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

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16.2.2 Economic Evaluation The Base Case financial scenario at a conservative gold price of US$625 per ounce (Table 19) shows the El Castillo Project to be NPV positive and economically viable. At a gold price of US$625, the El Castillo project creates an after tax Net Cash Flow of US$95.0 million with a Net Present Value of $70.4 million at a discount rate of 5%, $61.3 million at 7.5% and $53.8 million at 10% discount rate. The breakeven (after tax) long term gold price is approximately US$ 370/oz Au. The breakeven price includes recovery of capital and operating costs. For comparison purposes, Table 20 summarizes the NPV differences at a 10% discount rate and variable gold prices between the 2006 Howe report and the current report (Table 21). Table 20. NPV differences at a 10% discount rate. Gold Price (US$) NPV (10%) % Difference with Howe 2008 US$625 Base Case Scenario 450* 12,350,000* 335 500* 19,065,000* 182 550* 25,783,000* 108 600* 32,500,000* 65 * Data from Howe 2006 Report #897 Table 21. Gold Price Chart (1995-2008) 60
The El Castillo Project contracts out a large amount of its operating costs including drilling, blasting, mining, truck haulage and crushing. Thus, the project will require very little capital to increase production to 4.8 million tonnes of ore per year. The breakeven gold price of $370 per ounce should be sufficiently low to protect El Castillo from a substantial drop in the price of gold. Thus Howe concludes the El Castillo Project is economically viable and robust under conservative operating scenarios. In the current evaluation, Howe has created an “Optimum Pit” for each of the gold prices from $550 to $700 per ounce of gold. In addition, Howe has optimized the mine production schedule to maximize the present value of the El Castillo project for the US$625/ounce Base Case. Thus, the present value of the Net Cash Flow for the $625 case discounted at 10% increases from $53.8 million to $64.3 million. This is done by mining the highest gold grades as early in the mining schedule as reasonably feasible. While Howe has not created optimized production schedules for each of the other optimum pits, using the grade schedule from the $625 case, Howe has created a pseudo-optimized production schedule for each of the other gold price cases. Table 22 illustrates the impact of optimizing the mine schedule on each of the other optimum pits using the 10% discount rate. The Exchange rate for the Mexican Peso and the US Dollar has been relatively stable for the last few years as compared to other Resource Exporters such as Canada, Australia, South Africa and Brazil, all of whom have experienced rapid increases in their exchange rates against the US dollar. Table 22. Impact of Mine Schedule Optimization based on a 10% Discount Rate 61
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TECHNICAL REPORT ON THE EL CASTILLO
Page 3 and 4:
SUMMARY Introduction At the request
Page 5 and 6:
Castillo Remaining Mineral Resource
Page 7 and 8:
Undiluted Reserves at $550 per Ounc
Page 9 and 10:
epresent an incremental increase in
Page 11 and 12:
TABLE OF CONTENTS 1.0 INTRODUCTION
Page 13 and 14:
Table 4. Driving distances from Dur
Page 15 and 16:
Castle Gold has accepted that the q
Page 17 and 18:
2.0 PROPERTY DESCRIPTION, LOCATION,
Page 19 and 20: Figure 2. Map showing mining conces
Page 21 and 22: 2.1.2.3 Property Taxes The property
Page 23 and 24: Table 5. Maximum precipitation in a
Page 25 and 26: 3.0 HISTORY The El Castillo Project
Page 27 and 28: commonly reach elevations of 2,500
Page 29 and 30: Figure 4. Cross-section through the
Page 31 and 32: At El Castillo, the presence of cha
Page 33 and 34: Toward the center of the mineralize
Page 35 and 36: 7.0 EXPLORATION In 2006, Castle Gol
Page 37 and 38: 9.0 SAMPLING METHOD AND APPROACH Th
Page 39 and 40: 11.0 DATA VERIFICATION 11.1 INTRODU
Page 41 and 42: Morgain Minerals Inc. El Cairo Gold
Page 43 and 44: 13.0 MINERAL PROCESSING AND METALLU
Page 45 and 46: Table 9. Castle Gold test heap leac
Page 47 and 48: material is relatively consistent a
Page 49 and 50: Plate 6. View of the El Castillo si
Page 51 and 52: 14.2.1 Methods A shift of -500,000
Page 53 and 54: 14.2.4 Pit Optimization Parameters
Page 55 and 56: Undiluted Reserves at $600 per Ounc
Page 57 and 58: Table 13. Comparison of Howe 2003 a
Page 59 and 60: 15.2.2 Change of Land Use The Compa
Page 61 and 62: 16.2.1 Capital and Operating Cost E
Page 63 and 64: Table 15. Operating Cost Summary (U
Page 65 and 66: will be operating the mine indirect
Page 67: Table 17. Sensitivity Analysis - Gr
Page 72 and 73: Table 23. US$ - Mexican Peso Exchan
Page 74 and 75: • Castle Gold should complete geo
Page 76 and 77: Panteleyev, A., 1996, Epithermal Au
Page 78 and 79: 9. To the best of my knowledge, inf
Page 80 and 81: CERTIFICATE OF AUTHOR dated July 31
Page 82 and 83: Appendix A Pit Optimization Level P
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