km, located 130 km northeast of Medellin in the Segovia-Remedios mining district, in Antioquia. Historic gold production is estimated at 5 Moz of gold over the past 150 years. The high-grade El Zancudo underground gold mine is located in the vein system of the Mid Cauca Gold Belt, which hosts La Colosa and Marmato. Mining has been carried out in the Zancudo District since 1783, with a historical

PERU/COLUMBIA production of 130,000 oz gold with recovered grades of 14.6 g/t Au and 108.4 g/t Ag. Initial trial mining has commenced with current 100 t/d mill at expected grades of 8 g/t Au. This remains an exploration project at the moment Eco Oro Minerals (formerly Greystar) has the massive Angostura goldsilver project that has been bogged down in administrative and environmental red tape recently. It is located in the mountains of the eastern Cordillera of South America, approximately 400 km north-northeast of the Colombian capital city Santa fé de Bogotá. It is planned as a large open-pit operation in which a single cut will be exploited over a 15-year period, at a maximum mineral processing rate of 70,000 t/d for the leaching process and 5,200 t/d for flotation. In the Anaima -Toche District, AngloGold Ashanti is working on what it describes as an “emerging worldclass gold porphyry district.” It includes one know deposit, that of La Colosa -with 13-20Moz Au. There are six drillOther companies active in Colombia include: www.antioquiagoldinc.com www.ashmont.ca www.b2gold.com www.brexia.co www.cbgoldinc.com www.cordilleragold.com www.galwayresources.com www.grupodebullet.com www.milpa.com.co www.minatura.com www.solvista.com www.tridentgoldcorp.com www.waymarresources.com

ready projects and other prospects - 208,000 ha without restriction. Cosigo Resources is targeting gold deposits in the highly prospective Taraira (Traira in Brazil) Gold Belt along the border between Colombia and Brazil. Dennis W Milburn, President & CEO explains “this area is underlain by rocks that have similarities to the Witwatersrand complex in South Africa where approximately 40% of all gold in the world has been mined. Gold is present in two forms, fine detrital and relatively large irregular grains. The gold targets in the Taraira Gold Belt are very large and have the potential to develop into several major gold deposits. Gold grades from bulk samples have assayed to over 35 g/t using gravity separation. Preliminary metallurgical work suggests that recoveries of over 70% are possible with gravity separation. Cosigo's main focus is the Machado Project, which covers more than 20 km of Machado ridge on the Colombian side of the border. Colombian government geologists first worked on the project in the late 1980's. Twelve diamond drill holes were completed to depths of up to 100 m. Gold grades were erratic but some were very high grade. In 2007, the 10,000 ha Machado property, along with two other properties, was put up for bid by the Colombian government as national treasures. Cosigo won the bid.”

High altitude riches Among the countries of Latin America, Peru is a giant, ranking 1st for gold (5th globally) zinc (4th globally), tin (2nd globally) lead (4th globally) and second for copper (7th globally) silver, globally too. In mid-December 2011, Peru's new Mines and Energy Minister, Jorge Merino, said the government would attract private investment to the vast sector while requiring it to bring more social benefits to the fast-growing economy. Just before this, President Ollanta Humala had shuffled his cabinet, in part to calm widespread disputes over natural resource projects, like Newmont's $4.8 billion Conga gold mine (IM, April 2011, pp8-19) in the northern region of Cajamarca.

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PERU/COLUMBIA Peru has $50 billion in mining and oil investment lined up for the next decade, but the government is worried some 200 social and environmental conflicts nationwide could prevent that from being realised. During late 2011 a number of protests against mining projects and illegal mining activities broke out in several regions. The most significant of these were in the Carjamarca region but protests also occurred elsewhere including at Andahuaylas in the Apurimac region, where protestors blocked roads for several weeks, Strike Resources reported. During this period its Peruvian JV company Apurimac Ferrum (AF) halted exploration and withdrew from formal discussions with communities at their request. “The Federal Government, led by President Humala, has consistently stated that it supports responsible mining in Peru and sees mining industry revenues as crucial to the delivery of its social programs. During the protests this view was consistently delivered by both Federal and Regional Governments, including the leaders of Apurimac, with all levels of government working to address legitimate concerns of protestors while ensuring sound, responsible mining industry investments are encouraged. “In early January President Humala visited Andahuaylas to meet with regional officials and delivered a public address. During his visit he reiterated that Apurimac would benefit from a strong and sustainable mining industry, which would bring significant benefits to the region and local communities through direct and indirect employment opportunities, social programs and royalty payments.” “Subsequent to the President’s visit AF has been approached by several communities to

recommence formal discussions regarding approvals for exploration activities on its projects in the Apurimac and Cusco regions. This includes the major Opaban project, which hosts the bulk of AF’s high-grade magnetite iron ore. Peru’s Mining and Metallurgical Geological Institute (INGEMMET) listed 7,500 mining concessions as of the close of 2011. According to INGEMMET, as of November 2011, there were 9,479 mining claim applications submitted at the national level. This was a 19% increase on the figures reported for the same period in 2010. The main petitioner in 2011 was BHP Billiton, with 1,181 mining claim applications. Of the total mining investment estimated by the Ministerio de Energia y Minas (MEM), the

Major mining projects in Peru http://www.mem.gob.pe/minem/archivos/file/ Mineria/INVERSION/2011/PROY%2012-11.pdf for full details. Ampliaciones = expansions, Con EIA Aprobado = EIS approved, Con EIA Presentado o en Evaluación = EIS presented or being evaluated, Exploración = exploration project bulk is set for the Apurimac region, at $10,600 million (20.31%) followed by Cajamarca, $9,641 million (18.47%), Arequipa, $7,853 million (15.04%), Moquegua $7,600 million (14.56%), Cusco $2,963 million (5.68%), Ancash $2,220 million (4.25%), Junin $2,200 million (4.21%), Ica $1,944 million (3.72%), Piura $1,925 million (3.69%) and Lambayeque $1,565 million (3.00%). Spending in each of the other regions is below $1 billion. Copper is far and away the leading mineral project investment at $34,489 million (66.07%) followed by iron ore $6,780 million (12.99%) gold $6,065 million (11.62%), molybdenum $2,000 million (3.83%), zinc $1,434 million (2.75%), silver $658 million (1.26%), polymetallic projects $347 million (0.66%), phosphate $300 million (0.57%) and potash $125 million (0.24%). And where is the investment coming from? China is the leader with $11,424 million (21.89%) estimated, followed by USA $9,571 million (18.34%), Canada $7,816 million (14.97%), Australia $5,870 million (11.25%), Switzerland $5,673 million (10.87%), the UK $4,700 million (9.00%), Mexico $3,900 million (7.47%), Brazil $1,442 million (2.76%), Peru $1,312 million (2.51%) and Japan $490 million (0.94%). Lagunas Norte is one of the world’s biggest gold mines

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PERU/COLUMBIA Antapaccay, April 2011 concentrator plant mills construction underway Southern Peru Copper (SPCC) is undertaking a major expansion that is to increase milling capacity to 60,000 t/d and that should increase production by 120,000 t of copper and 3,100 t of molybdenum. Project completion is scheduled for the second half of 2013. The purchase of mine and auxiliary equipment to support the work to optimise the Cuajone mine is in process. As part of the expansion plans, variable cutoff grade methodology will be used, which had already started to increase copper and molybdenum production at the end of the third quarter of 2011. When finished, the project will increase copper production by 22,000 t/y for approximately ten years. Project completion is scheduled for the third quarter of 2012. SPCC has re-addressed the 120,000 t/y Tia Maria with the new government and says it is “confident that good investment conditions, stability, social inclusion, and economic growth will prevail in Peru.” The Tantahuatay mine located in Cajamarca, in the northern region of Peru started producing in 2011. Development began in 2010, to exploit its gold cap, but production actually started in August 2011 with 17,700 oz of gold and 98,800 oz of silver in the third quarter. Tantahuatay is expected to have an average annual production of 90,000 oz of gold and 425,000 oz of silver for five years. SPCC has a 44.2% participation in this project and the remaining balance is owned by Cía de Minas Buenaventura and others. Vale’s Cia Minera Miski Mayo is expanding the Bayovar phosphate mine in Sechura province from 3.9 to 5.9 Mt/y. While in Ancash, Cia Minera Antamina, the copper/zinc mine owned by BHP Billiton, Xstrata, Teck and Mitsubishi, is being expanded to produce 175,000 t/y of copper. Barrick is expanding Lagunas Norte on the Alto Chicama property in north-central Peru, 140 km east of the coastal city of Trujillo, and 175 km north of Barrick’s Pierina mine. The property lies on the western flank of the Peruvian Andes and is at an elevation of 4,000 to 4,260 m above sea level. The Lagunas Norte mine is an open-pit, crush, valley-fill heap leach operation. It is Barrick’s lowest cost operation and in 2010, the mine produced 808,000 oz of gold at total cash costs of $182/oz. Proven and Probable gold reserves as of December 31, 2010 was 6.6 Moz. The Antapaccay deposit is located 9 km from Xstrata Copper’s Tintaya mine in southern Peru. The deposit consists of two adjacent mineral structures: Antapaccay North and Antapaccay South. The Xstrata Board approved a $1.47 billion investment in the Antapaccay project in July 2010 following approval of the Environmental and Social Impact Assessment.

The brownfield expansion to the Tintaya operation will produce an average of 160,000 t/y of copper for at least the first five years and 143,000 t/y of copper over the current estimated mine life of 22 years. In December 2010, an improved Mineral Resource for Antapaccay was announced of 817 Mt at a grade of 0.51% Cu.

Giant Las Bambas Las Bambas is the biggest project (in terms of projected capital cost) in development in Peru at the moment. The Xstrata Board approved the $4.2 billion Las Bambas project in August 2010. It will produce an average of 400,000 t/y of copper in concentrate including significant gold, silver and molybdenum byproducts, and first quartile cash costs. The mine is expected to be commissioned in the third quarter of 2014 with ramp up and full production reached by the end of that year. In December 2011, Xstrata Copper announced increases in the Las Bambas project Mineral Resource estimate to 1,710 Mt at a grade of

0.60% Cu, using a 0.2% Cu cutoff grade, an increase of 10% compared to the previous resource of October 2010. The project’s Environmental and Social Impact Assessment received community approval in July 2010 and was approved by Peruvian authorities in March 2011 paving the way for final permitting and construction to commence as scheduled in the third quarter of 2011. Next in project value, according to MEM is the greenfield Quellaveco project located in southern Peru at 3,500 m above sea level. The project is currently at the feasibility stage, with potential start up in 2015. Production is forecast at 225,000 t/y of copper, with molybdenum and silver byproducts. Once at full capacity, the operation is expected to be in the lower half of the cost curve. The capital cost of the project is forecast at $2.5-$3.0 billion, according to Anglo American. Anglo acquired Michiquillay in 2007 in a government privatisation. Early stage work continues. It is currently envisaged that the

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PERU/COLUMBIA project will move to the prefeasibility stage once drilling analysis and ore body modelling have been satisfactorily completed. Minera Chinalco Perú’s (MCP) Toromocho project is located at 4,500 m above sea level, 142 km from Lima. Its reserves are estimated at 1,526 Mt, consisting mainly of copper, molybdenum and silver. The mine will be an open-pit operation. MCP says it will invest $2,150 million in the project. The Toromocho mine will have a 36year life. MCP contributed more than $40 million toward building the new town of Morococha, of more than 5,000 inhabitants. It has cost MCP $33 million dollars to build the Kingsmill Tunnel water treatment plant. Hudbay Minerals’ Constancia project is located some 100 km south of Cusco, in a highly prospective region near several development projects and operating mines. It is situated on the eastern side of the Andahuaylas-Yauri copper belt, approximately 3 km from the Katanga mine, a copper-gold mine that operated from the early 1900s up until the 1990s. The project is also near the San Jose prospect, which was explored in the 1980s. Ausenco Solutions Canada completed a Feasibility Study Optimisation (FSO) report on the Constancia project dated February 21, 2011. The FSO estimates a global mineral reserve of 372 Mt grading 0.39% Cu, 105.3 g/t Mo, 3.57 g/t Ag and 0.05 g/t Au (using high operating margin ore above $3.00/t). The FSO evaluates the potential development of a low-cost open pit mine with a nominal 70,000 t/d sulphide concentrator plant producing copper and molybdenum concentrates with silver and gold byproduct credits. Invicta is Andean American Gold’s primary development project located roughly four hours’ drive from Lima. Invicta is expected to commence production in the second half of this year. Diamond drill programs have demonstrated a Measured and Indicated resource of 10.735 Mt. The mine plan is based on a 5 year program to produce 7.8 Mt of mineable ore in the Probable reserves category. With processing, 489,600 oz of gold, 3,861,800 oz of silver, 66.862 Mlb of copper, 52.627 Mlb of lead, and 41.205 Mlb of zinc will be recovered. When in production, a drill program will be initiated to upgrade the bulk of Inferred resources to the Indicated category in the Atenea, Pucamina and Dany mineralised structures. Close to the Atenea System there are several other mineralised structures that have yet to be tested by drilling. These include Yurac Punta, Azulmina, Zone 8 and Flor de Loto. This

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Vena Resources (its projects shown here) says “Peru had been suspected of containing plays with very high performance potential due to reports identifying high sulphidation systems. Combined with the country’s low production costs, Peru has today become one of the world’s most sought-after gold targets” It is a coastal country bordering the Pacific Ocean in western South America, between Chile and Ecuador, with a population approaching 29 million. Its total area is 1,285,220 km2. The climate is varied: tropical in the east; dry desert in the west; temperate to frigid in the Andes. Azulcochamining, a company owned by Vena and Trafigura (70/30) has received the construction permit for the Azulcocha zinc mine. This allows for the completion of the mine infrastructure and the immediate application for the Operating and Beneficiating licenses that are the final permits required to produce saleable concentrates. It was anticipated that plant tune up will be initiated in February from a stockpile of approximately 25,000 t. Upon completion of the plant tests, plant throughput will be increased to 500 t/d and an application will be presented to government agencies for an immediate increase to 750 t/d.Baseline studies are underway to support an application prior to year end 2012 to increase the plant capacity to 2,000 t/d in line with long-term strategy

could potentially extend the life of the project by several years. The Marcona copper project is located within Nazca Province, Ica Department in the southern coastal plain area of Peru approximately 20 to 30 km from the Pacific Ocean and about 400 km southeast of Lima. The centre of the project lies some 25 km north of the coastal town of San Juan de Marcona. The town of Nazca on the Pan American highway is located about 35 km to the north-northeast of the project. Elevations range from 500 m above sea level to nearly 1,200 m. The Marcona copper project covers 32,889 ha on which there are located five prospects: Mina Justa, Achupallas, Miramar, Clavelinas and the La Apreciada prospect. Mina Justa is currently the principal development project.

Mina Justa is a worldclass, large, long life copper deposit that is being developed by Marcobre, which is 70% owned by CST Mining. The project has a resource base of more than 3 Mt of contained copper. The project has potential for further resources in and around the existing Mina Justa deposit and on Marcobre's 33,000 ha of mineral rights. The Government of Peru has given Mina Justa Project ‘National Interest’ status. It is being developed as an open pit (strip ratio 2.5:1) with vat leaching of the oxide reserves and SX-EW to produce cathodes. The sulphide reserves will be treated by flotation to produce Cu concentrate. Average LOM production is 110,000 t/y of copper (50,000 t/y of cathodes and 60,000 t/y in concentrate). Resources 413 Mt @ 0.79% Cu; reserves 163 Mt @ 0.80% Cu. Marcobre expects to spend $745 million on project development. The estimated cash cost of copper is $0.90/lb (net of silver credit). The expected mine life is 11.5 years. La Arena project (Rio Alto Mining) consists of 20,673 ha in 44 concessions located 480 km north-northwest of Lima. It is situated on the eastern slope of the Western Cordillera, close to the Continental Divide at an average altitude of 3,400 m above sea level. The project lies within a multi-million ounce gold district that includes the Lagunas Norte mine (Barrick Gold) located at Alto-Chicama, the Comarsa mine (Cia Minera Aurifera Santa Rosa), La Virgen mine (Cia Minera San Simon), the Shahuindo gold-silver exploration project (Sulliden Exploration) and the Tres Cruces gold exploration project (New Oroperu Resources). The first gold pour at La Arena gold oxide mine was on May 6, 2011. Since then mining was building up to a nameplate level of 10,000 t/d. Management was targeting gold production of some 75,000 oz for 2011. Production capacity was to be increased from 10,000 to 24,000 t/d of ore to pad by January 2012. Also a feasibility study on the copper-gold sulphide deposit at La Arena has started. Alex Black, President and COO of Rio Alto stated, "Rio Alto is making the transition from mine developer to gold producer. We are especially pleased to have achieved gold production nine months after receiving environmental approval. This achievement is a result of the commitment, hard work and persistence of Rio Alto's management team, employees, contractors, suppliers and the local community. With cash flow to underpin ongoing development, we look forward to developing the exceptional asset base at La

PERU/COLUMBIA Arena and generate value creating growth for all our stakeholders." Minera Coimolache is developing the Tantahuatay gold mine, with a beneficiation plant with a steady throughput of 12,000 t/d. It is expected to produce at 100,000 oz/y of gold. The other pure gold development listed in the MEM tables is Minsur’s (the country’s leading tin producer) Pucamarca in Tacna. The project is located near the Peruvian-Chilean border, which forms its eastern boundary. Last November Candente Copper provided an update on the impact of the new Peru Mining Tax Law on the Cañariaco Norte economics – the feasibility study being prepared by AMEC Americas and on general corporate activities. It said “an assessment of the new tax rates in Peru confirms the robust economics of the Cañariaco Norte project. AMEC has completed an assessment of the impact to the project economics resulting from the new Mineral Taxation Law recently enacted. The new tax rates were applied to the financial model developed by AMEC as part of the prefeasibility study progress report completed in March 2011. In order to complete a direct assessment of the new tax rates, all other aspects of the financial assessment including metal prices were held constant as per the March 2011 Financial Model. Under the new tax rates, the after tax NPV, IRR and payback period for the project are $912 million, 17.2% and 4.4 years respectively, at a long term copper price of $2.25 /lb and a discount rate of 8%. The after tax NPV, IRR and payback period reported in March 2011 in the study progress report were $1.063 billion, 18.8% and 4.2 years respectively.” As part of the feasibility study program, AMEC completed an analysis of the potential benefits of increased daily throughput. Four different production rates were evaluated which considered the impacts on mining, processing, ancillary facilities, water balance, project footprint and project financials including capital and operating costs. Based on the analyses a larger SAG mill and larger ball mills will be incorporated into the Cañariaco Norte process plant. Specifically, a 12 m diameter SAG mill will be used. Candente says “the larger 12 m SAG mills are rapidly becoming the preferred size for large mining operations. Preliminary modelling indicates that the larger SAG mill will achieve a processing rate in the range of 100,000 to 110,000 t/d, which is an increase from the 95,000 t/d rate projected in the prefeasibility study. This increase in processing rate will result in higher levels of annual copper, gold, and silver production, however the resulting increase in metal production totals are still under assessment, pending completion of the Feasibility level mine design.” IM

MARCH 2012 | International Mining 109