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14.0 Variography

Variography is used to describe the spatial variability or correlation of an attribute (gold, silver etc.). The
spatial variability is traditionally measured by means of a variogram, which is generated by determining the
averaged squared difference of data points at a nominated distance (h), or lag (Srivastava and Isaacs,
1989). The averaged squared difference (variogram or γ(h)) for each lag distance is plotted on a bivariate
plot, where the X-axis is the lag distance and the Y-axis represents the average squared differences (γ(h))
for the nominated lag distance.

Several types of variogram calculations are employed to determine the directions of the continuity of the
mineralisation:

▪ Traditional variograms are calculated from the raw assay values.

▪ Log-transformed variography involves a logarithmic transformation of the assay data.

▪ Gaussian variograms are based on the results after declustering and a transformation to a
Normal distribution.

▪ Pairwise-relative variograms attempt to ‘normalise’ the variogram by dividing the variogram

value for each pair by their squared mean value.

▪ Correlograms are ‘standardized’ by the variance calculated from the sample values that
contribute to each lag.

Fan variography involves the graphical representation of spatial trends by calculating a range of variograms
in a selected plane and contouring the variogram values. The result is a contour map of the grade continuity
within the domain.

The variography was calculated and modelled in the geostatistical software, Isatis. The rotations are
tabulated as dip and dip direction of major, semi-major and minor axes of continuity.

A variographic analysis was completed on the coded composite data for the resource estimate study.
Composite data from all domains has been combined for variographic analysis. Note that, as the samples
have been ‘flattened’ or ‘unfolded’ for the purposes of grade estimation, the variograms are presented in
the direction of optimal continuity, as determined from fan variography calculated in the flattened plane. A
principal orientation of 15° has been determined with the orthogonal directions to this being 105° and
vertical. Assumptions and parameters are presented in the following paragraphs.

Traditional semi-variograms were selected as the appropriate spatial measure given the spatial distribution
of the data and the sample statistics.

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Semi-variograms were generated in the direction of interpreted continuity and are presented as Figures 30
through to 35 for Au, Ag, Cu, Pb, Zn and density respectively. Models are presented in Table 38.

Table 38. Summary Variography Models – 1m Composites

orientation Range (a1) Range (a2)
Nugget
Var C1 C2
(C0) Major Semi major Minor Major Semi Minor Major Semi Minor

Au 6 0°→15° 0°→105° 90°→0° 4 40 30 10 8.6 90 50 18

Ag 650 0°→15° 0°→105° 90°→0 1,350 40 20 10 1,500 100 50 18
Cu 1.1 0°→15° 0°→105° 90°→0 5.05 50 30 10 5.05 100 60 18
Pb 0.16 0°→15° 0°→105° 90°→0 0.25 50 40 8 0.50 110 70 15
Zn 4 0°→15° 0°→105° 90°→0 13.5 40 40 8 12.2 100 60 20
Density 0.05 0°→15° 0°→105° 90°→0 0.1 55 40 12 0.15 110 80 20
As 40,000 0°→15° 0°→105° 90°→0 200,000 50 40 12 335,000 110 70 20
Ba 2,007,770 0°→15° 0°→105° 90°→0 5,746,700 20 16 10 8,479,800 110 110 20
Sb 3,000 0°→15° 0°→105° 90°→0 12,100 40 30 10 12,500 100 60 20
S 10 0°→15° 0°→105° 90°→0 38 40 30 14 40 100 70 20
Fe 6 0°→15° 0°→105° 90°→0 21 55 40 12 12 110 80 20

The variograms are only moderately well-structured and therefore considered moderate confidence. This
is a reflection of the data spatial distribution and the sometimes -extreme changes in grade between
adjacent drill holes.

Nugget effects have been modelled as low to moderate and are in keeping with the style of mineralisation
at La Plata. Extended ranges of 90m to 110m have been fitted in the major axis. Shorter ranges of between
50m and 70m have been fitted for the semi-major and the minor axis has been modelled with 15m to 20m
ranges. Short-range variability (nugget variance and the close-range structure) dominates the variogram. The
following relative nugget values (nugget divided by the total sill) have been returned:

• Au: 33%
• Ag: 19%
• Cu: 10%
• Pb: 18%
• Zn: 13%

As is typical, Au shows the highest level of close range variability (relative nugget of 33%), whilst the base
metals and silver returned materially lower relative nugget levels.

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Figure 30. Au variogram

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Figure 31. Ag variogram

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Figure 32. Cu variogram

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Figure 33. Pb variogram

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Figure 34. Zn variogram

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Figure 35. Density variogram

14.1 Block Modelling

The grade estimation was completed into a sub-blocked block models with a 5m x 10m x 5m cell size sub-
blocked to 1m in all 3 directions as summarised in Table 39. No rotation has been applied. Block model
variables were added to enable OK estimates of all variable of interest including auxiliary variables and
density. Service variables were also added to record various estimation parameters to review the quality of
the estimates.

The model has been at least partially depleted to account for historic production by the void and topo
wireframes received from Toachi. Based on plans provided by Toachi, the likely depletion is moderately
significant versus the total model however the capture and modelling of all development and stoping is
considered critical to high confidence mine planning.

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Table 39. Block Model Construction Parameters

Min Max Extent Parent/subcell

(m) (m) (m) Block Size
Easting 728,800 729,500 700 5/1
Northing 9,956,600 9,957,800 1,200 10/1
Elevation 1,100 1,650 550 5/1

14.2 Bulk Density Data

A dry bulk density database has been supplied containing a total of 2,638 data. The database can be
subdivided on the basis of flagging by the various mineralisation wireframes and a total of 621 density
determinations correspond to flagged mineralised intervals. Descriptive statistics are discussed in Section
14.10 and variograms have been calculated and modelled (Section 14.11). Densities have been assigned
to the block model via Ordinary Kriging (OK) for tonnage reporting purposes and this is discussed i n the
following section.

14.9 Grade Estimation

An ordinary kriging (OK) grade estimation plan was devised which utilised hard boundaries throughout. For
each metal the domain coded material was estimated first followed by material within a halo to the VMS
domains in which the metal distribution and model of occurrence is less well understood.

For the purposes of the grade estimate, the coded domains and corresponding composites were unfolded
to form a flat surface via the tetra modelling function in the Vulcan software package. Both a hangingwall
and a footwall surface to the mineralisation were constructed prior to the estimation. The unfolding
algorithm then adjusts the RLs so that a transformed thickness is assumed to be 1. In this manner, the
search neighbourhood ellipse is ‘folded’ or ‘bent’ in cartesian space to follow the contours of the
mineralisation domain and thereby correctly estimates the grades both locally and spatially. Once the
estimate is complete, the unfolded coordinates are transformed back into the original coordinates. In the
case of La Mina, where extreme grade fluctuations can exist both between adjacent drill holes and within
individual drill holes, this approach is considered necessary to preserve the spatial distribution of grades
within the various domains.

A number of grade estimate scenarios were performed, with the accepted grade estimate based on using a
minimum of 2 drill holes and 6 input composite samples. Three estimation passes were made for each
variable estimated, with the sample search ranges expanded for each successive pass not estimated by the
previous estimates and reducing the minimum number of input composites. The estimation parameters are
summarised in Table 40. Note for the purposes of the unfolding implemented during the estimation the minor

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search radii was set to 0.3 for the first pass and 5 for the second and this relates to the unfolded coordinate
system and not the cartesian coordinate system. The third estimate pass was executed in cartesian space
as there is a significant time penalty inherent in the unfolded estimates as the search neighbourhoods increase
in size due to the complexity of the mathematics involved. Additionally, the first and second estimation passes
informed more than 95% of the blocks and the third pass can be considered negligible in terms of the total
grade tonnage distribution and was only carried out to ensure that all blocks within the wireframes were
estimated.

Table 40. Estimation Parameters

Sample Search
Estimation Disc
Pass Orientation Search Radii Max Data (X x Y x Z)
Min Max
(X Y’ Z’’) (X Y’ Z’’) per Hole
1 15º/0º/0º 60m x 60m x 0.3 6 6 3 3x3x2

2 15º/0º/0º 250m x 250m x 5 4 6 - 3x3x2

3 15º/0º/0º 20m x 250m x 40m 3 6 - 3x3x2

The input 1m composites had high-grade cuts applied prior to grade estimation with the high-grade cuts
based on the statistical analysis described in Section 14. In addition, a high-grade distance restriction was
applied to grade estimation of copper in Domain 100 (South Zone). The distance restriction was based on
a review of the distribution plots, variography and visual inspection of the composite data in 3D. Grades
above the nominated threshold of 15% Cu were not collected for estimation when located in excess of a
sample search radii of 20m x 20m x 10m. The distance restriction was applied to limit extrapolation of high-
grade copper data into lower grade regions, which was originally evident in block statistics calculated after
initial grade estimation runs without distance restrictions.

The OK grade estimates were generated with sample search neighbourhoods designed to minimise the
level of smoothing given the degree of grade variation present and the current drill spacing. While this
approach is generally not recommended, it is possible to produce an acceptable global estimate that is
consistent with the likely global grade-tonnage distribution. However, when applying the restricted kriging
approach, significant local variation between the block estimates and the actual block grades is likely. It is
considered that, as further drill data is collected, a much greater level of confidence in the grade estimates
will be generated.

14.10 Depletion for mining activity

Mining has been undertaken both from open pit operations and underground. Records exist; however, the
completeness of these records cannot be verified. Underground workings have been digitally transferred
from existing records and the model has been depleted using these via insertion of a block model ‘flag’.
Additionally, open voids have been encountered in surface drilling and the existence of underground stopes

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has been inferred from this. These voids have been modelled into likely stope positions and volumes and
the model has been additionally depleted. Total depletion of mineralised zones from underground workings
is thus 173kt and this tonnage has been excluded from any subsequent grade tonnage reporting in Section
14.18. Underground depletion solids are depicted in Figure 36with stopes as the grey shapes within the
mineralised bodies. Note only the north blocks are depleted, as no mining has taken place from the South
block.

Figure 36. Underground Depletion

14.11 Model Validation

Validation was completed via the following approaches:

▪ Comparison of the input composite mean grades versus the block grades (as summarised in
Table 41). The block model grades are generally very similar to the composite mean grade for the
mineralisation interpretation and the block model grades are within 6% of the declustered input
composite means. The differences in mean grades are at an acceptable level for the data spatial
configuration, the overall number of data points and the proposed resource classification.

▪ Sections (20m) through the block model comparing block grades and composite grades
(swath plots). Good reproduction of the input data was noted with the usual local fluctuation, as
is typical.

The grade estimate is considered to be globally robust and reproduces the input data to an acceptable
level. The grade estimate is considered acceptable for resource classification and reporting.

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Table 41. Comparison of Block Grades with Composite Mean Grades – All Data Used

Block Model Grades

Composites % Diff Block Model
Variable Zone (Capped and Distance
(declustered, capped) versus Mean
Restriction Estimate)

100 4.18 4.39 5.0%

200 2.02 1.90 -6.0%
Au (g/t) 300 2.26 2.65 17.3%
400 1.65 1.98 19.5%
All 2.83 3.01 6.3%
100 63.9 63.2 -1.2%
200 26.0 22.3 -14.1%
Ag (g/t) 300 26.3 28.3 8.0%
400 14.9 18.3 23.3%
All 38.4 38.4 0.0%
100 2.12 2.23 5.6%
200 3.27 2.83 -13.4%
Cu (%) 300 1.64 1.95 18.8%
400 0.96 0.90 -7.0%
All 2.11 2.23 5.9%
100 0.81 0.77 -4.8%
200 0.19 0.19 -1.0%
Pb (%) 300 0.47 0.48 1.7%
400 0.26 0.34 30.4%
All 0.51 0.49 -4.9%
100 5.19 4.85 -6.5%
200 1.79 1.78 -0.5%
Zn (%) 300 3.12 3.27 4.9%
400 2.52 2.98 18.3%
All 3.51 3.39 -3.5%

14.12 Resource Classification

The grade estimate was classified in accordance with the current CIM guidelines as an Inferred Mineral
Resource based on the confidence levels of the key criteria as presented in Table 42. The resource
categorisation was based on the robustness of the various data sources available, including:

▪ Geological knowledge and interpretation.

▪ Variogram models and the ranges of the first structure in multi-structure models.

▪ Drilling density and orientation.

▪ Estimation quality statistics.

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Table 42. Confidence Lavels by Key Criteria

Items Discussion Confidence
Drilling Techniques Diamond - Industry Standard approach. Less certain for
Moderate/High
previous operators.
Logging Standard nomenclature has been adopted. Logging
electronically recorded and observed procedures to a high Moderate/High
technical standard.
Drill Sample Recovery Recoveries are not recorded in entire database. Review of
Moderate/High
current drilling suggests recoveries are of acceptable standard.
Sub-sampling Techniques and
Diamond sampling conducted by industry standard techniques. Moderate/High
Sample Preparation
Quality of Assay Data Appropriate quality control procedures are available. They were
reviewed on site and considered to be of industry standard.
Moderate/High
Previous operators QAQC limited however the available data
does not indicate the likelihood of bias occurring.
Verif ication of Sampling and Assaying Sampling and assaying procedures have been assessed and
Moderate
are considered of appropriate industry standards.
Location of Sampling Points Survey of all collars conducted with accurate survey equipment.
Investigation of downhole survey indicates appropriate Moderate/High
behaviours.
Data Density and Distribution Majority of regions defined on a notional 50mE x 50mN drill
spacing or better however significant local variation in geological low/moderate
continuity and grade continuity is evident.
Audits or Reviews no external reviews completed N/A
Database Integrity Assay certificates have been verified and no issues were
Moderate
identified.
Geological Interpretation Mineralisation controls are moderately well understood. The
mineralisation constraints are robust but relatively broad and Moderate
theref ore of moderate confidence.
Estimation and Modelling Techniques Ordinary Kriging is considered to be appropriate given the
High
geological setting and grade distribution.
Cutoff Grades A lower cutoff grade of 4g/t gold equivalent has been applied to
the mineralisation constraints and grade reporting which
approximately equates to an NSR value per tonne of US$165 in Moderate
situ gross value, as a rough approximation of possible
underground mining and subsequent processing costs.
Mining Factors or Assumptions A 5mE x 10mN x 5mRL block size has been selected assuming
an underground mining scenario. Block model size is relatively
Moderate
small compared to data density and distribution leading to poor
local estimates.
Metallurgical Factors or Assumptions Not applied to resource estimate N/A
Tonnage Factors Suf ficient data exists to enable moderate quality estimates of
moderate
(In-situ Bulk Densities) density via ordinary kriging

14.13 Resource Reporting

The grade estimate was classified in accordance with the current 2014 CIM guidelines as an Inferred
Mineral Resource. The Inferred Mineral Resource reported for the La Mina deposit is summarised below
as Table 43. The preferred reporting cutoff grade is 4g/t AuEq.

Tables 44 and 45 report the La Mina deposit, subdivided into South and North zones, based on the
Quebrada Malo fault.

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Table 43. La Mina Deposit – Inferred Mineral Resource – Ordinary Kriking Estimate
Cutoff
Tonnage AuEq Au Ag Cu Pb Zn Aueq Au Ag Cu Pb Zn
(AuEq
(kt) (g/t) (g/t) (g/t) (%) (%) (%) koz koz koz kt kt t
– g/t)
2 2,373 10.6 3.4 42.4 2.7 0.5 3.8 812 260 3,238 64 13 89
3 2,055 11.9 3.8 46.9 3.0 0.6 4.2 787 251 3,097 62 12 87
4 1,846 12.9 4.1 50.0 3.3 0.6 4.6 763 244 2,966 61 12 84
5 1,655 13.8 4.4 53.7 3.5 0.7 4.9 736 236 2,860 59 11 80
6 1,461 14.9 4.8 58.5 3.8 0.7 5.2 701 225 2,747 56 11 75
7 1,320 15.8 5.1 62.4 4.1 0.8 5.5 672 217 2,647 54 10 72
8 1,195 16.7 5.4 66.0 4.3 0.8 5.8 642 208 2,535 51 10 69
9 1,111 17.3 5.7 68.6 4.4 0.9 5.9 619 202 2,449 49 10 66
10 1,019 18.0 5.9 71.4 4.6 0.9 6.1 591 194 2,340 47 9 63
Note: AuEq This Updated Mineral Resources Estimate as of March 30, 2019 was prepared in accordance with NI 43-101 and CIM Standards
(2014).

10. The Updated Mineral Resource Estimate tonnages have been rounded to the nearest 1,000 and Au, Ag, Cu, Pb and Zn grades
have been rounded to one decimal. Troy ounces have been rounded to kilo troy ounces (koz), and tonnes of Cu, Pb, and Zn have
been rounded to kilo-tonnes (kt).
11. The Updated Mineral Resources Estimate for the La Mina VMS polymetallic deposit have been classified as Inferred Mineral
Resources.
12. The Updated Mineral Resources has been reported at various cut-off grades to demonstrate the grade-tonnage relationship. The
preferred reporting cut-off grade is 4 g AuEq / t (4 gold equivalent grams / tonne). The gold equivalent grade formula, which
assumes 100% metallurgical recoveries, is:
AuEq ppm = Au ppm + (Cu % * 1.454) + (Ag ppm * 0.013) + (Zn % * 0.654) + (Pb %*0.532)
13. The Updated Mineral Resources could be accessed by developing a mine ramp and are considered reasonable prospects for
economic extraction in the foreseeable future.
14. The Updated Mineral Resources Estimate is based on the following three year trailing monthly average prices of metal, as of
January 31st, 2019:
$1,264/ troy oz Au $16.64/ troy oz Ag
$2.68/lb Cu - $5,909 / t Cu $0.98/lb Pb – $2,162 / t Pb
$1.21/lb Zn - $2,656 / t Zn
15. This Updated Mineral Resources Estimate was prepared by Brian R. Wolfe, BSc (Hons), MAIG.
16. Mineral Resources do not have demonstrated economic viability.
17. Mineral Resources are exclusive of material that has been mined.
18. This Updated Mineral Resources Estimate may be materially affected by environmental, permitting, legal title, taxation, socio-
political, marketing or other relevant issues.

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Table 44. La Mina Deposit – South Domain Inferred Mineral Resource – Ordinary Kriging Estimate
Cutoff
Tonnage AuEq Au Ag Cu Pb Zn Aueq Au Ag Cu Pb Zn
(AuEq
(kt) (g/t) (g/t) (g/t) (%) (%) (%) koz koz koz kt kt kt
– g/t)
2 981 13.0 4.7 64.7 2.7 0.8 4.8 411 147 2,041 27 8 47
3 889 14.1 5.0 68.7 3.0 0.8 5.2 404 144 1,962 27 7 46
4 814 15.1 5.4 71.9 3.2 0.9 5.5 395 141 1,881 26 7 45
5 738 16.2 5.8 77.0 3.5 0.9 5.9 384 138 1,827 25 7 43
6 681 17.1 6.2 81.3 3.7 1.0 6.1 374 136 1,779 25 7 42
7 630 18.0 6.6 85.5 3.8 1.0 6.4 364 133 1,732 24 7 40
8 593 18.6 6.8 88.8 3.9 1.1 6.6 355 130 1,695 23 6 39
9 562 19.2 7.0 91.2 4.1 1.1 6.8 346 127 1,648 23 6 38
10 518 20.0 7.4 95.0 4.2 1.1 7.0 333 123 1,581 22 6 36
11. Note: This Updated Mineral Resources Estimate as of March 30, 2019 was prepared in accordance with NI 43-101 and CIM
Standards (2014).
12. The Updated Mineral Resource Estimate tonnages have been rounded to the nearest 1,000 and Au, Ag, Cu, Pb and Zn grades
have been rounded to one decimal. Troy ounces have been rounded to kilo troy ounces (koz), and tonnes of Cu, Pb, and Zn have
been rounded to kilo-tonnes (kt).
13. The Updated Mineral Resources Estimate for the La Mina VMS polymetallic deposit have been classified as Inferred Mineral
Resources.
14. The Updated Mineral Resources has been reported at various cut-off grades to demonstrate the grade-tonnage relationship. The
preferred reporting cut-off grade is 4 g AuEq / t (4 gold equivalent grams / tonne). The gold equivalent grade formula, which
assumes 100% metallurgical recoveries, is:
AuEq ppm = Au ppm + (Cu % * 1.454) + (Ag ppm * 0.013) + (Zn % * 0.654) + (Pb %*0.532)
15. The Updated Mineral Resources could be accessed by developing a mine ramp and are considered reasonable prospects for
economic extraction in the foreseeable future.
16. The Updated Mineral Resources Estimate is based on the following three year trailing monthly average prices of metal, as of
January 31st, 2019:
$1,264/ troy oz Au $16.64/ troy oz Ag
$2.68/lb Cu - $5,909 / t Cu $0.98/lb Pb – $2,162 / t Pb
$1.21/lb Zn - $2,656 / t Zn
17. This Updated Mineral Resources Estimate was prepared by Brian R. Wolfe, BSc (Hons), MAIG.
18. Mineral Resources do not have demonstrated economic viability.
19. Mineral Resources are exclusive of material that has been mined.
20. This Updated Mineral Resources Estimate may be materially affected by environmental, permitting, legal title, taxation, socio-
political, marketing or other relevant issues.

Table 45. La Mina Deposit – North Domains Inferred Mineral Resource – Ordinary Kriging
Estimate

Cutoff
Tonnage AuEq Au Ag Cu Pb Zn Aueq Au Ag Cu Pb Zn
(AuEq
(kt) (g/t) (g/t) (g/t) (%) (%) (%) koz koz koz kt kt kt
– g/t)
2 1,392 9.0 2.5 26.8 2.7 0.4 3.0 401 113 1,198 37 5 42
3 1,166 10.2 2.9 30.3 3.1 0.4 3.5 383 107 1,135 36 5 40
4 1,032 11.1 3.1 32.7 3.4 0.4 3.8 368 103 1,084 35 5 39
5 917 11.9 3.3 35.1 3.6 0.5 4.1 352 98 1,033 33 4 37
6 780 13.0 3.6 38.6 4.0 0.5 4.3 327 89 969 31 4 34
7 690 13.9 3.8 41.3 4.3 0.6 4.6 308 84 915 30 4 32
8 602 14.8 4.1 43.4 4.6 0.6 4.9 287 79 840 28 4 30
9 549 15.4 4.3 45.4 4.8 0.6 5.1 273 75 801 26 3 28
10 501 16.0 4.4 47.1 5.0 0.7 5.2 258 71 759 25 3 26
11. Note: This Updated Mineral Resources Estimate as of March 30, 2019 was prepared in accordance with NI 43-101 and CIM
Standards (2014).

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12. The Updated Mineral Resource Estimate tonnages have been rounded to the nearest 1,000 and Au, Ag, Cu, Pb and Zn grades
have been rounded to one decimal. Troy ounces have been rounded to kilo troy ounces (koz), and tonnes of Cu, Pb, and Zn have
been rounded to kilo-tonnes (kt).
13. The Updated Mineral Resources Estimate for the La Mina VMS polymetallic deposit have been classified as Inf erred Mineral
Resources.
14. The Updated Mineral Resources has been reported at various cut-off grades to demonstrate the grade-tonnage relationship. The
preferred reporting cut-off grade is 4 g AuEq / t (4 gold equivalent grams / tonne). The gold equivalent grade formula, which
assumes 100% metallurgical recoveries, is:
AuEq ppm = Au ppm + (Cu % * 1.454) + (Ag ppm * 0.013) + (Zn % * 0.654) + (Pb %*0.532)
15. The Updated Mineral Resources could be accessed by developing a mine ramp and are considered reasonable prospects for
economic extraction in the foreseeable future.
16. The Updated Mineral Resources Estimate is based on the following three year trailing monthly average prices of metal, as of
January 31st, 2019:
$1,264/ troy oz Au $16.64/ troy oz Ag
$2.68/lb Cu - $5,909 / t Cu $0.98/lb Pb – $2,162 / t Pb
$1.21/lb Zn - $2,656 / t Zn
17. This Updated Mineral Resources Estimate was prepared by Brian R. Wolfe, BSc (Hons), MAIG.
18. Mineral Resources do not have demonstrated economic viability.
19. Mineral Resources are exclusive of material that has been mined.
20. This Updated Mineral Resources Estimate may be materially affected by environmental, permitting, legal title, taxation, socio-
political, marketing or other relevant issues.

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15.0 Mineral Reserve Estimates

A Mineral Reserve has not been estimated for the Project as part of this PEA.

Several mineral resources estimates have been made for the La Mina VMS deposit over the preceding
decades as previously described in this PEA. SGS has identified references to historical mineral reserve
estimates (for portions of the La Mina VMS deposit known at those times) that were made circa 1950 and
1980 well before the introduction of NI 43-101 Standards of Disclosure for Mineral Projects. As such, SGS
is not aware of any existing mineral reserve estimates for the La Mina VMS deposit that were developed
based on NI 43-101 requirements.

The PEA includes Inferred Mineral Resources that are considered too speculative geologically to have the
economic considerations applied to them that would enable them to be categorized as mineral reserves.

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16.0 Mining Methods

The Inferred Mineral Resources used in this PEA are considered too speculative geologically to have the
economic considerations applied to them that would enable them to be categorized as mineral reserves,
and there is no certainty that the PEA will be realized. The words “production”, “mineable” and mine plan”
are used in the PEA in an operational sense and not in an accounting sense.

16.1 Overview

Toachi would operate the proposed underground mine using its own labour and conventional technologies
and equipment. Mine consumables such as fuel and rock bolts would be purchased from suppliers.

The La Mina VMS deposit comprises the La Mina South block and the La Mina North block. For present
preliminary mine planning purposes, the La Mina North block is subdivided into two zones referred to as
the “Upper North zone” and the “Lower North zone”; and the La Mina South block is referred to as the
“South zone”. The proposed mine plan includes production from each of these three zones. The PEA
assumes that Toachi would:

• Commence underground mine development in Year -1 by developing a new portal and a ramp to
the Upper North zone. The Upper North zone is scheduled to be mined in Years 1 to 3. It is
understood that a previous mine operator mined approximately 173 kt from the Upper North zone
in years 1975 to 1981. The PEA assumes that some historic mine access headings would be
rehabilitated and used as mine ventilation / escapeway headings.

• Develop a second new portal and ramp to access the Lower North zone and the South zone which
are scheduled to be mined in Years 2 to 8 and Years 3 to 8 respectively.

• The proposed 800 tpd mill is scheduled to ramp-up and be commissioned in the first quarter of
Year 1. The mine is scheduled to deliver 240 kt of material to the mill for processing in Year 1
increasing to 288 kt/yr in Year 2.

The ramps and stope access headings would be developed 5 m high x 4.5 m wide with gradients ranging
from -15% to +15%.

16.2 Mine Layout

The conceptual mine layout is shown in Figures 37, 38 and 39.

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Figure 37. Conceptual mine layout

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Figure 38. Longitudinal projection looking West

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Figure 39. General plan view of proposed mine

16.3 Mechanized Cut and Fill Mining

The PEA is based on mining the deposit using two variations of the widely -used and flexible mechanized
cut and fill mining method:

• A mechanized drift and slash mining with cemented rock fill (CRF) approach would be used in
most stopes.

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• A mechanized room and pillar with CRF approach would be used to mine stopes in the flatter dip
uppermost part of the South zone.

The proposed mining methods were selected following the review and assessment of: the geology; the
mineral deposit characteristics including faulting; the local topography; geotechnical, hydrogeological and
hydrological aspects that affect stope design and mining method selection; climate data; local settlements
and land and water uses; available information on the historic mine; the resource tonnage and grade
distributions; projected metallurgical recoveries; health and safety and ecological protection aspects;
estimated mine development and infrastructure requirements and development time lines; projected
stoping cycles; projected training requirements; projected internal and external dilution factors and
production losses; projected cut-off grade; relevant Republic of Ecuador legislation; mine planning
guidelines and best management practices; and mining method and backfilling options. As part of this
process, SGS reviewed the ranges of the footwall and hangingwall dips and resource mineralization widths
in the Upper North, Lower North and South zones and applied this and other factors to select the proposed
mining methods.

Sections through the deposit are shown in Figures 40 and 41. The orientation of these sections on plan is
shown in Figure 42.

Figure 40. North Zone Section 531 looking North 19 East

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Figure 41. South Zone Section 311 looking North 19 East

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