Projects Overview
QA/QC Procedures
February 11, 2011
Summary
Orko Silver and Pan American Silver continue to advance the La Preciosa project.
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La Preciosa property is located in Durango State, 47 km northeast of the city of Durango. It consists of a block of mineral exploitation concessions covering 32,400 hectares (80,000 acres) located southeast of the village of Francisco Javier Mina, northwest of the village of Francisco I. Madero and east of the village of Ricardo Flores Magon.
La Preciosa property covers Tertiary aged gold and silver bearing epithermal quartz veins, with barite and lesser quantities of base metals, primarily zinc and lead. There are three major vein and vein-breccia systems exposed on a series of hills and ridges, separated by flat floored valleys roughly 800 m wide. The main vein system consists of northward striking and westward dipping veins, plus east striking south dipping cross-cutting veins. The eastern vein-breccia system (Zona Oriente) strikes northwest. Two systems may intersect to the north beneath younger basalt. To the west of these is a third sub-parallel vein system, with north and northwest trending veins, dipping to the west.
La Preciosa veins are composed of poly-phase veins of quartz, often banded, smoky, chalcedonic and amathystine, with a substantial amount of barite laths. Sulphide mineralization is scarce on surface and in the shallow underground workings. Drill core contains disseminated sphalerite, galena, pyrite and acanthite, plus iron and manganese oxides. Wall rocks adjacent to the veins are silicified, particularly between the prominent veins La Gloria and Abundancia. Kaolinite and hematite alteration is common, as well as more distal propylitic chlorite, epidote and pyrite.
The oldest rocks, found only in deeper drill core, consist of Jurassic-Cretaceous graphitic schist, chlorite schist and layers of quartzite. Above the metamorphic units is a thick package of Cretaceous polymictic conglomerate, with lenses of arkosic sandstone. This sedimentary package is topped by Tertiary andesite tuff and andesite agglomerate of the regional Lower Volcanic Sequence. No rhyolites of the Upper Volcanic Sequence are found in the immediate study area, but can be seen on cliffs further to the west. The conglomerates and andesitic rocks are the main host rocks for the veins, but mineralization also extends into the metamorphic rocks. There are a few dioritic dykes in deeper core, but intrusive rocks are generally rare. The youngest unit comes from several Quaternary volcanic vents which erupted basalt flows, filling the lower valleys.
Multiple veins in the main structural zone of La Preciosa ridge have been traced on surface for over 5 kilometres and drilling has revealed that the veins continue to the north beneath the basaltic cover. The veins are also interpreted to extend further south of known exposures. Individual veins have been traced for up to 4 km. Of the entire structural zone, the Abundancia and La Gloria veins, plus more recently the Martha vein, have been explored in the greatest detail. The Abundancia and La Gloria veins coalesce at depth, the merged vein is known as the Abundancia vein. There are 2.5 km of underground drifts, following the Abundancia and La Gloria veins, as well as a small portion of the Transversal vein. The original workings are over 100 years old, however, about 60% of the drifts were enlarged and resampled 30 years ago by Luismin. There is a winze that leads down to workings 50 metres below the main 2065 metre level in Abundancia vein. There are also several raises and small stopes which break through to surface on the Abundancia and La Gloria veins above the 2065 level. At the farthest south exposures, El Orito vein was drifted upon for several hundred metres over a century ago, the workings for which are inaccessible, but has had no modern exploration.
Seven diamond drill holes, totalling 1,319 metres, were drilled by Luismin in a 1981-1982 program. The group of holes were mainly collared west of the Abundancia and La Gloria veins to test a 400 metre strike length of the veins roughly 50 to 75 metres below the 2065 level. The best intercept was from BP-1, which hit a true width of 13.6 metres at 232.0 g/t Ag and 0.10 g/t Au. Hole BP-7 was a longer hole which tested Abundancia and La Gloria veins and also intercepted the sub-parallel Luz Elena vein at greater depth. The 1981-1982 drill program was terminated due to falling metal prices at that time. Core from Luismin's program was split and the remaining half is intact and stored on site.
A single 313 metre hole was drilled by Luismin in the eastern vein-breccia system in 1994. The hole intersected a series of variable silicified zones and veinlet stockwork anomalous in Ag, Au, Pb, Zn and Hg, but did not pass through the complete structure.
In the 1980s, Luismin staff prepared several preliminary resource estimates, which were in-house and do not meet the current NI 43-101 reporting requirements for disclosure of Reserves and Resources. The studies showed a general "Resource" in all categories of approximately 320,000 tonnes in the Abundancia and La Gloria veins grading 238 g/t Ag, 0.70 g/t Au and 0.17 % Pb. The "Proven and Probable Reserves" stood at 30,000 tonnes grading 319 g/t Ag, 1.0 g/t Au, with 0.55 % Pb and Zn combined. These estimates do not follow the requirements for reserves and resources outlined in NI 43-101 as they were estimated prior to the enactment of NI 43-101, however, they have been obtained from sources believed reliable. The resource estimates are considered to be historic, and are relevant, but have been replaced by recent estimates utilizing much more drilling data and using current CIM terminology.
In June of 2004, Orko commenced a geological mapping and sampling program on La Preciosa. This was followed by a 40 line-km geophysical survey of Induced Polarization in the northern part of the property in January 2005, performed by SJ Geophysics under Orko's guidance. Orko commenced diamond drilling in March 2005 by Major Drilling International on La Preciosa Ridge, targeting Abundancia and La Gloria, but also extending to Luz Elena vein. The first 24 drill holes were completed by late October 2005 totalling 10,259 metres of diamond drill core.
Favourable results from drilling and interpretation of distinct mineral-shoots within the Abundancia and La Gloria veins gave reason for Orko to make a first resource estimate for the property. Using a cut-off grade of 150 g/t silver-equivalent, Inferred Resource Estimate I totalled 2.72 million tonnes grading 227.2 g/t Ag and 0.462 g/t Au for a silver-equivalent grade of 255.0 g/t. Resource Estimate I was released on 19 January 2006 (Gunning and Whiting, 2006).
Drilling continued and Inferred Resource Estimate II was released on 7 September 2006. This estimate was up to hole BP06-38 for a total of 16,334 metres in La Preciosa Ridge area, including Abundancia, La Gloria and Abundancia Zona Sur veins. Using a cut-off grade of 100 g/t silver-equivalent, Inferred Resource Estimate II totalled 4.05 million tonnes grading 207.4 g/t Ag and 0.384 g/t Au for a silver-equivalent grade of 230.4 g/t. Alternatively, at a 150 g/t cut-off, Inferred Resource Estimate II totalled 3.42 million tonnes grading 235.0 g/t Ag and 0.435 g/t Au for a silver-equivalent grade of 261.1 g/t (Whiting, 2006).
Drilling continued and Inferred Resource Estimate III was released on 13 March 2007. Inferred Resource Estimate III -- At 100 g/t Ag-Eq cut-off the estimate is 5.72 million tonnes grading 192.9 g/t Ag and 0.345 g/t Au, for a silver-equivalent of 213.6 g/t. At 150 g/t Ag-Eq cut-off the estimate is 4.39 million tonnes grading 229.9 g/t Ag and 0.396 g/t Au, for a silver-equivalent of 253.7 g/t (Whiting, 2007).
Drilling continued and Inferred Resource Estimate IV was released on 1 October 2007. Inferred Resource Estimate IV -- At 100 g/t Ag-Eq cut-off the estimate is 10.36 million tonnes grading 199.7 g/t Ag and 0.328 g/t Au, for a silver-equivalent of 219.4 g/t. At 150 g/t Ag-Eq cut-off the estimate is 6.88 million tonnes grading 256.6 g/t Ag and 0.387 g/t Au, for a silver-equivalent of 279.8 g/t (Whiting and Gunning, 2007).
Drilling continued and Inferred Resource Estimate V was released on 31 March 2008. Inferred Resource Estimate V -- At 100 g/t Ag-Eq cut-off the estimate is 15.35 million tonnes grading 190.0 g/t Ag and 0.321 g/t Au, for a silver-equivalent of 209.2 g/t. At 150 g/t Ag-Eq cut-off the estimate is 6.88 million tonnes grading 256.6 g/t Ag and 0.387 g/t Au, for a silver-equivalent of 279.8 g/t (Whiting, 2008).
The Company's Resource Estimate VI was released Feb 18, 2009 and it is based on the results of all the holes drilled to that date including the 2008 drilling of an additional 205 holes (79,021m) that was completed after the date of the last resource estimate. The La Preciosa deposit now comprises 47% Indicated Resources and 53% Inferred Resources. Current Indicated Resources are 10.64 million tonnes grading 0.27 g/t Au and 185 g/t Ag for a Silver-Equivalent grade of 201 g/t. at a cut off grade of 100 g/t. The contained metal equals 63.2 million ounces of Silver and 94,000 ounces of Gold for a Silver Equivalent of 68.9 Million Ounces. Current Inferred Resources are 12.0 million tonnes grading 0.25 g/t Au and 185 g/t Ag for a Silver-Equivalent grade of 200 g/t. at a cut off grade of 100 g/t. The contained metal equals 71.8 million ounces of Silver and 97,000 ounces of Gold for a Silver Equivalent of 77.6 Million Ounces (Ristorcelli et al., 2009).*
* The six resource estimates are all undiluted using a 60:1 gold to silver ratio with no metallurgical extractive factors applied.
In total, eight veins were modeled for the new estimate including the Martha Vein, which dominates the resource. In the process of modeling, lithological units were differentiated which helped in establishing the orientation and continuity of the individual veins. Using geological data along with the metal grades, it was possible to establish continuity of mineralized zones of stockwork, breccia, veins, and veinlets. The high-grade veins within these zones were segregated and modeled. All zones and veins were modeled into a three dimensional solid. Once defined, statistics of each domain and each vein were evaluated separately, and capping was carried-out individually for each vein and domain. The sample data was then composited to three-metre intervals. Grade continuity was evaluated separately for each vein and domain. Inverse distance squared estimation was used. A cut-off grade of 100 g/t was selected by MDA. Classification into Indicated and Inferred was dependent upon the vein continuity, geological continuity and proximity to the closest drill hole, as well as the number of samples and the number of drill holes used in the individual blocks.
All reported resources lie within the modeled veins. The QA/QC work demonstrates reliability of the analytical data and the auditing of the database has shown it is accurate.
Average drill hole spacing is approximately 100 metres for all the holes drilled from 2005-2008. For the 1981-82 program, analytical testing was performed in the Luismin Labs in Durango, Mexico. All 2005-2008 analytical testing has been done by SGS or Inspectorate laboratories, which are North American based labs both holding ISO certification.
The Martha vein, first identified in hole BP06-77, represents the most significant target. It is relatively flat lying, dipping an average of 20 degrees to the west. It has a known lateral extent of over four kilometres and varies in down-dip widths between 200 metres to 1.7 kilometres. The Martha vein varies in thickness from one meter to sixty meters and averages about 15 meters. Within the Martha vein are one or more veins or vein breccias which contain the resource grade material and which average about five meters.
Orko has conducted geological mapping, geophysical testing and systematic drilling of a portion of the known strike length of epithermal silver-gold veins on the property. Two of the veins, La Gloria and Abundancia, were drill tested each along 1.2 km strike length to establish veins on "La Preciosa" which have been traced for five kilometres north-south, as well as multiple east-west veins. Some of the veins include Abundancia, La Gloria, Luz Elena, Carmen, Esperancita, Transversal, Incognita, Nueva, Sur, Ramal Sur, El Orito, Nancy, etc. The Martha Vein has been the focus of drill testing since its discovery in 2007.
On April 14th, 2009 Pan American Silver Corp. and Orko Silver announced that they have agreed to form a joint venture to develop the La Preciosa project. Pan American will contribute its demonstrated mine development expertise, as well as 100% of the funds necessary to develop and construct an operating mine, in consideration for a 55% interest in the joint venture. Orko Silver retains a 45% interest fully carried to production.
Since assuming operatorship of the project in April 2009, Pan American has drilled 340 holes, for a total of 88,658 metres. Delineation drilling is in the Central Area of the La Preciosa Resource.
Diamond drilling by Major Drilling International continued to the end of 2010. Combining Pan American's 2009-2010 drilling of over 88,000 metres, with Orko's 2005-2008 drilling of 154,000 metres, the project now has 694 holes and has passed the 242,000 metre mark.
Pan American has completed a first phase detailed metallurgical program, which included: work index tests, abrasion tests, mineralogical studies, gravity tests, floatation tests and cyanide leach tests. The program was a follow-up to the preliminary testing conducted in 2008 by Orko (Orko's news release April 17, 2008). Additional flotation studies are still underway.
Simple cyanide leaching yielded average silver recoveries of 91%, although the use of selective oxidants could further enhance these results. In addition, Pan American has been successful in reducing cyanide consumption to 1.6 kg/t, which is materially lower than the results from the metallurgical work previously completed by Orko. Lastly, the current test work has shown that with the use of oxidants, the leach cycle times can be reduced to 48 hours with minimal impact on ultimate silver recovery.
Pan American Silver is examining various scenarios for the economic evaluation of La Preciosa, including coordinating the work of external engineering studies. These studies have been completed, or are soon to be completed, and are being incorporated into the overall project review:
- Golder Associates Ltd. (Canada) has been contracted to conduct geotechnical engineering for both underground and open pit mine design;
- M-3 Engineering (USA) has been contracted for plant and tailings design, as well as infrastructure costing;
- Quantitative Group Pty. Ltd. (Australia) has been contracted to conduct geostatistical evaluation and resource modeling;
- SGS Mineral Services (Mexico) has been contracted to conduct additional metallurgical studies; and
- Clifton Associates Ltd. (Canada) has been contracted for environmental studies.
In the Resource area, more high-grade values have been intercepted, such as hole BP10-539, which yielded a true thickness of 7.71 metres in the Gloria vein grading Au 0.646 g/t and Ag 648.0 g/t for a silver-equivalent of 686.8 g/t. This included 3.59 metres grading Au 0.894 g/t and Ag 986.7 g/t for a silver-equivalent of 1,040.3 g/t.
In exploration diamond drilling beyond the main resource area, 11 holes have been completed in the El Orito Norte sector, 12 holes in the Nancy sector, 9 holes in the Baritina sector, 6 holes in the Baritina Norte (Zona Oriente Extension) sector, 8 holes in the Plomosa sector, 6 holes in the Orito Sur sector, 4 holes in the Vaquero sector, and 11 reconnaissance holes have been completed in the north-northwest trend.
In El Orito Norte, a mineralized dyke was intercepted in hole BP10-598, which yielded a true thickness of 2.49 metres grading Au 0.209 g/t and Ag 396.3 g/t for a silver-equivalent of 408.9 g/t. On the north margin of the Nancy drilling, hole BP10-595 yielded a true thickness of 2.41 metres grading Au 1.123 g/t and Ag 157.1 g/t for a silver-equivalent of 224.5 g/t.
On the south margin of the Orito Sur drilling, hole BO06-01 contained a gold intercept with high values in a hematite zone, which yielded a true thickness of 0.56 metres grading Au 67.400 g/t and Ag 42.7 g/t for a gold-equivalent of 68.112 g/t (silver-equivalent 4,086.7 g/t). More exploration testing is planned.
The delineation drilling results from the new holes are mainly located in the known Martha vein structure and were drilled at approximately 18 metre and 50 metre spacing in an area previously drilled by Orko at 100 metre spacing. This data again confirms Orko's previously reported results, and forms the basis of a geostatistical study, toward ultimate reserve definition.
Integral to the planned exploration and perhaps the most important investigation ongoing by Pan American will be determining the optimal mining method should all the results of the accelerated work program remain positive. Due to the recent major increases in silver and gold prices, the Preliminary Assessment (PA) for La Preciosa will be rescheduled to the second quarter of 2011. This will give Pan American and its technical consultants sufficient time to examine various alternate mining methods and extraction scenarios. The three main approaches are to examine the mining as i) an underground operation, ii) a combined underground / open-pit operation, or iii) a large open-pit operation.
References
Gunning, D.R., and Whiting, B.H., 2006, Technical Report -- Mineral Resource Estimate on La Preciosa silver-gold deposit, Durango State, Mexico. Orko Gold Corporation, 49 p. (plus maps) -- SEDAR dated 4 March 2006.
Ristorcelli, S., Ronning, P., Whiting, B., and Hawthorn, G., 2009, Technical report on the La Preciosa Project, Durango State, Mexico. Mine Development Associates for Orko Silver Corporation, 203 p. -- SEDAR dated 31 March 2009
Whiting, B.H., 2008, Orko's La Preciosa: The discovery of a major epithermal silver-gold deposit in Durango, Mexico. in Technical Session Abstract Book, Mining for a Minerals Dependent World, Northwest Mining Association, Reno, Nevada, USA, 1-5 December 2008, p. 16-17.
Whiting, B.H., 2008, Technical report -- mineral resource estimate V -- La Preciosa silver-gold deposit, Durango State, Mexico. for Orko Silver Corporation, 75 p. (plus maps). -- SEDAR dated 31 March 2008.
Whiting, B.H., 2007, Technical report -- mineral resource estimate III -- La Preciosa silver-gold deposit, Durango, Mexico. for Orko Silver Corporation, March 2007, 64 p. -- SEDAR dated 31 March 2007.
Whiting, B.H., 2006, Technical report -- mineral resource estimate II -- La Preciosa silver-gold deposit, Durango, Mexico. for Orko Silver Corporation, March 2007, 56 p. -- SEDAR dated 5 September 2006.
Whiting, B.H. and Gunning, D.R., 2007, Technical report -- mineral resource estimate IV -- La Preciosa silver-gold deposit, Durango, Mexico. for Orko Silver Corporation, October 2007, 68 p. (plus maps). -- SEDAR dated 1 October 2007
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