Near-term gold and silver production in Peru


Latest Developments:

• Environmental & Social Impact Assessment (ESIA) submitted to the Federal Ministry of Energy and Mines in December 2012.
        - The ESIA was the result of over 18 months of technical studies including water management plan, feasibility study, archeological, flora and fauna studies, mine closure planning, social baseline studies, and results from several months of public consultations with local communities.
• Final Public Audience completed in March 2013. This marks the last required step prior to the ESIA approval.
        - Click HERE to see a short video of the event
        - Click HERE to see the “ESIA & Final Public Audience” photo album
        - Click  HERE to see permitting update press release from March 14, 2013
  

Quick Facts:

• Near term gold producer; currently in advanced stage of permitting
• Located in a prolific gold producing belt
• Feasibility Study completed in Sept. 2012 (includes only 40% of mineral resources):
        - Shallow open-pit heap leach mine
        - Initial 10k tpd mine scenario producing +/- 90,000 oz AuEq annually
        - Cash costs of $552/oz; CAPEX of $131.8M
        - Pre-Tax IRR of 52.2%; After-tax IRR of 37.8%
        - LOM average gold grade of 0.84 g/t and average silver grade of 9.50 g/t
        - This initial mine scenario to act as a foundation for future production growth
• NI 43-101 mineral resource estimate completed in Sept 2012:
        - M&I oxide gold mineral resources increase to 2,438,000 oz
        - Inferred gold mineral resources increase to 1,628,000 oz
        - M&I silver mineral resources increase to 33,370,000 oz
        - Inferred silver mineral resources increase to 46,560,000 oz
• Tremendous potential to continue expanding mineral resources
  
  

Project Location & Infrastructure

 The Shahuindo Project is located in one of the world’s most prospective gold belts, neighbouring several low cash, low capital, heap leach gold mines including Barrick Gold’s Lagunas Norte Mine, 30 km to the south, and the Yanacocha Mine operated by Newmont Mining Company 80 km to the north.

The 100%-owned Shahuindo Project covers approximately 9,200 ha (35 mi²) and 10,800 ha (41 mi²) in the Cajabamba Province in northern Peru. It is located in a historically known mining region, 80 kilometers south of Cajamarca, the region’s capital city, and 15 kilometers west of Cajabamba city.

   

Feasibility Study Results - September 2012

The mining scenario presented in the Feasibility Study considers only approximately 40% of the gold ounces from the total oxide mineral resource (see Mineral Resource press release from September 5, 2012).  Although the mineral resources currently outlined on the property could support a significantly higher mining rate and production profile, it is the Company’s preference to build a low capital cost and smaller footprint operation.  This initial mining scenario will act as a foundation for future production growth and will also provide the Company with the opportunity to fund future expansions from internally generated cash flow.

The full report can be found on SEDAR or in the Technical Reports section of Sulliden's website.


Base Case Operating Highlights and Project Performance of Feasibility Study

Financial Analysis
Internal Rate of Return (IRR), Pre-Tax	52.2 %
Internal Rate of Return (IRR), After-Tax	37.8 %
Average Annual Cash Flow, Pre-Tax	$ 70.1M
Net Present Value @ 5%, Pre-Tax	$ 382.9M
Average Annual Cash Flow, After-tax	$ 52.1M
Net Present Value @ 5%, After-Tax	$ 248.6M
Gold Price Assumption ($/Ounce)	$ 1,415
Silver Price Assumption ($/Ounce)	$ 27
After-tax Pay Back Period	2.2 years
Capital Costs
Pre-Production Capital	$ 131.8M
Working Capital and initial fills	$ 8.5M
Sustaining Capital (life of mine)	$ 47.8M
Operating Costs (Average life of mine)
Mining	$ 5.66/Tonne Processed
Processing	$ 4.51/Tonne Processed
G&A	$ 1.77/Tonne Processed
Total Operating Cost/Tonne Ore	$ 11.94/Tonne Processed
Total Cash Operating Costs (per oz of gold)	$ 552/Ounce
Cash Operating Costs before royalty	$ 523/Ounce
Production Data
Life of Mine	10.4 Years
Mine Throughput (Ore)	3.65 M TPY / 10,000 TPD
Metallurgical Recovery Au	85.8%
Average Annual Gold Production	84,500 Ounces
Metallurgical Recovery Ag	15%
Average Annual Silver Production	167,200 Ounces
Total Gold Produced (AuEq)	909,500 Ounces
Average LOM Strip Ratio (waste:ore)	1.91:1

*All monetary values are in U.S. dollars

Additional Technical Information Related to the Feasibility Study

Financial Analysis

Projected prices of $1,415 per ounce of gold and $27 per ounce of silver were used as the base case in the Feasibility Study.  These figures are three-year trailing average prices at August 31, 2012.  The financial analysis for the base case indicates a project with a pre-tax IRR of 52.2% generating $ 52.1 million average annual after-tax cash flow with a payback period of 2.2 years.  The table below outlines metal price sensitivities for the Shahuindo Project.


Metal Price Sensitivity Table

Gold Price (US$/oz)	Silver Price (US$/oz)	IRR Pre-Tax (%)	IRR After-Tax (%)	Cash Costs per oz Au	Payback After-tax (Yrs)
$900	$17	19.0%	13.5%	$509	4.8
$1,100	$21	33.2%	23.9%	$524	3.2
$1,300	$25	45.6%	33.0%	$541	2.5
$1,500	$29	56.9%	41.3%	$559	2.0
$1,415 (Base Case)	$27 (Base Case)	52.2%	37.8%	$552	2.2
$1,765 (Spot Price)	$34 (Base Case)	70.8%	51.5%	$585	1.7

Geology

The Shahuindo property is located in the regional flexure of a thrust and fold belt that contains a large-scale epithermal gold and silver system that extends over an area of 8 km by 4 km and vertically to a depth of at least 400 metres.  The current oxide mineral resource outcrops on surface and extends to an average depth of 150 metres along a 3.8 km strike length of one of these fault systems named the “Central Corridor”.  The oxide mineralization in the Central Corridor is followed by a thin transition layer with non-oxidized material continuing below it at depth.  Good gold grades continue to depth, but, due to the non-oxidized nature of the mineralization, a different processing method would be required.

Mining

Oxide ore is forecasted to be mined in a shallow open pit with an owner operated mining fleet.  Mining bench height will be 8 meters.  The life of mine stripping ratio is 1.91:1.  Ore will be trucked to a crushing and agglomeration facility near the mine where it will be crushed to 100% passing 32mm; agglomerated with cement; and conveyed to the leach pad.  Waste from the mine will be sent to a single dump located adjacent to the mine.

Metallurgy and Processing

Gold mineralization at the Shahuindo property occurs as very fine particles dispersed in iron oxides that are typically associated with structural features such as breccias and contact points between sediments and porphyries.  The ore at Shahuindo exhibits very good gold recovery with conventional heap leach cyanidation.  Gold and silver are recovered from a heap leach solution with a carbon adsorption facility (ADR plant).  Column leach tests returned average gold recoveries of 89% and demonstrated rapid leach characteristics, with 85% of gold recovered in first 20 days.  Metal recovery values used in the Feasibility Study were calculated using test work results that were adjusted to compensate for actual heap performance with gold recovery set at 86% and silver recovery at 15% for oxide ore.  In order to ensure and maintain consistent precious metal recoveries, the treatment circuit incorporates primary and secondary stage crushing circuits as well as agglomeration with cement.  

Simple Heap Leach Processing

Mineral Resource Summary, September 2012

Measured & Indicated Mineral Resources
	Gold (Oz)	Gold (g/t)	Silver (Oz)	Silver (g/t)	Tonnes	Gold Grade Eq. (g/t)
Measured Mineral Resources
Oxide (Reported at 0.2 g/t cut-off)	766,000	0.59	10,530,000	8.1	40,500,000	0.62
Mixed* (Reported at 0.35 g/t cut-off)	19,000	0.75	850,000	33.7	780,000	0.96
Indicated Mineral Resources
Oxide (Reported at 0.2 g/t cut-off)	1,624,000	0.48	21,080,000	6.3	104,840,000	0.51
Mixed* (Reported at 0.35 g/t cut-off)	29,000	0.77	910,000	23.8	1,190,000	0.92
Total	2,438,000	0.52	33,370,000	7.1	147,310,000	0.54

Inferred Mineral Resources
	Gold (Oz)	Gold (g/t)	Silver (Oz)	Silver (g/t)	Tonnes	Gold Grade Eq. (g/t)
Oxide (Reported at 0.2 g/t cut-off)	124,000	0.40	1,330,000	4.3	9,570,000	0.42
Mixed* (Reported at 0.35 g/t cut-off)	- -	0.68	10,000	12.2	20,000	0.76
Sulphide (Reported at 0.5 g/t cut-off)	1,504,000	0.76	45,220,000	22.9	61,410,000	1.20
Total	1,628,000	0.71	46,560,000	20.4	71,000,000	1.20

The Mineral Resource calculations were completed by Mine Development Associates of Reno, Nevada under the direction of Paul Tietz C.P.G., an independent Qualified Person (“Q.P.”) pursuant to NI 43-101.

*The Mixed material is classified as a transition zone that contains both oxide and sulphide material.  The cut-off grade was increased for the Mixed material to reflect the lower metallurgical recoveries that have been observed in the metallurgical test results of the transitional material. Mixed ore will be processed as oxides.

Mineral Reserve Summary, September 2012

Proven & Probable Mineral Reserves
	Gold (Oz)	Gold (g/t)	Silver (Oz)	Silver (g/t)	Tonnes	Gold Grade Eq. (g/t)	AuEq Ounces
Total Proven Mineral Reserves	437,000	0.90	5,102,000	10.5	15,159,000	0.91	441,000
Oxide	434,000	0.90	5,008,000	10.4	165,000	0.91	438,000
Mixed*	4,000	0.71	93,000	17.6	14,994,000	0.72	4,000
Total Probable Mineral Reserves	584,000	0.80	6,459,000	9.4	22,688,000	0.81	591,000
Oxide	582,000	0.80	6,396,000	8.8	22,595,000	0.81	588,000
Mixed*	3,000	0.87	64,000	21.3	93,000	0.89	3,000
Total Proven and Probable Mineral Reserves	1,022,000	0.84	11,561,000	9.5	37,847,000	0.85	1,032,000
Oxide	1,015,000	0.84	11,404,000	9.4	37,589,000	0.85	1,026,000
Mixed	6,000	0.76	157,000	18.9	258,000	0.78	6,000

Notes related to the Mineral Reserve Table:

Mineral reserves are reported based on open pit mining within designed pits based on variable gold g/t cutoff grades where Oxide:  0.35, 0.35, 0.30, 0.35, 0.30, 0.30 for Phases 1, 1B, 2, 3, 4, and 5 respectively; and Mixed: 0.35, 0.35, 0.33, 0.35, 0.33, 0.33 for Phases 1, 1B, 2, 3, 4, and 5 respectively.  These phases represent the sequential operational phases of the mine.  The mineral reserves incorporate estimates of dilution and mining losses.  The cut-off grade and pit designs are considered appropriate for long term metal prices of US$1,340/oz gold and US$25/oz silver.  Rounding of the numbers in the mineral reserves listed above may cause apparent inconsistencies.