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Goldsource Mines Inc.


Preliminary Economic Assessment Highlights

The PEA incorporates a gold price of $1,250 per ounce gold. Highlights of the Base Case economic estimates are as follows:

  • Pre-tax Net Present Value (“NPV”)(5%) of $69.4 million and after-tax NPV(5%) of $45.6 million.
  • Pre-tax NPV(7%) of $61.1 million and after-tax NPV(7%) of $39.8 million.
  • Pre-tax Internal Rate of Return (“IRR”) of 84% and after-tax IRR of 63%.
  • Phase I, pre-production capital costs of $5.9 million including a 15% contingency.
  • Total capital costs including all proposed expansions (Phase II, III & IV expansions) and sustaining capital are estimated at $24.2 million.
  • Cash operating costs, exclusive of sustaining capital, for saprolite mine life averages $480 per ounce gold including a 15% contingency.
  • Cost per tonne of mill feed averages $8.96.
  • Pre-tax undiscounted operating cash flow before capital expenditures totalling $123.4 million.
  • 8-year LOMP PEA mine plan totalling 8.6 million tonnes at an average grade of 1.20 g/tonne gold (diluted and recoverable).
  • Of the 8.6 million tonnes, only 7.3 million tonnes (undersize sub-2mm) grading 1.20 g/tonne gold will be conceptually processed. The remaining tonnes (oversize larger than 2mm) would be stockpiled for further metallurgical test work and potential further processing.
  • Conceptually, the first four years of gold production would be 5,600, 14,400, 21,600 and 28,800 ounces gold, respectively.
  • Life of mine production of an estimated 168,700 ounces gold from gravity-only processing at estimated 60% recovery.  
  • Inventory of 161,900 oz Au in settlement ponds from gravity-only processing rejects for potential future reprocessing using standard technologies.
  • Not considered in the PEA are the in-situ “fresh-rock” resources of Indicated 2,331,000 tonnes @ 1.52 g/tonne Au containing 114,000 oz and Inferred 13,433,000 tonnes @ 1.13 g/tonne, containing 486,000 oz (both at 0.5 g/t Au cut-off).

The Eagle Mountain mining and processing schedules are based on a phased-approach model with four phases proposed over four years. Phase I mining rates would be 1,000 tonnes per day (one 12-hour shift, 7-days per week) in year one ramping up to 4,000 tonnes per day by year four. Conventional open cut mining of soft weathered rock (gold mineralized saprolite) is proposed using a team of excavators, bulldozers and wheel-loaders to excavate and separate materials within the open cut with downhill gravity transport by slurry to the processing facility. The stripping ratio is low and estimated at an average of 0.9:1 (waste:ore) over mine life. No blasting or truck hauling is required for mineralized saprolite.

Eagle Mountain Mineral Resource

In 2012, ACA Howe prepared on behalf of Eagle Mountain Gold Corporation (“EMGC”), now a subsidiary of Goldsource, a mineral resource estimate for the Eagle Mountain gold deposit, which had been tested by drill campaigns completed between 1947 and 2011. Neither EMGC nor Goldsource has completed additional drilling since this estimate was completed. ACA Howe has therefore reissued the resource without change for the purpose of the 2014 PEA.

Category Material Tonnes Au Grade
Ounces Au
Used in PEA
Indicated Saprolite 1,590,000 1.45 74,000 Yes
Fresh 2,331,000 1.52 114,000 No
Total 3,921,000 1.49 188,000  
Inferred Saprolite 7,202,000 1.32 306,000 Yes
Fresh 13,433,000 1.13 486,000 No
Total 20,635,000 1.19 792,000  

Notes for mineral resource estimate:

  • A block cut-off value of 0.5 g/tonne gold was applied to all resource blocks assuming a typical mining recovery of 95%, a typical overall processing recovery of 90%, a typical smelter return of 98% and a 3-year trailing average gold price of approximately $US 1,450 per ounce gold (November 21, 2012).
  • Tonnes and ounces have been rounded to reflect the relative accuracy of the mineral resource estimate; therefore numbers may not total correctly.
  • A notional cut-off gold grade for mineralized domain interpretation was 0.2 g/tonne gold.
  • A top cut of 20 g/tonne gold was applied to raw assay values.
  • Composited diamond drill hole and trench samples are assigned to 29 layered and fault bound resource domains that encompass the Zion and Kilroy portions of the deposit.
  • Corresponding domain blocks and composite samples are projected to a horizontal plane for grade estimation by Ordinary Kriging.
  • The block model is constrained by topography and saprolite and fresh weathering domains with bulk density values of 1.6 t/m3 and 2.6 t/m3 respectively assigned.
  • Mineral Resource tonnes quoted are not diluted.
  • The mineral resource estimate was prepared in accordance with CIM Standards on Mineral Resources and Reserves (adopted November 27, 2010), remains in accordance with CIM Standards on Mineral Resources and Reserves (adopted May 10, 2014), and is reported in accordance with the Canadian Securities Administrators’ NI 43-101 and 43-101CP.
  • This mineral resource includes Indicated and Inferred Mineral Resources. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

Mine Plan

The mine plan consists of standard open cut mining using conventional mining equipment. For Phase I, a team of excavators, bulldozers and wheel-loaders would excavate in-situ soft weathered rock (saprolite) at a rate of 100 tonnes per hour (1000 tonnes per day) and deliver the material to the in-pit grizzly, scrubber and screens with sub-2mm material being delivered by slurry line to the processing plant. Larger than 2mm material would be stockpiled for potential processing in the future.

No blasting or truck hauling would be required for mineralized saprolite. No blasting would be required for waste. Waste material would be loaded and truck hauled to a nearby storage facility. The strip ratio has been estimated at 0.9 to 1 (waste to mineralized saprolite). Top soils would be pre-stripped and stockpiled near the open cuts for future reclamation purposes.

Conceptual mining would consist of one 12-hour shift, 300 days per year based on equipment availability and rainy season conditions. Potential exists to significantly increase production by adding a second shift and/or increasing production days by effectively mitigating periodic heavy rain conditions.

Gold grade control would consist of drilling auger holes on a 5m by 5m pattern 5m deep with collection of representative samples for analysis in the onsite lab. Using a cut-off grade of 0.3 grams of gold per tonne ("g/tonne"), material designation would be determined and properly marked in the mining area for excavation. 


Recent metallurgical test work completed by Met-Solve Laboratories Inc. of Langley, B.C., Canada has determined an approximate gold recovery of 60% for the saprolite resources for sub-2mm material. Additional recovery is possible for larger than 2mm material after completion of further test work.

Gold is considered to be fine grained with approximately 59 % passing 100 mesh (150 micron). Recovery of fine gold has historically been problematic, however, modern centrifugal gravity concentrators are able to recover finer gold particle sizes.


A single Sepro 10K (1,000 tpd) gravity processing plant is envisioned for Phase I. Generally, the plant consists of a grizzly, scrubber, screens, and Falcon gravity concentrators. Gold concentrate from the gravity concentrators will be further concentrated using a shaking table and refined on site for production of dore bars.

The processing plant is powered by a 300 to 400 Kilowatt (“kW”) diesel generator. Total electrical load for the plant is approximately 250 kW. A backup generator will be in place for redundant purposes. Ample water is locally available for all processing needs for all proposed phases of the project.
Upon successful completion of Phase I, three additional similar plants would be sequentially installed to increase production to between 3,500 to 4,000 tpd by year four.

Coarser grained (larger than 2mm) saprolite would be screened-out and stockpiled. Opportunities to increase production by crushing or milling stockpiled oversized material is possible, depending on further test work. Additional test work on potential flotation and cyanidation may also increase production.

Capital & Operating Costs

Detailed cost estimates have been prepared for the mine and processing plant based on current vendor quotes, experience and industry cost publications. Pre-production capital costs are estimated to total $5.9 million including a 15% contingency. The Company does not presently have the funds to carry out these developments and plans to source the funds through equity or debt financing or a combination thereof.

Initial capital costs include rehabilitation of the access road, dredging and preparation of tailings settling ponds, construction of the modular processing facility, initial mining equipment purchases, and preproduction development and infrastructure requirements. This includes pre-production and construction of facilities over a period of six months. Infrastructure in the Eagle Mountain area is in reasonable condition. An existing 7-kilometre  (“km”) road connects the project with the local airport and the main road to Georgetown, which is approximately 230 km away. The local community of Mahdia would be the primary source for skilled workers. The capital costs from the PEA are summarized below.

Capital Costs (Pre-production and LOMP)

Capital Expense Item (Phase I) Estimated cost in US $
Mining Equipment Purchases 1,167,000
Process Plant  1,600,000
Lab and Refinery 231,000
Tailings Storage and Settlement 468,000
Access Road Rehabilitation, 7 km 315,000
EPCM, Design and Technical Services 214,000
Site Preparation and Construction 300,000
Working Capital 400,000
Sustaining Capital 0
Indirects 428,000
Contingency at 15% 769,000
Initial capital including contingency  $5,892,000
Capital Expense Item (All Phases)  
Mining Equipment Purchases (All Phases) 3,687,000
Process Plant 6,400,000
Lab and Refinery 924,000
Tailings Storage and Settlement 2,413,000
Access Road Rehabilitation and Maintenance 715,000
EPCM, Design and Technical Services 858,000
Site Preparation and Construction 1,200,000
Operations Sustaining Capital 2,900,000
Indirect 1,897,000
Contingency at 15% 3,209,000
Total Capital including contingency $24,203,000

The operating costs have been entered into a cost model to determine the cost per tonne of material handled to the processing plant, whether waste or mineralized material.  The operating cost is divided into cost per tonne mining, cost per tonne processing and cost per tonne general and administrative.

The PEA has estimated total operating costs at an average of $8.96 per tonne of material processed.

Operating Costs

Aspects of Operations (Averages over LOMP) Cost per tonne of Saprolite

Mining Cost (Ore and Waste)


Processing of Saprolite – Gravity Only


Tailings Storage, Settlement and Maintenance


General and Administrative (“G & A”)


Contingency at 15%

In costs above

Total Average LOMP Cost per tonne


Average Operating Cost per Ounce Gold Sold (LOMP)

$480 / oz.

Pit Optimization and Production Scheduling

Optimized pits were created based on the presented operating costs and used for conceptual mine design and scheduling. Eight non-contiguous pits were outlined.

Mine Inventory

Total Waste
Stripping Ratio
by Mass
1 107,000 0.94 394,000  3.7:1
2 4,417,000 1.25 3,880,000  0.9:1
3 1,204,000 1.25 472,000  0.4:1
4 805,000 1.04 429,000  0.5:1
5 805,000 1.42 356,000  0.4:1
6 363,000 0.96 220,000  0.6:1
7 591,000 0.78 443,000  0.7:1
8 301,000 1.30 762,000  2.5:1
Total 8,593,000 1.20 6,956,000  0.9:1


  • Non-mineralized dyke material estimated to be 5% by mass.
  • Dilution 10% at 0.15 g/tonne.
  • Cut-off grade 0.3 g/tonne.

Production & Financial Model

Total mine inventory for mineralized saprolite is 8,563,000 tonnes grading 1.20 g/tonne gold. Of this estimated inventory approximately 7,303,000 tonnes grading 1.20 g/tonne gold is considered plant feed representing the undersize sub 2mm material. An estimated 1,290,000 tonnes grading 1.20 g/tonne gold will be stockpiled representing large than 2mm material for potential further processing. Details of the production schedule and economic model are as follows:

Production Schedule and Financial Model

  Pre-Production Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Total
Plant Feed Tonnes
(sub 2mm size)
  300,000 600,000 900,000 1,200,000 1,200,000 1,200,000 1,200,000 703,000 7,303,000
Proportion of Inferred Tonnes   67% 80% 80% 80% 81% 77% 70% 93% 78%
Proportion of Inferred Gold   68% 77% 77% 77% 79% 76% 69% 93% 76%
Plant Feed Grade (g/tonne)   0.96 1.24 1.25 1.25 1.19 1.01 1.33 1.21 1.20
Au Oz in Plant Feed   10,900 28,200 42,400 56,500 54,100 45,900 60,500 32,100 330,600
Total Waste Tonnes   214,000 617,000 930,000 1,240,000 1,219,000 830,000 1,229,000 676,000 6,955,000
Stripping Ratio by Mass (based on all material sizes)   0.6:1 0.9:1 0.9:1 0.9:1 0.9:1 0.6:1 0.9:1 0.8:1 0.9:1
Gold Recovered, Net of Gov't Royalty (Ounces)   5,300 13,700 20,500 27,400 26,200 22,200 29,400 15,600 160,300
Revenue ($000s)   6,625 17,125 25,625 34,250 32,750 27,750 36,750 19,500 200,375
Operating Costs Including G&A ($000s)   3,055 6,397 9,602 12,802 12,770 12,179 12,786 7,422 77,013
Operating Profit ($000s)   3,570 10,728 16,023 21,448 19,980 15,571 23,964 12,078 123,362
Capital Costs ($000s) 5,892 4,610 6,102 4,955 1,895 288 518 288 -343 24,203
Pre-Tax Cash Flow ($000s) -5,892 -1,039 4,626 11,069 19,553 17,192 15,053 23,677 12,421 96,659
30% Tax ($000s)   441 2,348 3,814 5,526 6,000 4,045 6,671 3,209 32,053
Post-Tax Cash Flow ($000s) -5,892 -1,480 2,278 7,255 14,027 11,192 11,008 17,006 9,212 64,606


Pre-Tax NPV(5%) (Millions) $69.4
Pre-Tax NPV(7%) (Millions) $61.1
Pre-Tax IRR 84%
Post-Tax NPV(5%) (Millions) $45.6
Post-Tax NPV(7%) (Millions) $39.8
Post-Tax IRR 63%

PEA Sensitivity Analysis

The economic sensitivity of the proposed operation was explored by varying key assumptions within reasonable ranges (see table below). As is typically the case, the price of gold and operating costs are the most sensitive parameters.

At a gold price as low as $1,100 per ounce, the project is expected to remain quite profitable with an IRR of 49%. With an increase in operating costs of more than 30%, the project is also projected to remain quite profitable with an IRR of 30%.

Based on limited metallurgical test work, gold recovery was estimated at 60% using gravity methods alone. Should the actual recovery be as low as 50%, the project is expected to remain quite profitable with an IRR of 43%.

Increases in capital costs caused the least disturbance in profitability. Even with an increase in capital costs of 30%, the project is expected to remain quite profitable. Quotes have been received for the major capital costs (processing plant, mining equipment, road work) and a 15% contingency has been applied. Large capital cost overruns are unlikely.

NPV(7%) (Millions) IRR
Base Case $39.8 63%
Gold Price $1100 $28.5 49%
Gold Price $1500 $58.7 85%
Gold Price $1750 $77.6 105%
Operating Costs +10% $32.2 54%
Operating Costs +20% $23.8 43%
Operating Costs +30% $14.7 30%
Gold Recovery 50% $24.0 43%
Capital Costs +10% $37.8 56%
Capital Costs +20% $35.8 51%
Capital Costs +30% $33.8 45%

Recommendations & Future Opportunities

The majority of the proposed plant feed consists of Inferred mineral resources. Further sampling and surveying should be carried out within and surrounding the proposed pits in an effort to upgrade Inferred blocks to higher resource categories with adequate QA/QC and additional density data collection.

Resources are open in most directions and good potential exists to initially expand mineralized saprolite. Further drilling is recommended to potentially expand resources for consideration in the phased development of the project. 

This project envisions screening-out any material that is larger than 2mm and stockpiling it for potential further processing. If this material were ground finer in a grinding mill, it could be fed into the proposed processing plant. Further metallurgical testing and economic analysis should be carried out to determine whether this gold could be profitably recovered.

Using gravity processing methods alone, gold recovery is expected to be 60% with the remainder of the gold flowing to the tailings storage area. Most of this gold may be recovered with further processing such as flotation or cyanidation. Further metallurgical testing and economic analysis should be carried out to determine whether this gold could be profitably recovered from the tailings. This work should also include further tailings characterization and deposition properties.

Based on the positive results of the PEA, mineral resource estimates should be updated, the economic analysis refined and updated, and a mineral reserve statement prepared to a Pre-Feasibility Study level. Mining the "fresh" rock that would require drilling and blasting should be considered during this work. A budget of $820,000 is recommended for this work.

The Qualified Persons (“QP”) for this Technical Report and who have reviewed and approved the contents of this news release are:

Ian Trinder, P.Geo.
Douglas Roy, M.A.Sc., P.Eng.
Mineral Resource, Pit Design, Mine Planning, Financial Modeling, Supervising Mining Engineering ACA Howe International Limited, Toronto, ON
Alex Lum, P.Eng.
Mauritz Lundt, P.Eng.
Metallurgical Test Work, Processing Plant Design, Processing Capital & Operating Costs Met-Solve Laboratories Inc, Sepro Mineral Systems, Langley, BC