43-101 2008 Technical Report On The La Fortuna Project, Durango ...

Howe 2008 Reserve Estimate
Following the completion of the revised resource estimation, Howe completed a revised mineral reserve
estimate for the El Castillo gold deposit.
The overall procedure that was used to revise the mineral reserve estimate follows that used previously in
the preceding 2006 Howe report (Report #897). Material changes including the use of revised unit costs
and predicted gold price in the open pit mine planning process, and revision of the project’s capital and
operating costs. The gold price is based primarily on the previous three years gold price, while the
operating costs are based on Castle Gold’s current operating experience. Projected capital costs are not
large as El Castillo is now in production, and while an expansion to a production rate of 5 million tonnes
of ore per year is forecast, most of the capital costs will be borne by outside contractors.
The revised Measured and Indicated Mineral Resources for the El Castillo gold deposit are inclusive of
those Mineral Resources modified to produce the revised Mineral Reserves. Inferred Mineral Resources
are not included in the revised Mineral Reserves. Readers are reminded that mineral resources that are not
mineral reserves do not have demonstrated economic viability.
The revised mineral reserves have yet to be mined and remain in place as of October 2007.
This study only addresses the excavation of the revised Measured and Indicated Mineral Resources. In
accordance with NI 43-101, Inferred Resources are included as waste when they occur within the open pit
limits. The Howe 2008 geological block model described above was used for the pit optimization process
with the Lerchs-Grossman optimization function within Microlynx mine planning software was used to
determine the optimum pit shells for the following cost, revenue and mining parameters.
Proven and Probable Mineral Reserves at the base case of $625 ($US per troy ounce – 3 year average)
gold price totaled 46.8 million tonnes with an average gold grade of 0.50g/tonne Au (750,000 ounces).
Inferred mineral resources occurring within the optimum pit outline totaled 100,000 tonnes with an
average gold grade of 0.32g/tonne Au (1,000 ounces). This material would have to be mined and would
be processed if the block grade was above the operating cut-off grade. However, this material is not
considered to be a mineral reserve.
Mineral reserves for this study were reported using a 0.15g/tonne Au operating cut-off grade. During the
pit design process when one is determining whether a block will be mined and processed, an operational
cut-off grade is used. This is the grade at which revenue exceeds mining and processing costs. For the
base case, $625 gold price scenario, the operational cut-off grade was 0.22 grams Au per tonne.
Once the pit limit has been decided, it follows that everything within the pit must be mined. In other
words, mining costs are sunk and the decision shifts to whether a mined block will be sent to the mill or to
the waste pile. The processing cut-off grade is the grade at which revenue exceeds only the processing
costs. For the base case, $625 gold price scenario, the processing cut-off grade was 0.15 grams per tonne.
Blocks within the optimum pit with grades less than 0.15g/tonne Au would have to be mined, but would
be considered as waste.
The following tables are the undiluted reserves results of the pit optimization based on various gold prices
from US$550, US$625 and US$700 per ounce While Howe has selected $625 as the “best estimate””
long term gold price, it was considered necessary to follow industry practice and produce pits $75 above
and below the base price to make sure that there were no impediments to lower or higher production pits
should the forecast price scenario change.
iv