LEXAM PROPERTIES
The Lexam properties are located in the heart of the Timmins Gold Camp in northern Ontario, Canada, adjacent to past and current mining operations. Timmins is a world class gold camp, having produced over 70 million ounces to date. Home to more than 50 operating mines since 1910, it hosts some of Canada’s most lucrative gold deposits. “The Big Three” stand out: Hollinger, Dome and McIntyre mines.
The Hollinger Mine is still in operation and has produced 19.3 million ounces of gold from 1910 to 1968, more than any other single mining operation in Canada. With over 17.2 million ounces of gold produced from 1910 to 2017, Dome Mine is North America’s longest continuously operating gold mine. Adjacent to the east of Hollinger, the McIntyre Mine produced 10.8 million ounces of gold in 76 years of operation. The McIntyre and Hollinger mines averaged a recovered gold grade of 9.94 grams per tonne.
Lexam consists of four properties: the contiguous Buffalo Ankerite, Fuller and Paymaster properties, located 3 km southeast of Timmins (Lexam South), and the Davidson Tisdale Property, located approximately 4 km northeast of Lexam South. Buffalo Ankerite, Fuller and Davidson Tisdale are 100% owned by McEwen Mining. The Paymaster Property is a joint venture with Newmont Goldcorp (61% McEwen Mining - 39% Newmont Goldcorp).
Fuller, Paymaster and Davidson Tisdale were minor historic producers. Buffalo Ankerite produced 1.02 million ounces of gold at an average recovered grade of 6.5 grams per tonne, mainly from a 4,000-foot deep production shaft.
EXPLORATION
Lexam has a favourable geological position in the area - Lexam South straddles the Destor-Porcupine Fault and Davidson Tisdale is situated north of this prolific fault, together with the great majority of the mines in the Timmins Gold Camp. In addition, Davidson Tisdale lies approximately 5 km along strike from the Hollinger, McIntyre and Coniaurum mines, which have produced over 31 million ounces of gold at average grade of 7.7 grams per tonne.
Exploration drilling in early 2000s at Buffalo Ankerite outlined a pit design between surface and 400 feet depth on the south limb of the fold. Historical work indicated additional potential on the property below the pit resource. Exploration drilling by McEwen Mining confirmed that significant potential for underground high-grade gold mineralization continued to a depth of approximately 4,000 feet.
Exploration programs on the Fuller property successfully identified gold mineralization, at both shallow elevations and to depth. Drilling programs obtained favourable results with good widths in a quartz-feldspar porphyry as well as the surrounding volcanics. The figure below exemplifies these results (for corresponding drill data see press releases here).
Hole VGP-09-20 intersected mineralization including 1,390 grams per tonne gold over 0.9 metres
Paymaster is located immediately west of the Dome Mine, which produced to a depth of 5,500 feet, while other neighbours in Timmins have been mined to 7,000 feet. Limited drilling in the 1950’s at the 1,500-foot and the 2,500-foot levels encountered good grades and widths, indicating excellent potential at depth.
The Company’s interest in the Paymaster property was acquired from Newmont Goldcorp through a 2008 option and joint venture agreement. The requirements of the agreement, fulfilled during an option term of four years, included $6 million in exploration expenditures and 27,000 metres of core diamond drilling on the property. This exploration work expanded the gold mineralization zones of Fuller, Buffalo Ankerite South and Buffalo Ankerite North into the Paymaster Property and developed a resource at the Paymaster West Project.
The Davidson Tisdale Property is a high-grade gold project adjacent to Pan American Silver to the north and Newmont Goldcorp to the south. Exploration at Davidson Tisdale focused on the vicinity of the historical underground workings, concentrating primarily on the Main Zone and the S-Zone.
Several shafts have been developed on Davidson Tisdale with a decline ramp driven to a vertical depth of 200 metres. Diamond drilling was successful in extending the known gold mineralization to a depth of 400m, and remains open to depth and along strike.
Key north-adjoining mineral claims acquired in 2014 added to the Davidson Tisdale land package. The known geology of these claims encompasses favourable structures, such as four parallel hydrothermal alteration zones of over 2 km strike length. This northern land addition is relatively unexplored, with very few known drill holes completed by predecessors. Intriguing historic assay results from these claims include a surface grab sample that returned 31.2 gpt gold and a drill intercept, DBK-87-6, of 26.1 gpt gold over 1.0 m at 39 metres below surface.
Significant Drill Intercepts at Davidson Tisdale. For details see technical report here.
RESOURCE ESTIMATE
In 2013 the Company completed a resource estimate update on the properties, that conforms to the requirements set out in NI 43-101. Computed by 3-D digital block modelling, the updated resource estimate allows for open pit design and optimization.
| Measured | Davidson Tisdale Main Zone | 0.45 | 2.44 | 35,500 |
|---|---|---|---|---|
| Indicated | Buffalo Ankerite | 3.82 | 2.37 | 292,800 |
| Paymaster | 2.80 | 1.61 | 145,000 | 145,000 |
| Fuller | 5.33 | 1.68 | 290,000 | 290,000 |
| Davidson Tisdale Main Zone | 0.17 | 2.43 | 13,500 | 13,500 |
| Total Measured + Indicated | 12.57 | 1.91 | 776,800 | 776,800 |
| Inferred | Buffalo Ankerite | 2.74 | 2.31 | 203,400 |
| Paymaster | 0.84 | 1.61 | 43,000 | 43,000 |
| Fuller | 2.70 | 1.30 | 112,000 | 112,000 |
| Total Inferred | 6.28 | 1.79 | 358,400 |
| Measured | Davidson Tisdale Main | 0.02 | 6.64 | 3,800 |
|---|---|---|---|---|
| Davidson Tisdale S-Zone | 0.34 | 5.50 | 59,800 | 59,800 |
| Indicated | Buffalo Ankerite | 3.27 | 4.76 | 500,200 |
| Fuller | 0.33 | 5.76 | 61,000 | 61,000 |
| DTM | 0.04 | 4.91 | 6,500 | 6,500 |
| DTS | 0.42 | 4.52 | 60,400 | 60,400 |
| Total Measured + Indicated | 4.41 | 4.88 | 691,700 | |
| Inferred | Buffalo Ankerite | 2.81 | 4.05 | 367,100 |
| Paymaster | 0.13 | 6.14 | 26,000 | 26,000 |
| Fuller | 0.84 | 4.97 | 135,000 | 135,000 |
| Davidson Tisdale Main | 0.07 | 4.20 | 9,600 | 9,600 |
| Davidson Tisdale S-Zone | 0.39 | 4.68 | 58,200 | 58,200 |
| Total Inferred | 4.24 | 4.35 | 595,800 |
| Total Measured + Indicated Lexam Resources(Open Pit and Underground) | 1,468,500 oz |
|---|---|
| Total Inferred Lexam Resources(Open Pit and Underground) | 954,200 oz |
Cut-Offs:
* Open Pit - 0.51 gpt (Buffalo Ankerite, Paymaster, Fuller), 0.5 gpt (Davidson Tisdale Main Zone);
* Underground - 2.57 gpt (Buffalo Ankerite, Paymaster, Fuller), 2.6 gpt Au (Davidson Tisdale Main Zone), 2.0 gpt (Davidson Tisdale S-Zone).
The resource estimates are presented in: "Technical Report and Updated Resource Estimate on the Buffalo Ankerite, Fuller, Paymaster and Davidson Tisdale Gold Deposits” dated June 21, 2013 for Buffalo Ankerite, Paymaster, Fuller, Davidson Tisdale Main Zone and "Davidson Tisdale Gold Property, Timmins, Ontario Technical Report" dated November 2003 for Davidson Tisdale S-Zone. The resources are net to McEwen Mining, calculated at ownership interests: 100% for Buffalo Ankerite, Davidson Tisdale and Fuller; 60% for Paymaster. The Buffalo Ankerite deposit lies on both the Buffalo Ankerite Property and the Paymaster Property, consequently the Buffalo Ankerite resources were calculated using 100% of the resources located on the Buffalo Ankerite Property and 60% of the resources located on the Paymaster Property.
PEA ON LEXAM OPEN PITS
In consideration of the near surface nature for part of the gold mineralization on the four projects in Timmins, a preliminary economic assessment (PEA) testing the economics of open pit mining was completed in 2014 by RPA (Technical Report on the PEA of the Buffalo Ankerite, Fuller, Paymaster and Davidson Tisdale Gold Deposits, 14 MB PDF).
HIGHLIGHTS
OF ASSUMPTIONS FOR THE PEA ON OPEN PITS
The results below are presented on a 100% ownership basis. for the scope of this PEA all dollar amounts are considered Canadian unless otherwise specified.
- Open pit optimization designed at US$1,200/oz Au price;
- Net Present Value (NPV) calculated at 7.5% discount rate;
- Factored in: 9.6:1 strip ratio, 95% mining extraction, up to 27.5% mining dilution;
- Toll milling for all mineralization, contract mining for a portion of the waste stripping;
- 25% contingency priced in, with potential for further cost reduction through additional project optimization studies;
Base Case and Sensitivities
The base case was set at US$1,300 / oz Au, with sensitivities ranging from US$1,250 to US$1,400 / oz Au.
| GOLD PRICE (US$/OZ) | 1,300 | 1,250 | 1,400 | 1,400 |
|---|---|---|---|---|
| EXCHANGE RATE (C$:US$) | 0.9 | 0.9 | 0.9 | 0.9 |
| PRODUCTION PROFILE | PRODUCTION PROFILE | PRODUCTION PROFILE | PRODUCTION PROFILE | PRODUCTION PROFILE |
| LOM (YEARS) | 6.5 | 6.5 | 6.5 | 9.2 |
| MINERALIZED PRODUCTION RATE (THOUSAND TONNES/DAY) | 2 | 2 | 2 | 3.5 |
| LOM ANNUAL GOLD PRODUCTION (THOUSAND OZ) | 45 | 45 | 45 | 62 |
| STRIP RATIO (WASTE:ORE) | 9.6 | 9.6 | 9.6 | 9.9 |
| CASH OPERATING COST (US$/OZ) | 865 | 860 | 875 | 944 |
| PROCESSING | PROCESSING | PROCESSING | PROCESSING | PROCESSING |
| GOLD GRADE (GPT) | 2.23 | 2.23 | 2.23 | 1.74 |
| RECOVERED GOLD (THOUSAND OZ) | 293 | 293 | 293 | 571 |
| CAPITAL COSTS | CAPITAL COSTS | CAPITAL COSTS | CAPITAL COSTS | CAPITAL COSTS |
| INITIAL CAPITAL (MILLION C$) | 58 | 58 | 58 | 95 |
| AFTER-TAX ECONOMIC PERFORMANCE | AFTER-TAX ECONOMIC PERFORMANCE | AFTER-TAX ECONOMIC PERFORMANCE | AFTER-TAX ECONOMIC PERFORMANCE | AFTER-TAX ECONOMIC PERFORMANCE |
| NET AFTER-TAX CASH FLOW (MILLION C$) | 61 | 50 | 84 | 137 |
| IRR | 32% | 27% | 41% | 35% |
| NPV AT DISCOUNT RATE OF 7.5% (MILLION C$) | 33 | 26 | 49 | 70 |
| PAYBACK (YEARS) | 2.1 | 2.3 | 1.8 | 2.4 |
In RPA's view the PEA indicates a viable project, with a reasonable return on capital and with mineral resources of sufficient quantity and quality to warrant and recommend additional investigation at the level of prefeasibility studies. Future exploration drilling to upgrade and augment the resource classification was also recommended.
Further from the PEA's focus on mineral resources amenable to economic extraction by open pit mining methods, consideration is due to the underground mineralization (see the resource summary for Timmins underground resources).
Cautionary Note
The 2014 PEA on open pits is a NI 43-101 compliant technical report. The economic analysis contained in the PEA is based in part on Inferred Resources and is preliminary in nature. Inferred Resources are considered too geologically speculative to have mining and economic considerations applied to them and to be categorized as Mineral Reserves. There is no certainty that economic forecasts on which the PEA is based will be realized or that higher level of study will result in a decision to put the open pit projects into production.