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Operations / Mexico / Dolores

Dolores (100% Ownership)

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Project Description and Location

The Dolores open pit silver-gold mine is located in the Sierra Madre Occidental mountain range in the state of Chihuahua, in the municipality of Madera, approximately 250 kilometres west of the city of Chihuahua. The area of the concessions is 27,700 hectares.

History

Placer mining began in the region of the Dolores mine in the 1860s and was followed by lode mining in 1898. A power line was installed from the town of Madera by 1915, and a 25 tonne per day stamp mill began treating the Dolores ore. The stamp mill operated until early 1929 when it was destroyed by fire. Only sporadic production occurred from 1929 to 1931, and there are no records of any historical production after 1931. Incomplete mining records from between 1922 and 1931 indicate that on the order of 372,000 tonnes of ore containing over 116,000 ounces of gold and six million ounces of silver were mined from several underground mine operations, including Dolores.

The property lay idle until 1993 when Minefinders Ltd. began acquiring a land position in the district. Minefinders began a full exploration programme in November 1995 and drilling started in September 1996, using both diamond and reverse circulation drilling methods. In July 1996 Minefinders granted Echo Bay Mines (“Echo Bay”) an option in the property. Echo Bay completed drilling, sampling, environmental data collection, and metallurgical testing. Minefinders bought out the Echo Bay interest, including the technical information collected by Echo Bay, in October 1997.

Minefinders completed a feasibility study for the project in June 2005, based upon the results of earlier studies, and completed a separate feasibility study in March of 2006 which formed the basis for Minefinders mine development. Following construction, Minefinders commenced mining in 2008. During the years 2008 and 2011, Minefinders produced 25.5 million tonnes and stacked 18.3 million tonnes on the leach pads, producing 210,660 ounces of gold and 6.2 million ounces of silver.

In 2012, Pan American acquired all of the issued and outstanding shares of Minefinders by way of a plan of arrangement. Upon completion, Pan American owned 100% of Minefinders and its subsidiaries, including Minefinders’ wholly owned Mexican subsidiary, Compañía Minera Dolores, S.A. de C. V. (“CMD”), which directly owns 100% of the Dolores, Silvia and Unificacion Real Cananea concessions which comprise the Dolores mine.

Geology and Mineralization

The Dolores mine is located in the Sierra Madre Occidental mountain range, which comprises a long northwest trending volcanic plateau. The region is dominated by rhyolitic ash flow tuffs of Oligocene age known as the Upper Volcanic Series. The Upper Volcanic Series unconformably overlies rocks of the slightly older Lower Volcanic Series which are comprised primarily of andesites with interlayered felsic ash flow tuff deposits of Eocene age. The deposition of the Lower Volcanic Series was accompanied by the emplacement of quartz diorite and granodiorite batholiths and small intrusive bodies. The majority of the epithermal and porphyry related precious metals deposits in the Sierra Madre are hosted in the Lower Volcanic Series. The oldest structural episode is related to the Laramide orogeny, which produced east striking, steeply dipping strike slip faults. Later extensional forces resulted in the regional development of north-south to northwest-southeast striking sub-vertical normal faults. The structures hosting mineralization in the Dolores area are believed to have controlled emplacement of a series of north-northwest trending andesite to latite intrusions. Zones of permeability associated with these faults and intrusive contacts formed conduits for the ascending mineralizing hydrothermal fluids.

The Dolores project is underlain by the Lower and Upper Volcanic Series. At the mine site the Lower Volcanic Series consists of gently tilted lavas, flow breccias, and tuffaceous rocks with a minimum thickness of 700 metres. It is conformably overlain by 100 to 200 metres of felsic latite volcaniclastic breccia. These units are overlain by the Upper Volcanic Series, which comprise a volcaniclastic assemblage of mostly felsic ignimbrites and tuffs. The Upper and Lower Volcanic Series are separated by a distinctive erosional rubble zone unconformity that formed after development of north-northwest trending anticlinal uplift. Subsequent erosion has exposed mineralized rocks of the Lower Volcanic Series in the Dolores district.

Gold and silver mineralization at Dolores is present as low to medium sulphidation, epithermal gold-silver bearing veins, silica stock works, breccias, and replacements. The system is mostly structurally controlled within a north-northwest striking extensional fault system. Gold and silver mineralization identified on the surface at Dolores lies over an area 4,000 metres long and up to 1,000 metres wide, at elevations ranging between 1,100 metres to 1,700 metres above sea level. The extent of mineralization at depth and along strike has not been fully defined.

Relatively deep mineralization tends to be located in high grade veins typically of five to ten metres wide, while at higher elevations these feeder veins grade into wider, lower grade stock works, veinlets, and disseminations toward the less competent and more permeable overlying latite flows and tuffs of the Lower Volcanic Series. These wider areas are on the order of a few hundred metres. Near the surface, mineralization shows a strong structural control, but widens out owing to development of breccia and fractures adjacent to the main mineralizing conduits. The main mineralization occurs as a series of parallel structures trending to the north-northwest and dipping steeply to the west.

Mineralization is generally associated with quartz and may be composed primarily of iron-oxides, silver sulfosalts, electrum, and native gold in the oxidized zone and with pyrite, silver sulphides, native silver, visible gold, galena, and sphalerite deeper in the sulphide zone.

Mineral Resource and Mineral Reserves

Management estimates that the Proven and Probable mineral reserves for the Dolores mine, as at December 31, 2013, are as follows:

Dolores Mineral Reserves 1, 2

Reserve Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) Grams of Gold per tonne Contained Au (Koz)
Proven 39.4 31 39.9 0.75 949.5
Probable 29.2 35 32.7 0.85 802.3
TOTAL 68.6 33 72.6 0.79 1751.8

Notes:

1. Estimated using a price of $22 per ounce of silver and $1,300 per ounce of gold.

2. Mineral Reserve estimates for Dolores were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., and Martin G. Wafforn, P.Eng., as Qualified Persons as that term is defined in NI 43-101.

 

Management estimates that mineral resources at Dolores, as at December 31, 2013, are as follows:

Dolores Mineral Resources 1, 2

Resource Category Tonnes (Mt) Grams of Silver per tonne Contained Ag (Moz) Grams of Gold per tonne Contained Au (Koz)
Measured 2.4 31 2.5 0.51 40.4
Indicated 9.0 32 9.2 0.96 279.0
Inferred 10.7 39 13.3 0.97 334.5

Notes:

1. These mineral resources are in addition to Dolores mineral reserves. Estimated using a price of $35 per ounce of silver and $1,400 per ounce gold.

2. Mineral resource estimates for Dolores were prepared under the supervision of, or were reviewed by, Michael Steinmann, P.Geo., and Martin G. Wafforn, P.Eng., as Qualified Persons as that term is defined in NI 43-101.

 

Mineral reserve estimates are based on a number of assumptions that include metallurgical, taxation and economic parameters. Increasing costs or increasing taxation could have a negative impact on the estimation of mineral reserves. There are currently no known factors that may have a material negative impact on the estimate of mineral reserves or mineral resources at Dolores.

Mining and Processing Operations

Mining at Dolores is by standard open pit methods using shovels, loaders, and haul trucks. Each bench is 7.5 metres high. Ore control is carried out using angled reverse circulation drilling to provide closer spaced sample data for marking the ore/waste mining boundaries.

The mine uses conventional cyanide heap leaching technology to produce gold and silver doré. Broken ore is trucked from the open pit to the crushing plant, where it is crushed, conveyed to the leach pads, and placed on the pads using grasshoppers and a radial stacking system. A combination of drip and sprayer systems is used to distribute cyanide solution on the heaps. Metal recoveries are a function of solution flow rates, cyanide concentration, and time. The leaching period can cover years, and continues as subsequent lifts are placed on the pads. The pregnant solution is collected in a pond, clarified, and processed through a Merrill-Crowe circuit to precipitate gold and silver from solution onto zinc dust. The solution is pumped to filter presses, where the resulting material containing zinc, gold, and silver is dried. The dried material is then melted in a furnace to form doré bars. Metallurgical recoveries over the long term are estimated to average 55% for silver and 72% for gold. Low to medium grade material may be placed on stockpiles allowing for the preferential crushing and stacking of higher grade material.

During 2013, Dolores processed 5.4 million tonnes of ore, producing 3.5 million ounces of silver and 65,000 ounces of gold with metallurgical recoveries of 43% for silver and 82% for gold.

In 2013, capital expenditures at Dolores totalled $36.2 million, excluding the leach pad expansions projects and mine optimization projects, which was in line with management’s guidance of $37.0 million.

Activities in 2014

In 2014, we anticipate producing between 3.60 and 3.85 million ounces of silver and between 64,000 and 68,000 ounces of gold.

We expect capital expenditures of a sustaining nature at Dolores to be approximately $32.5 million, which includes pit pre-stripping for $18.2 million, equipment repair and replacements of $7.8 million, access road improvements of $0.8 million, support infrastructure upgrades of $1.9 million and $3.6 million for mine-site exploration. In addition, we forecast capital expenditures relating to the pad 3 expansion, a new power line installation and process plant optimization projects to require $35 million.

Environmental

Permit applications for construction and operation of Dolores, including EIS, Technical Justification Study for Change of Land-Use, and Risk Study were approved by SEMARNAT in April 2006. An additional modification to the mine permit was made to allow the construction of an underground exploration ramp in 2012.

Problems related to the stability of Heap Leach Pad 1 developed in 2010 and significant leakage was detected through the pad liner that was unable to be contained by the leak collection system. This issue resulted in cessation of stacking and irrigation on the Pad and the relocation of approximately 2 million tons of ore to heap leach Pad 2 which is currently in operation. Soil and water sampling below Pad 1 in 2012 confirmed that no residual cyanide is present, however full remediation of the liner system would be required if Pad 1 was ever to be used for production again.

Dolores has voluntarily participated in the PROFEPA “Clean Industry” Program which involves independent verification of compliance with all environmental permits and the implementation of good practice environmental management procedures and practices. The mine obtained its first certification in 2010 and was re-certified again on June 8, 2012.

A closure cost estimate for Dolores was prepared according to State of Nevada approved SRCE methodology in 2012 and will be updated every year. We have estimated the present value of reclamation costs for the Dolores property at December 31, 2012 to be approximately $5.2 million.

Health and Safety

A safety audit was conducted at Dolores in 2012. During the year 2013, personnel employed at Dolores attended approximately 57,600 hours of safety related training.

Operating highlights

2013 2012* 2011
Tonnes milled (millions) 5.4 4.3 -
Silver million ounces 3.5 2.7 -
Gold ounces 65,230 43,476 -
Cash cost per ounce 1 $7.47 $4.05 -

 

*Results for the nine months of 2012 that the Company operated the Dolores mine.

1. Net of by-product credits. For purposes of calculating 2013′s cash costs, the Company used the following price levels for its by-product production: Au $1,200/oz.

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