Guanaco 29Nov2010

(1)

Prepared for:

Guanaco Compañía Minera Limitada Prepared by:

Emmanuel Henry, MAusIMM Douglas Chapman P.E. Alfonso Ovalle, MAusIMM David Miranda, MAusIMM

(2)

Av. Américo Vespucio Sur 100, Of. 201, Las Condes

Santiago, Chile Tel (56) 2 210 9500 Fax (56) 2 210 9510. [email protected]

I, Emmanuel Henry, am employed as a Principal Geostatistician, and the Geology and Mining Consulting Group Manager, South America, with AMEC International Ingeniería y Construcción Limitada.

This certificate applies to the technical report entitled “Guanaco Compañía Minera Limitada Guanaco Gold Project Antofagasta Province, Region II, Chile NI 43-101 Technical Report on Feasibility Study“ (the “Technical Report”) dated 12 November 2010.

I am a member and Chartered Professional of the Australasian Institute of Mining and Metallurgy (MAusIMM and CP, #208972). I graduated from the Ecole Nationale Supérieure de Géologie, in Nancy, France in 1996, and I have a Master of Applied Science in Geostatistics from the Ecole Polytechnique de Montreal in Canada in 1999.

I have practiced my profession for 12 years. I have been directly involved in mining operations, project management, and resource estimation since 1999 and have participated in the audit and estimation of gold resource models in Canada, USA, and Argentina since 2003.

As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43–101 Standards of Disclosure for Mineral Projects (NI 43–101).

I visited the Guanaco property on 9 September, 2010.

I am responsible for Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 17.1, 17.3, 20, 21, 22 and 23 of the Technical Report.

I am independent of Guanaco Compañía Minera Limitada as independence is described by Section 1.4 of NI 43–101.

I have had no previous involvement with the Guanaco Gold Project.

I have read NI 43–101 and this Technical Report has been prepared in compliance with that Instrument.

(3)

“Signed and sealed”

Emmanuel Henry, MAusIMM (CP) 12 November 2010

(4)

Av. Apoquindo 3846, Piso 19 Las Condes, Santiago, Chile

Tel (56) 2 957-7777 Fax (56) 2 957-7769 [email protected]

I, Douglas A. Chapman P.E., am employed as a Principal Mining Engineer with AMEC International Ingeniería y Construcción Limitada.

I am a member of Nevada State Board of Professional Engineers and Land Surveyors. I

graduated from Montana College of Mineral Science and Technology in 1992 with a Bachelor of Science degree in Mining Engineering.

I have practiced my profession for 18 years since graduation. I have been directly involved in mine planning, optimization and design for open pit mining operations and in design blasting audits, fragmentation and recovery improvement programs, technology development and implementation, project management, and operations supervision.

As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43–101 Standards of Disclosure for Mineral Projects (NI 43–101).

I have not visited the Guanaco property.

I am responsible for Sections 17.2, 17.3, 18.1, 18.3, 18.5, and those portions of the Summary, Conclusions and Recommendations that pertain to those Sections.

(5)

Douglas A. Chapman P.E. Dated: 12 November 2010

(6)

I, Alfonso Ovalle, MAusIMM, am employed as a Principal Mining Engineer with AMEC International Ingenieria y Construccion Limitada.

This certificate applies to the technical report entitled “Guanaco Compañía Minera Limitada Guanaco Gold Project Antofagasta Province, Region II, Chile NI 43-101 Technical Report on Feasibility Study“ (the “Technical Report”) dated 12 November 2010.

I am member of the Australasian Institute of Mining and Metallurgy (AusIMM, #303157). I graduated in Mining Engineering from the University of Chile in 1969.

I have practiced my profession for 41 years. I have been directly involved in planning, engineering, operations and management of underground mining projects.

I visited the Guanaco property on 19 October 2009.

I am responsible for preparation of Sections 17.2, 17.3, 18.2, 18.3 and those portions of the Summary, Conclusions and Recommendations that pertain to those Sections of the Technical Report.

(7)

“Signed”

Alfonso Ovalle, MAusIMM Dated: 12 November 2010

(8)

AMEC International Ingenieria y Construccion Limitada Av. Américo Vespucio Sur 100, Of. 201, Las Condes

I, David Miranda, MAusIMM, am employed as a Technical Director, Process South America with AMEC International Ingenieria y Construccion Limitada.

This certificate applies to the technical report “Guanaco Compañía Minera Limitada Guanaco Gold Project Antofagasta Province, Region II, Chile NI 43-101 Technical Report on Feasibility

Study“ (the “Technical Report”) dated 12 November 2010.

I am a member of the Australasian Institute of Mining and Metallurgy (AusIMM #990791). I graduated from with a distinction degree in Mining Engineering (Extractive Metallurgy) from University of Chile in 1980.

I have practiced my profession for 29 years. I have been directly involved process and plant design and operations, engineering studies, EPCM projects and commissioning of mineral processing including SAG mills and other comminution circuits, sulphide flotation, heap and ROM leaching, and SX-EW. As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43–101 Standards of Disclosure for Mineral Projects (NI 43–101).

I am responsible for Sections 16.1 to 16.3.1, 16.3.6 to 16.3.11, 16.5 and 16.6, and those portions of the Summary, Conclusions and Recommendations that pertain to those Sections of the Technical Report.

(9)

“Signed”

David Miranda, MAusIMM Dated: 12 November, 2010

(10)

I, Anthony Ralph Maycock, am employed as Manager of the Projects Department with AMEC International Ingenieria y Construccion Limitada

This certificate applies to the technical report entitled “Guanaco Compañía Minera Limitada Guanaco Gold Project Antofagasta Province, Region II, Chile NI 43-101 Technical Report on Feasibility Study“ (the “Technical Report”) dated 12 November 2010.

I am a member of the Association of Professional Engineers and Geoscientists of British Columbia (APEGBC, #13275). I graduated from the University of London, Imperial College, Royal School of Mines in 1969 with a BSc. (Hons) in mineral processing.

I have practiced my profession for 41 years. I have been directly involved in plant operations, process design and project management for mines and projects in Zambia, Canada, USA, Brazil, Peru, Argentina and Chile.

I am responsible for Sections 18.4, 18.6 to 18.11, and 19, and those portions of the Summary, Conclusions and Recommendations that pertain to those Sections of the Technical Report.

I am independent of Guanaco Compañia Minera Limitada as independence is described by Section 1.4 of NI 43–101.

(11)

Anthony Ralph Maycock, P. Eng Dated: 12 November 2010

(12)

Santiago, Chile

I Krishna P. Sinha, Ph.D., P.E, am employed as the Corporate Technical Director with Ausenco Vector. This certificate applies to the Technical report entitled This certificate applies to the technical report entitled “Guanaco Compañía Minera Limitada Guanaco Gold Project Antofagasta Province, Region II, Chile NI 43-101 Technical Report on Feasibility Study“ (the “Technical Report”) dated 12 November 2010.

I am a member of Society of Petroleum Engineering (SPE) and have been a member of the Mining & Metallurgical Society of America (MMSA) for many years in the past. I graduated from the University of Minnesota, Department of Civil & Mineral Engineering (Ph.D. Geological Engineering) in 1979, the University of Roorkee, India (M.E., Civil Engineering – Soil Mechanics & Foundation Eng.) in 1967, and Bihar Institute of Technology, Sindri, India, (B.Sc. Engineering, Civil) in 1964.

I am a professional engineer registered in the State of Utah (#272545). I am a current member of the American Society of Petroleum Engineering.

I have practiced my profession for 36 years since obtaining my undergraduate degree in 1964 in the fields of geotechnical engineering and energy resources related to drilling, exploration, production, stimulation and development. In the mining sector, I have been directly involved in and have worked on issues related to both surface and underground mining including heap leaching and mine waste/tailings disposal. As a result of my experience and qualifications, I am a “Qualified Person” as defined in in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).

I have not visited the proposed tailings disposal or heap leach facility site at the Guanaco Mine.

I am responsible for Sections Sections 16.3.2 to 16.3.5 and 16.4, and those portions of the Summary, Conclusions and Recommendations that pertain to those Sections, with the exception of the information on tailings disposal, tailings treatment, and cyanide decomposition by hydrolysis and natural degredation. I am independent of Guanaco Compañía Minera Limitada as independence described by Section 1.4 of NI 43-101.

I have read NI 43-101 and certify that the sections of the report I am responsible for, have been prepared in compliance with that instrument.

(13)

Krishna P. Sinha, Ph.D., P.E.

Professional Structural Engineer- Utah #272545 Ausenco Vector

Rosario Norte 532, Piso 2, Las Condes, Santiago, Chile 12 November 2010

(14)

West Perth, WA 6005 Australia Tel: (61 8) 9346 01 30 Fax: (61 8) 9226 2522

I, Andrew PW Briggs, P. Eng, am employed as a Consulting Metallurgist with First Quantum Minerals.

I am a member of the Southern African Institute of Mining and Metallurgy, and am a Professional Engineer Licensed by NAPEG - The Association of Professional Engineers, Geologists and Geophysicists of the Northwest Territories (and Nunavut) - Canada.

I graduated from Imperial College, London (Royal School of Mines) with a BSc (Eng) First Class in Metallurgy in 1974.

I have practiced my profession for 36 years. I have been directly involved in gold plant designs, including cyanide management, recycle and destruction for the 32 of my years in practice. I was involved in the design of the El Peñon Project in Chile, which is located in the Atacama Desert and utilises an identical process for tailings detoxification as proposed for Guanaco. I have also been involved in process development work for a cyanide recycle process using resins, and I designed the SART circuit for Yanachoca (Peru) for copper precipitation and cyanide recycle.

As a result of my experience and qualifications, I am a Qualified Person as defined in National lnstrument 43-101 Standards of Disclosure for Mineral Projects (N I 43-101).

I visited the Guanaco property for one week during August 2005.

I am responsible for that portion of Section 16.4 that deals with tailings disposal, tailings treatment, and cyanide decomposition by hydrolysis and natural degradation, and those portions of the Summary, Conclusions and Recommendations that pertain to those data.

I was involved with the Guanaco Mine Re-Opening project from July 2005 until November 2006 during the early phases of the project development, followed by some minor work reviewing testwork results up until June 2008, but have had no involvement since then, with the exception of reviewing the information in the sections for which I have responsibility of this Technical Report.

(15)

Andrew P.W. Briggs, P.Eng. 12 November 2010

(16)

IMPORTANT NOTICE

This report was prepared as a National Instrument 43-101 Technical Report for Guanaco Compañía Minera Limitada (Minera Guanaco) by AMEC Ingenieria y Construccion Limitada (AMEC). The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in AMEC’s services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended for use by Minera Guanaco subject to the terms and conditions of its contract with AMEC. This contract permits Minera Guanaco to file this report as a Technical Report with Canadian Securities Regulatory Authorities pursuant to National Instrument 43-101,

Standards of Disclosure for Mineral Projects. Except for the purposes legislated under provincial securities law, any other uses of this report by any third party is at that party’s sole risk.

(17)

CO N T E N T S

1.0 SUMMARY ... 1-1

1.1 Project Setting, Location and Access ... 1-1

1.2 Mineral Tenure ... 1-2

1.3 Royalties ... 1-2

1.4 Surface Rights and Land Use ... 1-2

1.5 Permits ... 1-2

1.6 Environmental ... 1-3

1.7 Geology and Mineralization ... 1-3

1.8 Production History ... 1-4

1.9 Exploration ... 1-4

1.10 Drilling ... 1-5

1.11 Sample Preparation and Analysis ... 1-5

1.12 Data Verification ... 1-6

1.13 Metallurgical Testwork ... 1-6

1.14 Mineral Resource Estimates... 1-6

1.15 Mineral Reserve Estimates ... 1-11

1.16 Proposed Mining Operations ... 1-13

1.16.1 Open Pit Operation ... 1-13

1.16.2 Underground Operation ... 1-14

1.17 Proposed Mine Plan ... 1-14

1.18 Process Considerations ... 1-15 1.19 Waste Disposal ... 1-16 1.20 Project Implementation ... 1-16 1.21 Taxation ... 1-17 1.22 Markets ... 1-17 1.23 Financial Analysis ... 1-17

1.24 Interpretation and Conclusions ... 1-19

1.25 Recommendations ... 1-20

2.0 INTRODUCTION ... 2-1

2.1 Qualified Persons ... 2-1

2.2 Site Visits ... 2-3

2.3 Effective Dates ... 2-4

2.4 Previous Technical Reports... 2-4

2.5 References ... 2-4

2.6 Technical Report Sections and Required Items under NI 43-101 ... 2-5

3.0 RELIANCE ON OTHER EXPERTS ... 3-1

3.1 Tenure and Encumbrances ... 3-1

3.2 Surface Rights, Royalties and Water Rights ... 3-1

3.3 Environmental ... 3-1

4.0 PROPERTY DESCRIPTION AND LOCATION ... 4-1

4.1 Location ... 4-1

(18)

4.2.3 Environmental ... 4-3

4.3 Project Ownership History ... 4-5

4.4 Tenure History ... 4-7

4.5 Mineral Tenure ... 4-7

4.5.1 Additional Tenure in the Region ... 4-14

4.6 Encumbrances/Royalties ... 4-14 4.7 Surface Rights ... 4-15 4.8 Conveyance Rights-of-Way ... 4-15 4.9 Water Rights ... 4-16 4.10 Permits ... 4-17 4.11 Environmental ... 4-17

4.11.1 Environmental Impact Statement ... 4-17

4.11.2 Environmental Approvals ... 4-18

4.11.3 Required Environmental Authorizations ... 4-18

4.11.4 Land Use Change Requests ... 4-19

4.12 Remediation and Closure ... 4-19

4.13 Socio-economics ... 4-19

4.14 Heritage and Culture ... 4-19

4.15 Comment on Section 4 ... 4-19

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY ... 5-1

5.1 Accessibility ... 5-1

5.2 Climate ... 5-1

5.3 Local Resources and Infrastructure ... 5-1

5.3.1 Existing Infrastructure ... 5-2

5.3.2 Planned Infrastructure ... 5-2

5.4 Physiography ... 5-8

5.5 Flora and Fauna ... 5-8

5.6 Comment on Section 5 ... 5-9 6.0 HISTORY ... 6-1 7.0 GEOLOGICAL SETTING ... 7-1 7.1 Regional Geology ... 7-1 7.2 Project Geology ... 7-3 7.2.1 Lithologies ... 7-3 7.2.2 Alteration ... 7-4 7.2.3 Structure ... 7-8 7.3 Comments on Section 7 ... 7-8 8.0 DEPOSIT TYPES ... 8-1 8.1 Comment on Section 8 ... 8-2 9.0 MINERALIZATION ... 9-1 9.1 Comment on Section 9 ... 9-1 10.0 EXPLORATION ... 10-1

10.1 Grids and Surveys ... 10-1

10.2 Geological and Structural Mapping ... 10-1

10.3 Geochemistry ... 10-2

10.4 Geophysics ... 10-2

(19)

10.6 Drilling ... 10-7

10.7 Bulk Density ... 10-7

10.8 Petrology, Mineralogy and Other Research Studies ... 10-7

10.9 Exploration Potential ... 10-7

10.10 Activity Related to Mine Development ... 10-7

11.0 DRILLING ... 11-1

11.1 Legacy Drill Data ... 11-3

11.1.1 Enami (1970s) ... 11-3

11.1.2 BHC (1980) ... 11-3

11.1.3 SCMG (1987–1990) ... 11-3

11.1.4 Amax (1991–1997) ... 11-4

11.1.5 Kinam (1999–2000) ... 11-4

11.2 Minera Guanaco Drill Programs ... 11-5

11.2.1 Drill Contractors and Methods ... 11-5

11.2.2 Legacy Data ... 11-6

11.2.3 Minera Guanaco Logging ... 11-6

11.2.4 Minera Guanaco Collar Surveys ... 11-6

11.2.5 Minera Guanaco Down-hole Surveys ... 11-6

11.2.6 Minera Guanaco Recoveries ... 11-7

11.2.7 2009–2010 Drill Program ... 11-7

11.2.8 Drilling Used to Support Mineral Resource and Mineral Reserve Estimation .. 11-8

12.0 SAMPLING METHOD AND APPROACH ... 12-1

12.1 Geochemical Sampling ... 12-1

12.2 Legacy Sampling ... 12-1

12.3 Minera Guanaco Sampling ... 12-2

12.4 Quality Assurance and Quality Control ... 12-2

12.5 Density (Specific Gravity) Determinations ... 12-2

13.0 SAMPLE PREPARATION, ANALYSES, AND SECURITY ... 13-1

13.1 Analytical Laboratories ... 13-1

13.1.1 Legacy Drill Campaigns... 13-1

13.1.2 Minera Guanaco Drill Campaigns ... 13-2

13.2 Sample Preparation and Analysis ... 13-2

13.2.1 Legacy Programs ... 13-2

13.2.2 Minera Guanaco Programs ... 13-3

13.3 Quality Assurance and Quality Control ... 13-5

13.4 Databases ... 13-6 13.5 Sample Security ... 13-6 13.6 Sample Storage ... 13-7 13.7 Comment on Section 13 ... 13-7 14.0 DATA VERIFICATION ... 14-1 14.1 AMEC (2000) ... 14-1 14.2 AMEC (2010) ... 14-1 14.2.1 Drill Data ... 14-2

(20)

15.0 ADJACENT PROPERTIES ... 15-1

16.0 MINERAL PROCESSING AND METALLURGICAL TESTING ... 16-1

16.1 Review of Metallurgical Testwork ... 16-1

16.1.1 Mineralogical and Analytical Studies ... 16-1

16.1.2 Bottle Roll Cyanide Tests ... 16-2

16.1.3 Comminution Tests ... 16-3

16.1.4 Activated Carbon Tests ... 16-4

16.1.5 Sedimentation Testwork ... 16-4

16.1.6 Filtration Testwork ... 16-5

16.2 Predicted Metallurgical Recoveries ... 16-5

16.2.1 Estimated Recovery, Phase II Heap ... 16-5

16.2.2 Estimated Historic Recovery, Mined Ore from Open Pits ... 16-5

16.2.3 Recovery Parameters Used for Feasibility Study ... 16-6

16.3 Proposed Process Design ... 16-6

16.3.1 Crushing Plant ... 16-6

16.3.2 Heap Leach Pad ... 16-11

16.3.3 Irrigation System ... 16-12

16.3.4 Heap Solution Collection System and Ditches ... 16-13

16.3.5 Process Ponds ... 16-13

16.3.6 Grinding Plant ... 16-14

16.3.7 CCD and Leaching Area ... 16-14

16.3.8 Adsorption, Desorption and Regeneration (ADR) Plant ... 16-16

16.3.9 Plant Control System ... 16-17

16.3.10 Water and Services ... 16-17

16.3.11 Reagents and Consumables ... 16-18

16.4 Tailings Storage Facilities ... 16-18

16.5 Projected Plant Production Plan ... 16-19

17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ... 17-1

17.1 Mineral Resources ... 17-1

17.1.1 Database ... 17-1

17.1.2 Geological Model ... 17-1

17.1.3 Block Model ... 17-2

17.1.4 Exploratory Data Analysis ... 17-3

17.1.5 Grade Capping ... 17-4

17.1.6 Composites ... 17-5

17.1.7 Variography ... 17-5

17.1.8 Grade Estimation ... 17-6

17.1.9 Density ... 17-8

17.1.10 Mineral Resource Confidence Classification ... 17-8

17.1.11 Assessment of Reasonable Prospects for Economic Extraction ... 17-9

17.1.12 Mineral Resource Statement ... 17-11

17.2 Mineral Reserves ... 17-14

17.2.1 Optimization Parameters ... 17-14

17.2.2 Mineral Reserve Statement ... 17-17

(21)

18.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORT ON DEVELOPMENT

PROPERTIES AND PRODUCTION PROPERTIES ... 18-1

18.1 Open Pit Mine Plan ... 18-1

18.1.1 Optimization ... 18-1

18.1.2 Slope Criteria ... 18-3

18.1.3 Mine Equipment ... 18-4

18.1.4 Mine Plan ... 18-4

18.2 Underground Mine Plan ... 18-8

18.2.1 Mining Method ... 18-8

18.2.2 Geotechnical ... 18-9

18.2.3 Hydrology ... 18-13

18.2.4 Equipment and Infrastructure ... 18-13

18.2.5 Personnel ... 18-14

18.3 Proposed Mine Plan ... 18-14

18.4 Project Implementation ... 18-15

18.5 Waste Rock Facilities ... 18-16

18.6 Workforce ... 18-17

18.7 Taxation ... 18-17

18.8 Markets ... 18-18

18.9 Capital Costs ... 18-19

18.9.1 Project Sunk Capital Costs ... 18-19

18.9.2 Project Initial Capital Cost ... 18-20

18.9.3 Project Sustaining Capital Cost ... 18-20

18.9.4 Project Closure Capital Cost ... 18-20

18.10 Operating Costs ... 18-21

18.11 Financial Analysis ... 18-23

18.11.1 Basis of Financial Analysis ... 18-23

18.11.2 Results of Financial Analysis ... 18-25

18.11.3 Sensitivity Analysis ... 18-25

19.0 OTHER RELEVANT DATA AND INFORMATION ... 19-31

20.0 INTERPRETATION AND CONCLUSIONS ... 20-1

21.0 RECOMMENDATIONS ... 21-1

22.0 REFERENCES ... 22-1

22.1 Bibliography ... 22-1

22.2 Units and Abbreviations ... 22-1

22.3 Glossary of Terms ... 22-1

23.0 DATE AND SIGNATURE PAGE ... 23-1

TA B L E S

Table 1-1: Open Pit Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry, M.AusIMM. . 1-9

Table 1-2: Underground Mineral Resources Mineral Resources, Effective Date 8 August 2010,

Emmanuel Henry, M.AusIMM ... 1-10

(22)

Table 1-4: Open Pit Probable Mineral Reserve, Effective Date May 19, 2010, Douglas Chapman,

P.E. ... 1-12

Table 1-5: Underground Mineral Reserves, Effective Date 19 May 2010, Alfonso Ovalle, M.AusIMM .. 1-12

Table 2-1: QPs, Areas of Report Responsibility, and Site Visits ... 2-3

Table 2-2: Contents Page Headings in Relation to NI 43-101 Prescribed Items—Contents ... 2-5

Table 4-1: Mineral Tenure Summary, Deposits with Reported Mineral Resource and Mineral Reserve Estimates ... 4-11

Table 4-2: Infrastructure Covered by Surface Rights Application ... 4-15

Table 11-1: RC and Core Drill Summary Table ... 11-1

Table 11-2: Sonic Drill Hole Summary Table ... 11-3

Table 11-3: 2009–2010 Exploration Drill Results ... 11-8

Table 11-4: Example Intercept Drill Summary Table ... 11-9

Table 16-1: Metallurgical Average Recovery Results ... 16-2

Table 16-2: Comminution Testwork Results ... 16-4

Table 16-3: Metal Recovery ... 16-6

Table 16-4: Proposed Integrated Production Plan, 2011 to 2016 ... 16-21

Table 17-1: Outlier Restriction Strategy, Inside the Grade-Shell ... 17-4

Table 17-2: Outlier Restriction Strategy, Outside the Grade-Shell ... 17-4

Table 17-3: Parameters for Open Pit Resource Classification ... 17-8

Table 17-4: Parameters for Underground Resource Classification ... 17-8

Table 17-5: Economic Parameters Used to Assess Reasonable Prospects of Economic Extraction for Open-Pit Mineral Resources ... 17-10

Table 17-6: Economic Parameters Used to Assess Reasonable Prospects of Economic Extraction for Underground Mineral Resources ... 17-10

Table 17-7: Open Pit Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry, MAusIMM (CP). ... 17-12

Table 17-8: Underground Mineral Resources Mineral Resources, Effective Date 8 August 2010,

Emmanuel Henry, MAusIMM (CP) ... 17-13

Table 17-9: Leach Pad Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry,

MAusIMM (CP) ... 17-14

Table 17-10: Open Pit Optimization Design Parameters ... 17-15

Table 17-11: Underground Optimization Design Parameters ... 17-16

Table 17-12: Open Pit Probable Mineral Reserve, Effective Date May 29, 2010, Douglas Chapman, P.E. ... 17-17

Table 17-13: Underground Mineral Reserves, Effective Date May 29, 2010, Alfonso Ovalle, MAusIMM17-18

Table 18-1: Pit Design Parameters ... 18-3

Table 18-2: Open Pit Proposed Production Schedule (mine to stockpile and plant) ... 18-5

Table 18-3: Open Pit Proposed Production Schedule (total to plant) ... 18-6

Table 18-4: Heap Leach Pad Proposed Production Schedule ... 18-8

Table 18-5: Proposed Annual Underground Mine Production ... 18-10

Table 18-6: Proposed Underground Mine Production by Zone ... 18-10

Table 18-7: Total Proposed Ore Production for Guanaco ... 18-14

Table 18-8: Proposed Ore Production by Source ... 18-14

Table 18-9: Design Tonnages and Volumes for the Open Pit Waste Dumps ... 18-16

(23)

Table 18-11: Exchange Rates Based On 1 April, 2010 US Dollars ... 18-19

Table 18-12: Project Sunk Capital Costs ... 18-19

Table 18-13: Project Initial Capital Costs ... 18-20

Table 18-14: Sustaining Capital ... 18-20

Table 18-15: Projected Total Underground Mine Operating Cost ... 18-22

Table 18-16: Open Pit and Heap Total Operating Cost ... 18-22

Table 18-17: Process Plant Total Operating Cost ... 18-22

Table 18-18: Smelting and Refining Terms ... 18-24

Table 18-19: Long-term Metal Price Assumptions ... 18-24

Table 18-20: Forecast Cashflow Analysis Table ... 18-26

Table 18-21: Sensitivity to Metal Price Changes ... 18-30

FI G U R E S

Figure 1-1: Projected Ore Production by Source ... 1-15

Figure 2-1: Project Location Map ... 2-2

Figure 4-1: Minera Guanaco Corporate Structure ... 4-6

Figure 4-2: Mineral Tenure Summary Map ... 4-8

Figure 4-3: Detail Map, Mineral Tenure ... 4-9

Figure 4-4: Detail Map, Mineral Tenure in Relation to Existing Infrastructure ... 4-10

Figure 4-5: Mineral Tenure Plan, Perseverencia, Dumbo and Defensa Deposit Areas ... 4-12

Figure 4-6: Mineral Tenure Plan, Cachinalito Area ... 4-13

Figure 5-1: Proposed Project Infrastructure Layout Plan ... 5-3

Figure 5-2: Final Layout Plan, Process Plant ... 5-4

Figure 7-1: Regional Geology Map... 7-2

Figure 7-2: Schematic Showing Main Vein Systems ... 7-5

Figure 7-3: Geological Plan Cachinalito Deposits Area ... 7-6

Figure 7-4: Dumbo and Perseverancia Deposits Area ... 7-7

Figure 9-1: Example Gold Grade Distribution, Defensa – Section 446,300E (Gold Composites) ... 9-2

Figure 9-2: Example Gold Grade Distribution, Defensa – Bench Plan 2700 (Gold Composites) ... 9-3

Figure 9-3: Example Gold Grade Distribution, Perseverancia – Section 446,400E (Gold Composites) .. 9-4

Figure 9-4: Example Gold Grade Distribution, Perseverancia – Bench Plan 2700 (Gold Composites) ... 9-5

Figure 10-1: Geochemical Sample Location Plan ... 10-3

Figure 10-2: Location Plan showing Outline of CSAMT Survey Lines ... 10-5

Figure 10-3: Magnetometric Survey Plan ... 10-6

Figure 11-1: Drill Hole Location Plan ... 11-2

Figure 12-1: Density Determination Results, 2006 ... 12-3

Figure 12-2: Density Determination Results, 2008 ... 12-4

Figure 16-1: Schematic Layout, Process Plant ... 16-7

Figure 16-2: Site Layout Plan, Process Infrastructure... 16-8

Figure 16-3: Crushing Plant Process Flow Diagram ... 16-9

Figure 16-4: Proposed Phase III Pad and Pond Locations ... 16-11

(24)

Figure 18-3: Current Phase I and II Leach Pads and Proposed Phase III Leach Pad ... 18-3

Figure 18-4: Proposed Open Pit Mine Production Schedule ... 18-7

Figure 18-5: Proposed Underground Mine Production by Tonnage and Grade ... 18-11

Figure 18-6: Cachinalito Central Isometric View ... 18-11

Figure 18-7: Cachinalito West Isometric View ... 18-12

Figure 18-8: Dumbo Isometric View ... 18-12

Figure 18-9: Proposed Ore Production by Source ... 18-15

Figure 18-10: Sensitivity of After-Tax NPV Discounted at 8% ... 18-29

Figure 18-11: Sensitivity of After-Tax NPV Discounted at 8% ... 18-29

Figure 18-12: Sensitivity of After-Tax IRR ... 18-30

Figure 18-13: Sensitivity of After-Tax IRR ... 18-30

AP P E N D I C E S

(25)

1.0 SUMMARY

AMEC Ingenieria y Construccion Limitada (AMEC) was commissioned by Guanaco Compañía Minera Ltda. (Minera Guanaco) to prepare an independent Qualified Person’s Review and NI 43-101 Technical Report (the Report) for the wholly-owned Guanaco gold project (the Project) located in the Antofagasta Province of Chile.

The Report discloses the results of a feasibility study completed on the Guanaco Project in August 2010, engineering design elements of which were updated in early November 2010.

Guanaco Compañía Minera Ltda. is an indirectly wholly-owned subsidiary of the Australian-listed company Austral Gold Limited (Austral) and is the Chilean operating entity for the Guanaco Project. For the purposes of this Report, the name “Minera Guanaco” is used interchangeably for the parent and subsidiary companies.

1.1 Project Setting, Location and Access

The Project is located in the community of Taltal, Province of Antofagasta, in Region II of Chile, 220 km southeast of Antofagasta, at an elevation of approximately 2,750 masl. The area has a low botanical diversity and a low flora coverage (less than 5%) which is characterized almost exclusively by formations of patches of annual grass and dispersed bushes.

The area is accessed by an unpaved road 42 km long turning off from the Panamericana Norte (Ruta 5 Norte) at km 1,198. Travel time by road from Antofagasta is approximately three hours.

The preferred transportation for equipment and materials for the Guanaco Project is by sea freight and the best port is Mejillones which is approximately of 320 km from the plant.

Potable and process water was projected to be obtained from ground and sub-surface water sources. Minera Guanaco holds water permits for a total of 16.59 L/s from these sources.

Feasibility-level trade-off studies have determined that for financial reasons, the proposed Guanaco mine will operate independent of the national grid systems in the area. Diesel generators will be installed to provide power for the Project.

(26)

1.2 Mineral

Tenure

The Project consists of 208 exploitation claims covering 13,571 ha. Additionally, there are 49 exploration mining claims covering 11,400 ha. Exploitation concessions (mensura) do not expire; exploration concessions (manifestations) have a two-year duration, after which they can be converted to mensura.

Minera Guanaco has the mining concessions transferred to its name in the Property Register or Discovery Register, as appropriate, of the Curator of Mines Department (Conservador de Minas) of Taltal. Three claims, part of the purchase agreement with the Chilean state company Empresa Nacional de Mineria (Enami), where Enami’s original ownership could not be conclusively established, remain in the name of Enami. The Boa claims remain in the name of Amax, but are held by Minera Guanaco via way of agreement.

All required mining patent payments have been made for 2009 and AMEC was advised by Minera Guanaco that no outstanding amounts are currently due for 2010. As part of the mineral patenting process, all claim monuments are surveyed by a licensed Chilean mining surveyor.

1.3 Royalties

Royalty payments are due to Compañía Minera Kinam Guanaco (a Kinross Gold Corp. subsidiary) on four of the Project tenements; however, these tenements do not host mineralization that forms the currently-envisaged production plan. There is also a royalty payable to Enami. This is calculated as 3% of gross income; however, an advance payment of $6.5 M has already been made.

1.4 Surface Rights and Land Use

Minera Guanaco has made application for 257 ha of surface rights (Judicial Rights) to cover proposed infrastructure sites in a submission dated 26 April 2010, to the state of Chile, in order to value the requested lands.

Minera Guanaco holds the appropriate conveyance rights-of-way to allow unfettered access to the Project and support transport of goods and materials to and from the proposed mining operation.

1.5 Permits

Mining projects in Chile require both environmental approval and numerous sectorial permits prior to construction. Sectorial permits for the Project are not all required at

(27)

the same time, and approvals times for different permit preparation and approval will vary. It is expected that permits will be prioritized and those on the critical path (requiring a long period for preparation or for approval, or required early in project development) will be given priority.

1.6 Environmental

The Guanaco Mine Re-opening Project was submitted to the Environmental Impact Evaluation System (SEIA) as an Environmental Impact Statement (DIA). The DIA was granted 15 July 2009.

A number of environmental approvals are already granted. Minera Guanaco has established a list of environmental authorisations, that will be required in addition to the granted permits, and has identified the primary agency, likely estimated times to prepare submissions, and likely review times.

Land use change requests were granted by Seremi of Agriculture for the Antofagasta Region for a total of 332.87 ha. Land use change for a further 204.79 ha was requested in the DIA. A preliminary closure plan has been prepared.

1.7 Geology and Mineralization

The Guanaco Project deposits are considered to be examples of high-sulphidation epithermal systems.

The Project lies along the western edge of the 30 km diameter Cachinal Caldera and is about 25 km south of the overlapping, 7 Ma younger, Soldado Caldera. The sub-alkaline volcanic complex consists of alternating lava flows, tuff beds, breccias, and agglomerates, commonly massive or loosely stratified, mainly andesitic and dacitic in composition, with minor basaltic and rhyolitic constituents. These rocks are intruded by small subvolcanic bodies formed of gabbros to rhyolites, and by rhyolitic and dacitic domes. Hydrothermal alteration of varying intensities has affected wide zones in the region, and gold and silver epithermal deposits and minor copper, lead, and zinc veins, are related to the hydrothermal activity.

The main alteration phase within the Guanaco deposits is characterised by an intense silicification hosting the gold mineralization. The gold-bearing structures are all steeply inclined ledges composed of massive vuggy and cryptocrystalline quartz of replacement origin. The ledge structures extend for at least 4 km along strike, although gold concentrations are confined to relatively restricted shoots within them.

(28)

Native gold forming dendrites and coarse and fine grains is the most important ore mineral, although it is rarely visible. Disseminated pyrite is the most common mineral in the non-weathered ores, while enargite, luzonite, and minor chalcopyrite are present in the deeper horizons. Chalcocite and covellite together with copper carbonates, silicates, and a number of rare copper arsenates (chenevixite, ceruleite) have been found in secondary enrichment zones.

1.8 Production History

Gold was discovered at Guanaco in 1878, with small-scale production occurring to 1886. From 1887 until 1890 more than 200 underground mines were developed and approximately 200,000 oz Au were produced from high-grade veins. Extensive gold production continued until 1928, when low gold prices forced the closure of the mines. Relatively high copper prices led to the development of copper deposits from 1928 to 1930. Total gold production prior to 1986 has been estimated at approximately 1 Moz Au. The amount of copper production is unknown.

In 1990, an 800 t/d open pit/heap leach operation commenced, producing about 75,000 oz Au to the end of 1991.

Amax Inc. (Amax) began large-scale open pit mining in early 1993, with gold recovered from heap leach pads and a Merrill Crowe recovery plant. Three open pit mines were operated by Amax: the Dumbo and Defensa open pits exploiting the Dumbo–Defensa vein structure, and the Perseverancia open pit exploiting the Chilena vein structure. In 1997, the operation was placed on care and maintenance due to a combination of low gold prices and poor metallurgical recoveries due to the presence of copper.

1.9 Exploration

Modern exploration commenced in the 1980s. Work programs by predecessor companies and Minera Guanaco comprised geological mapping, airborne and ground geophysical surveys, and geochemical sampling. Drilling methods include reverse circulation (RC) and core.

From 2003 to 2010, Minera Guanaco has undertaken data reviews, sonic, core, and RC drilling, mineral resource and mineral reserve estimation, hydrological and geotechnical studies, metallurgical studies, reviews of Project social and environmental conditions, and assessments of existing infrastructure and equipment, culminating in commissioning of a feasibility study during 2009–2010. Construction of an exploration decline commenced mid-2010, and at 31 October was at 1,344 m complete of the planned 1,500 m.

(29)

1.10 Drilling

Drilling methods include RC, core, and sonic types. Drilling supporting the open pit and underground Mineral Resource estimate comprises a total of 74,005.65 m of RC and core drilling, corresponding to 668 drill holes. Less than 1% of the drilling is core. Leach pad mineral resource estimates are based on 50 sonic drill holes (998 m).

All drill holes have been geologically logged. Geotechnical logging has also been performed.

RC and core drill collars have been picked up using geodetic-grade, global positioning system (GPS) instruments; sonic drill hole collars were surveyed using a Trimble GPS. Downhole inclinometry was completed at variable depths of 10 m, 20 m or 50 m intervals, and also at the end of some holes using a gyroscope instrument.

Recovery data for RC drill data are not recorded in the Project database. AMEC estimated RC recovery using a theoretical sample weight, with values returned ranging from 21% to 147%, averaging 100%.

Sample collection and handling of RC drill cuttings and core was done in accordance with industry standard practices. Sampling is typically undertaken on 1 m to 2 m intervals.

1.11 Sample Preparation and Analysis

Gold, copper, and silver analyses were performed by independent certified laboratories. Sample preparation protocols for all drill programs were generally appropriate for epithermal-style deposits, consisting of drying, crushing, splitting, and pulverization. Gold was typically assayed using fire assay (FA) with an atomic absorption (AA) finish. For samples with Au grades greater than 1 g/t Au, a gravimetric finish was used instead. Silver and copper were determined by AA following acid digest.

Specific gravity (SG) measurements were completed on 40 samples by an independent laboratory. Default density values of 2.5 g/cm3_{for mineralization and 2.4} g/cm3_{for waste were used for all open pit and underground models. For sonic drill} results, specific gravity was not measured; tonnages reported by Amax were used. There are a limited number of density determinations for a project at feasibility level. During the campaigns, the operator companies applied different programs of quality

(30)

submission of field duplicates, pulp duplicates, coarse blanks, and standard or certified reference materials (SRMs or CRMs).

Sample security has relied upon the fact that the samples were always attended or locked in the on-site sample preparation facility. Chain-of-custody procedures consist of filling out sample submittal forms that are sent to the laboratory with sample shipments to make certain that all samples are received by the laboratory.

1.12 Data

Verification

Verification is performed on all digitally-collected data on upload to the main database, and includes checks on surveys, collar co-ordinates, lithology data, and assay data. The checks are appropriate, and consistent with industry standards.

Data verification was performed by AMEC personnel during 2000 and 2007, and included checks on drill data, geological interpretations and QA/QC data. The database is considered sufficiently free from error to support Mineral Resource or Mineral Reserve estimation.

1.13 Metallurgical

Testwork

Several phases of metallurgical testwork were undertaken on the Project; the first prior to the 1993–1997 mining phase, and the second by Minera Guanaco. Testwork has included mineralogical studies, bottle roll cyanide tests, leach optimization testwork, comminution (work index) testwork, activated carbon tests, flocculant tests, and filtration testwork. Recovery factors developed for the underground and open pit ores are based on testwork. Recovery factors for the heap leach material were developed from a combination of testing and data obtained from the initial mining operation. Gold and silver recoveries were estimated for each year of production and average 72.4% and 49.1% respectively over the life-of-mine.

1.14 Mineral Resource Estimates

Wire-frame models for the projected underground and open pit areas were constructed by Minera Guanaco personnel. Open pit models (Defensa, Dumbo, and Perseverancia) represented the mineralization types (oxide and sulphide) and 0.5 g/t Au grade-shell solids interpreted from the drill hole data. For the underground (Dumbo West, Cachinalito Central, and Cachinalito West), the main vein was modelled together with several minor structures parallel to the main vein. The grade-shells were interpreted using a 1.0 g/t gold cut-off. No geological models were constructed for the leach pad (Phase I and Phase II) estimate.

(31)

Separate block models were created by AMEC for the Defensa, Dumbo, and Perseverancia deposits. Block size was 2.5 m x 2.5 m x 2.5 m. Minera Guanaco commissioned independent consultant Eduardo Magri Consultores in 2006 to prepare the Dumbo West, Cachinalito Central, and Cachinalito West block models, which consisted of regular blocks of 2 m x 2 m x 2 m. The resource block model for the Phase I and Phase II leach pads was prepared by Eduardo Magri Consultores. A block discretization of 4 m x 4 m x 1 m was adopted.

AMEC prepared a set of histograms, cumulative probability plots, box plots, and contact plots by mineralization types within and outside the grade-shells for each deposit, in order to validate the proposed estimation domains and define boundary modelling and outlier samples. Grade caps were applied to the gold, copper and silver values at each deposit. Hard boundaries were used between domains.

Composites were set at 1.5 m intervals for open pits, and 1 m intervals for the underground and leach pad.

Down-the-hole and directional correlograms were calculated for gold using Sage2001® software. Typically, the variograms show a very high nugget effect and absence of spatial structure.

AMEC estimated gold, silver, and copper grades for the open pit deposits using the inverse distance squared (ID2_{) method. The grade estimation was completed in four} passes including a first pass developed to restrict the influence of high grades. Ordinary kriging (OK) was used to interpolate Au, Ag and Cu grades inside the underground grade-shell; outside the grade-shell an ID2 _{interpolation approach was} used by Eduardo Magri Consultores. Copper was estimated only for Dumbo West. Inverse distance to the power of one was used to interpolate Au, Ag, and Cu grades for each leach pad. Blocks of each pad were estimated only with the drill holes of the that pad. Blocks were assigned to each pad based on the location of their centroids relative to the solids built with the current topography.

Checks on the estimate involved comparison of summary statistics between the ID2 estimates and a nearest-neighbour (NN) estimate, visual inspection of estimated grades against composites, drift analysis to detect spatial bias, and assessment of the degree of smoothing through an Hermitian correction method. The estimates were globally unbiased when compared to the drill-hole information.

Open pit Mineral Resources were only classified if they fell within the 0.5 g/t Au grade shell. Classification categories were based on a combination of distance to the nearest drill hole, and number of composites available to inform the block. Eduardo

(32)

in which a block was estimated and the average distance of samples used to estimate the block. The rest of the estimated blocks in Passes 2 or 3 were assigned to the Inferred category. Eduardo Magri Consultores classified leach pad Mineral Resources as Measured and Inferred. The proposed scheme was based on the fact that the lower parts of the pad were not drilled and hence grades could not be estimated. Given that total tonnage is relatively well established, mineral resources that were not estimated were assigned the same average grade as the rest of the material and classified as Inferred. AMEC reviewed the work completed by Eduardo Magri Consultores, and accepted the classifications.

Mineralization that fell within designed Lerchs–Grossmann (L–G) pit shells, and displayed geological and grade continuity was considered to have reasonable prospects for economic extraction using open pit mining methods. The reporting cut-off grade for open pit Mineral Resources is 0.4 g/t Au, consistent with the long term price and cost assumptions used. Mineralization that displayed geological and grade continuity, fell within the 1 g/t Au grade-shell, and can be constrained within a minimum stope width of 2 m and a minimum stope height of 10 m was considered to have reasonable prospects for economic extraction using a sub-level open stoping mining method. There are reasonable prospects for economic processing of the heap leach material as this material will have lower costs than in-situ material and its average grade is above the expected operational cut-off of 0.4 g/t Au. Copper was included in the Mineral Resources, because, although not in the current mine plan, an insitu leach of the tailings at the end of the mine life could recover the copper.

Mineralization at the Guanaco Project that demonstrates grade and geological continuity can be appropriately classified as Measured, Indicated, and Inferred Mineral Resources under the Australasian Joint Ore Reserves Committee (JORC) Code. Classifications were reconciled from JORC to the classifications outlined by the 2005 CIM Definition Standards for Mineral Resources and Mineral Reserves.

Mineral Resources have an effective date of 8 August 2010. The Qualified Person for the estimate is Emmanuel Henry, M.AusIMM, an AMEC employee. Mineral Resources are inclusive of Mineral Reserves and do not include dilution. Readers are cautioned that Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Mineral Resources that can be extracted using open pit mining methods are included in Table 1-1; Mineral Resources that can be extracted using underground mining methods are included in Table 1-2; and the Mineral Resources that are contained within the Phase I and Phase II heap leach pads are summarized in Table 1-3.

(33)

Table 1-1: Open Pit Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry, M.AusIMM.

“*” indicates values are less than 100 (ounces or tonnes); “—“ indicates not applicable Notes to Accompany Open Pit Mineral Resource Table:

1. Mineral Resources are inclusive of Mineral Reserves

2. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability

3. Mineral Resources are defined with a Lerchs–Grossmann pit shell, and reported at a 0.4 g/t Au cut-off grade 4. Mineral Resources are reported using commodity prices of US$890/oz Au, US$12.65/oz Ag, and US$2.07/lb

Cu, variable process recoveries based on redox state of the mineralization, a mining cost of US$2/t, a process cost of US$6.5/t and a gold marketing cost of US$3/oz

5. Tonnages are rounded to the nearest 1,000 tonnes, grades are rounded to two decimal places

6. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained metal content

7. Tonnage and grade measurements are in metric units; gold and silver ounces are reported as troy ounces. Category Deposit Redox

Type

Tonnage Au Ag Cu Au Metal Ag Metal Cu Metal (kt) (g/t) (g/t) (%) (koz) (koz) (kt) Measured Defensa Oxide 233 1.36 14.18 0.03 10 106 0.06

Sulphide 111 2.27 20.49 0.30 8 73 * Perseverancia Oxide 245 1.71 14.10 0.05 13 111 0.1

Sulphide 67 1.87 12.59 0.06 4 27 * Total Oxide 479 1.54 14.14 0.04 24 218 0.2

Sulphide 178 2.12 17.50 0.21 12 100 0.4 Indicated Defensa Oxide 246 1.26 12.15 0.04 10 96 *

Sulphide 71 1.64 19.05 0.43 4 43 0.3 Perseverancia Oxide 315 1.35 11.31 0.05 14 115 0.1 Sulphide 134 1.92 10.63 0.14 8 46 0.1 Total Oxide 561 1.31 11.68 0.04 24 211 0.2 Sulphide 205 1.82 13.55 0.24 12 89 0.5

Measured + Indicated Defensa Oxide 479 1.31 13.14 0.03 20 202 0.2 Sulphide 182 2.02 19.93 0.35 12 116 0.6 Perseverancia Oxide 560 1.51 12.53 0.05 27 226 0.3 Sulphide 201 1.90 11.28 0.11 12 73 0.2 Total Oxide 1,040 1.42 12.81 0.04 47 428 0.4 Sulphide 383 1.96 15.39 0.22 24 190 0.9

Inferred Defensa Oxide 2 1.42 14.29 0.03 0.1 1 *

Sulphide — — — — — — —

Perseverancia Oxide 13 1.67 9.52 0.09 0.7 4 *

Sulphide — — — — — — —

Total Oxide 15 1.63 10.27 0.08 0.8 5 * Sulphide — — — — — — —

(34)

Table 1-2: Underground Mineral Resources Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry, M.AusIMM

“—” indicates not applicable

Notes to Accompany Underground Mineral Resource Table: 1. Mineral Resources are inclusive of Mineral Reserves

2. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability 3. All underground mineral resources are based on sulphide material

4. Mineral Resources are defined with minimum stope widths, and reported at a1 g/t Au cut-off grade

5. Mineral Resources are reported using commodity prices of US$1,000/oz Au, US$12.65/oz Ag, and US$2.07/lb Cu, variable process recoveries based on redox state of the mineralization, a mining cost of US$14.6/t, a process cost of US$15/t and a gold marketing cost of US$10/oz

8. Tonnage and grade measurements are in metric units; gold and silver ounces are reported as troy ounces. Category Deposit Tonnage Au Ag Cu Au Metal Ag Metal Cu Metal

(kt) (g/t) (g/t) (%) (koz) (koz) (kt) Measured Cachinalito Central 515 5.25 3.40 — 87 56 — Cachinalito West 288 3.14 3.18 — 29 29 — Dumbo West 149 3.10 10.16 0.78 15 49 1 Defensa 78 2.06 20.91 0.45 5 53 0.3 Perseverancia 234 1.92 17.68 0.18 14 133 0.4 Total 1,264 3.70 7.88 — 151 320 2 Indicated Cachinalito Central 728 4.28 3.75 — 100 88 — Cachinalito West 524 2.84 3.47 — 48 58 — Dumbo West 540 2.78 10.38 0.99 48 180 5 Defensa 418 2.35 18.79 0.39 32 253 2 Perseverancia 596 1.71 20.54 0.30 33 393 2 Total 2,806 2.89 10.78 — 261 972 9 Measured + Indicated Cachinalito Central 1,243 4.68 3.61 — 187 144 — Cachinalito West 812 2.95 3.36 — 77 88 — Dumbo West 689 2.85 10.33 0.95 63 229 7 Defensa 497 2.30 19.12 0.40 37 305 2 Perseverancia 830 1.77 19.73 0.26 47 526 2 Total 4,070 3.14 9.88 — 411 1,292 11 Inferred Cachinalito Central 328 3.52 4.30 — 37 45 — Cachinalito West 115 2.59 3.93 — 10 15 — Dumbo West 1,010 2.24 15.08 1.07 732 489 11 Defensa 74 1.92 16.60 0.49 5 39 0.4 Perseverancia 166 1.62 11.14 0.10 9 59 3 0.2 Total 1,693 2.44 11.91 — 133 648 11

(35)

Table 1-3: Leach Pad Mineral Resources, Effective Date 8 August 2010, Emmanuel Henry, M.AusIMM.

Category Deposit Tonnage Au Ag Au Metal Ag Metal (kt) (g/t) (g/t) (koz) (koz) Measured Phase I 3,898 0.51 2.77 64 347 Phase II 4,437 0.57 2.56 82 365 Total 8,334 0.54 2.66 146 712 Inferred Phase I 939 0.51 2.77 15 84 Phase II 1,838 0.57 2.56 34 151 Total 2,777 0.55 2.63 49 235

Notes to Accompany Heap Leach Mineral Resource Table: 1. Mineral Resources are exclusive of Mineral Reserves

2. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability 3. Mineral Resources are defined with the heap leach pads; all mineralization is over 0.4 g/t Au 4. Tonnages are rounded to the nearest 1,000 tonnes, grades are rounded to two decimal places

6. Tonnage and grade measurements are in metric units; gold and silver ounces are reported as troy ounces.

1.15 Mineral Reserve Estimates

Three block models were developed by Minera Guanaco for the proposed Defensa, Perseverancia, and Dumbo open pit areas; however, it was determined that only the Defensa and Perseverancia areas would be mined by open pit methods and the Dumbo deposit would be mined by underground methods. As a result, an underground Mineral Reserve was developed for the Cachinalito and Dumbo vein systems. The leach pad material was included in the open pit Mineral Reserve estimate.

Mineral Reserves were estimated using a base case of US$825/oz Au and US$12.50/oz Ag. Pit optimization was completed by using a L–G-developed pit shell that considered only Measured and Indicated mineral resource classifications. A dilution factor of 15% that was provided by Minera Guanaco was used. A cut-off grade was established using appropriate parameters for an open pit operation at altitude in Chile. Underground Mineral Reserves were constrained assuming sublevel open stoping, with stopes having a maximum 60 m height with sublevels at 20 m. For design purposes it was assumed that there would be a recovery of 85% (losses in pillars and floors). Cut-off grades were established using input parameters that were appropriate to the underground mining conditions expected. Stope design, was based on a cut-off grade of 2.00 g/t Au, assuming a more conservative gold price of US$800/oz. A cut-off grade of 1.56 g/t Au was used for material that must be mined

(36)

The classifications used for Mineral Reserves are those outlined by the 2005 CIM Definition Standards for Mineral Resources and Mineral Reserves. These equate to Proved and Probable Ore Reserves under the JORC Code.

Open pit Mineral Reserves are presented in Table 1-4. The Qualified Person is Douglas Chapman, P.E., an AMEC employee, and the effective date of the estimate is 19 May, 2010. Underground Mineral Reserves are presented in Table 1-5. The Qualified Person is Alfonso Ovalle, MAusIMM, an AMEC employee, and the effective date of the estimate is 19 May, 2010.

Table 1-4: Open Pit Probable Mineral Reserve, Effective Date May 19, 2010, Douglas Chapman, P.E.

Area Category Tonnage (kt) Au (g/t) Ag (g/t) Au Metal (koz) Ag Metal (koz) Defensa Probable 322 1.37 10.65 14 110 Perseverancia Probable 370 1.57 8.63 19 103 Phase I Probable 3,898 0.51 2.77 64 347 Phase II Probable 4,437 0.57 2.56 82 365 Total Probable 9,026 0.62 3.18 179 923

Table 1-5: Underground Mineral Reserves, Effective Date 19 May 2010, Alfonso Ovalle, M.AusIMM

Area Category Tonnes Au Grade Ag Grade Au Metal Ag Metal

(kt) (g/t) (g/t) (koz) (koz)

Cachinalito Central Proven 334,341 6.68 3.52 71,807 37,838

Probable 406,933 5.71 3.87 74,706 50,633

Subtotal 630,083 6.15 3.71 146,513 88,471

Cachinalito West Proven 166,736 3.85 3.07 20,639 16,458

Probable 264,047 3.43 3.49 29,119 29,628

Subtotal 366,166 3.59 3.33 49,758 46,086

Dumbo West Proven 88,780 3.80 8.37 10,847 23,891

Probable 232,840 4.10 6.69 30,693 50,082

Subtotal 273,377 4.02 7.15 41,540 73,973

Total 1,269,625 4.95 4.34 237,810 208,530

Notes to accompany Mineral Reserve Tables:

1. Open pit Mineral Reserves are defined with a Lerchs-Grossmann pit shell; underground Mineral Reserves are confined to designed stopes. Underground Mineral Reserves incorporate 19% dilution and material that is projected to be left in pillars was removed from the estimate.

2. Mineral Reserves are reported using commodity prices of US$825/oz Au and US$12.50/oz Ag for the open pit and US$800/oz Au and US$12.50/oz Ag for the underground.

(37)

1.16 Proposed

Mining

Operations

Due to the nature and characteristics of the Mineral Reserves, Minera Guanaco plans to develop a combined open pit and underground mining operation at the Project. Substantial assets already exist on site including a crushing plant, heap leach infrastructure including a Merrill Crowe gold recovery plant, administration building, laboratory, warehouse, maintenance facilities, an accommodation complex, and mobile equipment.

The management and operation of the plant and management and engineering for the mine, and geology and exploration services will be performed by Minera Guanaco personnel. The underground mine, open pit and Phase II heap operation will be performed by contractors with known qualifications and experience in the area. The polyclinic, catering and camp services, transportation of personnel to and from the site, safety, and security will also be provided by contractors.

Existing facilities will be used to the largest possible extent, refurbishing existing facilities and replacing equipment where the process requires new capacities.

1.16.1 Open Pit Operation

The leach operation is based on a design tonnage of 4,000 t/d of ore being fed to the crushing plant from the two open pits and the old leach pads for loading on the new Phase III leach pad. The controlling production constraint for the operation is the old Phase II heap leach which has been scheduled to provide approximately 75% of the total estimated 4,000 t/d of ore sent to the new leach pad. The open pit expansion areas are therefore scheduled to provide approximately 800 t/d of ore. After the ore from the pits is depleted, the old leach pads, Phase II and later Phase I, provide the entire 4,000 t/d to the crushing plant. The project is scheduled to initially begin mining ore and waste from the Defensa pit and material from the Phase II heap. Production will then commence from the proposed Perseverancia pit, and then finally from the Phase 1 pad.

The ultimate pit designs were developed using recommended parameters provided by Minera Guanaco, and based on equipment recommendations that were also provided by Minera Guanaco. Both pit designs included set infrastructure dimensions necessary for pit operation such as bench height, haul road width and grade, catch bench width, and pit slope angles. The pit design slope angle parameters were based on historical performance and design criteria recommendations obtained from extensive field mapping and core logging completed by Ingeniería de Rocas Ltda.

(38)

Minera Guanaco has decided that the surface operation will be mined using contract labour and equipment. Using one contractor for all the transport operations will result in an optimized single fleet for the work. The ore and waste loading equipment are the same and one fleet can therefore operate on all four circuits (open pit to crusher, open pit to waste dumps, old heap to crusher, and crusher to the new pad). Blasting operations will be performed by a contractor, while Minera Guanaco will supply all consumable materials.

1.16.2 Underground Operation

The proposed underground operation was designed to produce 950 t/d, and has the potential to be expanded to as much as 1,500 t/d (540,000 t/a). Minera Guanaco will contract the pre-production and production work to contractors specialized in the construction of tunnels, underground work, and earthmoving.

Sub-level stoping will mine stopes of maximum 60 m height with sublevels at 20 m. Where higher-grade mineralization is present, or ground conditions warrant, cut-and-fill methods are envisaged: these could either be drift-and-fill and/or bench-and-fill. The development plan is based on an advance of 300 m/month per Jumbo with multiple working faces and a maximum advance of 90 m/month per face. Cachinalito Central is divided in to two zones (Central East and Central West) and is developed first because it is the zone that provides the most ounces of gold. The next zone to be developed is Cachinalito West and then Dumbo.

Underground mine design incorporated considerations of ramp and haulage level developments, road widths and grades, crossings, safety, and ventilation.

1.17 Proposed

Mine

Plan

The overall Minera Guanaco production plan considers that ore will come from the underground mine, the open pits, and the recovery of partially leached material from the existing Phase I and II heap pads (Figure 1-1).

(39)

Figure 1-1: Projected Ore Production by Source 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2010 2011 2012 2013 2014 2015 2016 YEAR Tonn e s o re

Underground Mine Leach Pad 2 Open Pit Mine Total Ore

1.18 Process

Considerations

Process facilities were designed to treat 1,000 t/d of underground sulphide ore, for seven years of operation. The facilities were designed for a future expansion to 1,500 t/d for some critical equipment. Process plant unit operations will comprise:

• Crushed ore stockpile • Ball mill grinding • Pre-leach thickening • Cyanide leaching

• Counter current decantation (CCD) • Tailings filtration

• Reagent preparation and distribution: lime, cyanide, flocculant • Water and solution storage tanks

• Process and emergency water ponds.

Initially the ore from the open pits and the Phase II heap leach will be processed through refurbished existing facilities. This material will be processed in the existing crushing plant, leached on the new heap, and the resultant solutions will be treated in the adsorption, desorption and recovery (ADR) plant. New facilities are required to process underground mine ore (of higher grade) in a grinding, agitation leach, CCD circuit, and filter plant followed by dry tailings deposition. Doré will be produced from

(40)

1.19 Waste

Disposal

An estimated 4.1 Mt of tailings will be produced over the seven-year mine life. Vector Chile Ltda. (Vector) designed the tailings storage facility (TSF) to be a dry deposit suitable for the containment of filtered tailings with a containment wall as a protection against possible tailings movement, and a catchment and rainwater diversion system. The tailings area will be located to the north of the existing Phase I and Phase II heap leach pads. The dry TSF will have a storage capacity of 4.07 Mt, which will be deposited at a rate of 1,500 t/d of wet tailings from the filter plant.

Waste dump designs and parameters were provided by Minera Guanaco and are based on proven operating designs for the historical open pit mining operation and the Ingeroc study in 1995. The two existing dumps for the Defensa and Perseverancia pits will be utilized and expanded for the open pit operations. Total expected waste is about 3.1 Mt.

1.20 Project

Implementation

The Project will be developed in two stages. The Project work plan considers the execution of Stage 1 during 2009 and 2010 to start production of doré from the processing of material from the Phase II heap on the Phase III heap in late 2010. Stage 2 will commence in December 2011.

Stage 1 activities included:

• Underground mine access ramp (pre-mining activities) • Existing crushing plant refurbishing

• Existing ADR plant reconditioning • Phase III heap leach pad construction

• Pond and solution handling system construction • Electrical system refurbishing

• Existing infrastructure refurbishing.

Stage 2 activities will comprise the construction of the following: • Grinding plant

• Agitation leach and CCD plant • Tailings filter plant