The Corporation is authorized to issue an unlimited number of
Common Shares. As of August 10, 2016, 310,962,088 Common Shares were issued and
outstanding.
Holders of Common Shares are entitled to receive notice of any
meetings of shareholders of the Corporation, to attend and to cast one vote per
full Common Share at all such meetings. Holders of Common Shares do not have
cumulative voting rights with respect to the election of directors and,
accordingly, holders of a majority of the Common Shares entitled to vote in any
election of directors may elect all directors standing for election. Holders of
Common Shares are entitled to receive on a pro rata basis such dividends, if
any, as and when declared by the Corporation’s Board of Directors at its
discretion from funds legally available therefor and upon the liquidation,
dissolution or winding up of the Corporation are entitled to receive on a pro
rata basis the net assets of the Corporation after payment of debts and other
liabilities, in each case subject to the rights, privileges, restrictions and
conditions attaching to any other series or class of shares ranking senior in
priority to or on a pro rata basis with the holders of Common Shares with
respect to dividends or liquidation.
There is currently no other series or class of shares
outstanding which ranks senior in priority to the Common Shares.
The Common Shares do not carry any pre-emptive, subscription,
redemption or conversion rights, nor do they contain any sinking or purchase
fund provisions.
The following table sets forth the high and low trading prices
of the Common Shares on the Toronto Stock Exchange and the New York Stock
Exchange during the indicated periods:
(1) The Common Shares commenced trading on the New York Stock
Exchange on May 8, 2012.
EXPENSES
The expenses in connection with the issuance and distribution
of the Common Shares being offered are as follows:
|
SEC registration fee
|
US$ 7,696
|
|
Legal fees and expenses*
|
US$ 89,000
|
|
Accounting fees and expenses*
|
US$ 19,000
|
|
TSX and NYSE listing fees
|
US$ 155,000
|
|
Printing and mailing expenses
|
US$ 10,000
|
|
Total
|
US$ 280,696
|
* Estimated
All Canadian dollar amounts in the
table above have been converted to U.S. dollars based on the noon exchange rate
of the Bank of Canada on August 10, 2016 of US$1.00 = CDN$1.306
MATERIAL CHANGES
Acquisition of Lake Shore Gold
On April 1, 2016, subsequent to the date of the Annual Report
on Form 40-F, Tahoe and Lake Shore Gold completed a business combination
transaction pursuant to a plan of arrangement (the “
Arrangement
”), as
provided for in an arrangement agreement between the parties dated February 8,
2016. Pursuant to the Arrangement, Tahoe acquired all of the issued and
outstanding shares of Lake Shore Gold (“
Lake Shore Gold Shares
”) for
consideration consisting of 0.1467 Common Shares for each outstanding Lake Shore
Gold Share, such that Lake Shore Gold is now a wholly-owned subsidiary of Tahoe.
As a result of its acquisition of Lake Shore Gold, Tahoe indirectly acquired the
Bell Creek and Timmins West gold mines located in northeastern Ontario, Canada.
On closing of the Arrangement, Tahoe issued an aggregate of
69,239,629 Common Shares to former Lake Shore Gold shareholders, who now hold
approximately 23.32% of the 296,900,457 Common shares issued and outstanding, on
an undiluted basis. Additionally, outstanding options to acquire Lake Shore Gold
Shares were exchanged for options of Tahoe that entitle the holders to receive,
upon exercise thereof, Common Shares based on the Exchange Ratio. The Lake Shore
Gold Shares have been de-listed from both the TSX and the NYSE MKT.
On May 16, 2016, Lake Shore Gold completed the redemption (the
“
Redemption
”) of its 6.25% senior unsecured convertible debentures due
September 30, 2017 (the “
Debentures
”). Pursuant to terms of Lake Shore
Gold’s convertible debenture indenture, Lake Shore Gold elected to satisfy the
redemption price for each Debenture by issuing Common Shares. All outstanding
Debentures were either redeemed by Lake Shore Gold or voluntarily converted into
Common Shares by holders of the Debentures. An aggregate of 10,611,411 Common
Shares were issued pursuant to the exercise of conversion rights available to holders of the Debentures. Those
Debentures remaining outstanding after voluntary conversions were redeemed by
Lake Shore Gold on May 16, 2016 for an aggregate of 122,264 Common Shares, and
the Debentures were delisted from trading on the Toronto Stock Exchange at the
close of business on the same day.
I-22
Timmins West Mine
The following descriptions of Tahoe’s Timmins West Mine are
summarized from a technical report prepared for Lake Shore Gold by Eric Kallio,
P. Geo, and Natasha Vaz, P. Eng, in compliance with NI 43-101 entitled “43-101
Technical Report, Updated Mineral Reserve Estimate for Timmins West Mine and
Initial Resource Estimate for the 144 Gap Deposit, Timmins, Ontario, Canada”
dated February 29, 2016 (the “
Timmins West Technical Report
”). Natasha
Vaz, P.Eng, and Eric Kallio, P.Geo, have reviewed and approved the scientific
and technical disclosure contained in this prospectus related to the Timmins
West Mine.
All defined terms used but not defined in the summary below
shall have the meanings ascribed to them in the Timmins West Technical Report.
Project Description, Location, Access and Infrastructure
The Timmins West Mine consists of mineralized zones from the
Timmins Deposit, the Thunder Creek Deposit, and the 144 Gap Deposit for a total
area of approximately 17.1 square kilometers, or approximately 1,712 hectares.
The majority of the property is situated within Bristol Township (1,340 ha),
with approximately 336 hectares located in Thorneloe Township and 36 hectares in
Carscallen Township.
A map showing the location and access to the Timmins West Mine
is provided below:
The Timmins Deposit portion of the Timmins West Mine consists
of a block of 23 contiguous claims (totaling approximately 395 hectares) of
which there are eleven (11) individual patented and surface rights claims, six
(6) claims that hold a patent surface rights with leased mining rights, and six
(6) claims that hold a 21 year Crown mining and surface rights lease. The
Thunder Creek Deposit portion of the property consists of 20 staked mineral
claims (35 units totaling approximately 629 hectares) of which two (2) claims
hold a surface rights patent and three (3) claims hold a 21 year Crown mining
and surface rights lease. The 144 Gap Deposit consists of a contiguous block of
33 staked mineral claims (43 units) covering an area of approximately 688
hectares. Surrounding the Timmins West Mine are an additional 289 staked claims,
9 leases, and 28 patents also owned by Lake Shore Gold.
Lake Shore Gold owns a 100% interest in most of the property,
subject to underlying royalties. The only exception is the Meunier-144 portion
of the property with Lake Shore Gold holding a 50% interest in these ten patent
claims. The claims and leases are all in good standing.
I-23
The Timmins West Mine is located 1.1 kilometres southeast of
the junction of provincial Highways 101and 144. All season road access to the
property is provided by provincial Highways 101 and 144, and the site access
road. Bush roads, trails suitable for all-terrain vehicles, and foot paths
provide access throughout the property and other locations within the claim
boundaries. A major power transmission line traverses the northwest portion of
the property.
Recent drilling and geophysical work have provided extensive
access to the 144 Gap Deposit area of the Highway 144 portion of the property.
All areas of drilling in the vicinity are accessible by motor vehicle and
all-terrain vehicles. The 144 Gap Deposit area has three main access points
located on both the east and west sides of Highway 144. Line cutting for a 2015
geophysical survey has also provided easy walking access to much of the field
area.
The Timmins West Mine area and the City of Timmins experience a
continental climate with an average mean temperature range of -16.8°C (January)
to +17.5° (July) and an annual precipitation of approximately 835 mm. Annually,
ice will start to form on lakes in approximately mid-November, and ice breakup
will take place in early to mid-May. Work can be carried out on the property
twelve months a year.
History
The discovery of gold in Bristol Township on the McAuley-Brydge
property (currently the Timmins West Mine) occurred in 1911. During the period
from 1911 to 1914 two shallow shafts were sunk; one on the present main
mineralized zone, which is reported to be 12 metres deep, and the second east of
Vein 2 and Vein 3 Zones at an unspecified “shallower” depth. At the time, only a
few claims were staked within the Bristol Township area. Shortly after, fire
storms swept large parts of Carscallen, Bristol and Ogden Townships, and the
surface plants at various mines were completely destroyed. It was not until the
late 1930s that any further significant drilling occurred, first by Orpit Mines
Limited, which completed 7,620 metres of diamond drilling between 1938 and 1944,
and also by Rusk Porcupine Mines, which excavated several pits and trenches
across a 150 metre to 200 metre area of the Thunder Creek portion of the
property. Holmer Gold Mines Limited (“
Holmer
”) acquired the first of its
interest in what is now the Timmins West Mine property in 1963.
Lake Shore Gold acquired the Timmins West Mine property by
fulfilling the earn-in requirements as set out in option agreements entered into
in 2003 with Holmer and West Timmins Mining Inc. (“
WTM
”), formerly
Band-Ore Resources Limited (“
Band-Ore
”) and Sydney Resources Ltd.,
respectively, and by completing business combination agreements with those
companies. Holmer became a wholly-owned subsidiary of Lake Shore Gold in
December 2004, and WTM became a wholly-owned subsidiary of Lake Shore Gold in
November 2009.
In January of 2011, commercial production was declared for the
Timmins Deposit. In January of 2012, commercial production was declared for the
Thunder Creek Deposit. Subsequently, the Timmins and Thunder Creek Deposits were
combined into a single operation called the Timmins West Mine. In March of 2012,
Lake Shore Gold filed an updated mineral resource estimate for the Timmins
Deposit, including a Preliminary Economic Assessment for the Timmins West Mine.
In May of 2012, Lake Shore Gold released a Pre-feasibility Study and Mineral
Reserves for the Timmins West Mine.
The 144 Gap Deposit was initially discovered in late 2014 as
part of a successful surface diamond drilling campaign. In 2015, Lake Shore Gold
reported significant expansion of the 144 Gap Deposit through continued surface
diamond drilling.
Mineral Tenure, Surface Rights and Royalties
In May 2003, Lake Shore Gold and Holmer entered into an option
agreement whereby Lake Shore Gold earned a 50% interest in the Holmer property
(the present day Timmins Deposit property) by March 24, 2006. This portion of
the property consists of 11 Freehold Patents with surface and mining rights;
Lease 106634 (formerly Lease 102611), a group of six Leasehold Patents with
surface and mining rights; and Lease 107874 (formerly Lease 104075), a group of
six Freehold Patents with mining rights as well as six Leasehold Patents of
surface rights for the same area. Lake Shore Gold completed the requirements to
earn 50% of the Holmer property in September 2004. On December 31st, 2004 Holmer
became a wholly-owned subsidiary of Lake Shore Gold pursuant to a business
combination agreement between Lake Shore Gold, its wholly owned subsidiary Lake
Shore Gold Holdings Corp. and Holmer. A 1.5% NSR royalty is assigned to claim
P-4227 payable to Mr. Lorne Labrash. This royalty may be purchased for $1
million. The current resource model for mineralization does not extend to claim
P-4227.
Lake Shore Gold optioned a 60% interest in the Thunder Creek
property from Band-Ore in November 2003. In September 2006, Band-Ore and Sydney
Resources Corporation to become WTM, and the terms of the Lake Shore Gold -
Band-Ore option agreement succeeded to WTM. In May 2008, Lake Shore Gold
informed WTM that the obligations to earn a 60% interest in the Thunder Creek
property had been fulfilled. On November 6, 2009, Lake Shore Gold and WTM
completed a business combination agreement resulting in WTM becoming a wholly
owned subsidiary of Lake Shore Gold. On January 1, 2012, WTM was amalgamated
into Lake Shore Gold, which now holds the 100% interest.
All claims and leases are in good standing as of the Effective
Date of the Timmins West Technical Report.
A land survey was completed in late 2015 in order to bring a
boundary of 56 mining claims to lease. With survey documents submitted to the
Ministry of Northern Development and Mines in early 2016, Lake Shore is waiting
for final approval from the Office of the Surveyor General before a
formal mining and surface mining rights lease application can be officially
submitted.
I-24
Royalties
Brief summaries of the royalties are outlined below.
Mineral claims optioned originally from Mr. Jim Croxall were
subject to a 2% Net Smelter Return (“
NSR
”) royalty. These claims were
also subject to an advanced annual royalty payment of $5,000 until commercial
production begins. Lake Shore Gold purchased 1% of the NSR in November 2010 in
exchange for approximately $1,500,000 equivalent in Lake Shore Gold stock. The
other 1% NSR was purchased from Jim Croxall by Premier Royalty in 2012.
Sandstorm Gold Ltd. has since acquired Premier Royalty Corp as of October 2013.
The surface rights for leased claims P495307, P495308, and P495309 (mineral
rights only lease number 108773) have been acquired by Lake Shore Gold (surface
lease number 108774), with both leases to remain in good standing until June 30,
2032.
The claim with number 1189886 was optioned from Mr. Bruce
Durham and has a 3.0% royalty attached.
Eight claims optioned from the late Mr. Matt Kangas and Mr. Jim
Croxall (1177807, 1177808, 1177809, 1177811, 1181410, 1181413, 1198803, and
1198804) are subject to a 2% NSR royalty of which 1% may be purchased for
$1,000,000. An advanced royalty payment of $5,000 (indexed for inflation) is
paid annually to the estate of Mr. Kangas and to Mr. Croxall in equal
portions.
Four claims (1189593, 1181995, 1189580, and 1189592) were
purchased by Bruce Durham, Robert Duess, Ken Krug, and Henry Hutteri from Ray
Meikle and Steve Anderson and then optioned to Band-Ore. A 3% NSR royalty is
payable, 1.5% to Durham et al., and 1.5% to Meikle and Anderson. There is not a
buy down of this royalty.
Claims 1189552 and 1189553 were optioned from Mr. Bruce Durham
and partners (“Durham”) and has a 3.0% royalty attached.
Claims 923646 and 923647 are subject to a 3% NSR, payable to
Royal Gold and Torogold.
As of March 1, 2012, Franco–Nevada Corporation (Franco-Nevada)
entered into an agreement with Lake Shore Gold through which Franco–Nevada paid
Lake Shore Gold US$35 million for a 2.25% NSR royalty on the sale of minerals
from the Timmins West Mine.
The surface and mining rights for claims P26392, P26393,
P26394, P26395, P26396, P26397, P26398, P26399, P26400, P26403, known as the
Meunier 144 Property, are currently held by Lake Shore Gold and Adventure Gold
Inc. (each with a 50% interest). There is a 2.5% NSR royalty payable to David
Meunier, with an option to purchase 1 percent.
Permits
The required permits and approvals for operations at the
Timmins West Mine have been acquired and include the following Provincial
Permits: Ministry of Northern Development and Mines (MNDM); Ministry of the
Environment (MOE); Ministry of Natural Resources (MNR); Ministry of
Transportation (MTO); Technical Standards and Safety Authority (TSSA); Ministry
of Labour (MOL); Occupational Health and Safety; Explosives; and Notification of
Commencement of Construction and Operation. The required permits and approvals
for operations at the Timmins West Mine, which have been acquired, also include
the following Federal Permits: Department of Fisheries and Oceans Canada (DFO);
Natural Resources Canada (NR CAN) – Explosives Regulatory Division (ERD) and
Environment Canada (EC).
Environment
Water management and protection of the cold water systems on
and adjacent to the Timmins West Mine site were recognized from the onset of the
project as primary environmental concerns. Preliminary design for Timmins West
Mine includes the concept of managing rock that can be an acid generating risk
within a containment facility and treating runoff in accordance with regulatory
requirements before release to the environment. Timmins West Mine is regulated
under both provincial and federal legislation.
The waste rock containment pad is designed to receive and
contain rock from the underground workings that are identified as potentially
acid generating. All runoff from the site waste rock piles is contained within
the footprint of the operation and treated through the treatment process prior
to discharge to the natural environment. Mine water from the underground
workings will also be directed to ponds and treated through the effluent
treatment plant (ETP) prior to discharge. The treatment process will ensure that
all Environmental Compliance Approval (ECA) criteria are met prior to
discharging into the natural environment.
To protect Thunder Creek, and maintain flows within the system,
un-impacted storm water is diverted away from Thunder Creek. Storm water is
captured and treated prior to discharge to the natural environment.
I-25
The development of the mine will create a disturbance footprint
on the terrestrial environment. Baseline work did not identify the possibility
of provincially or federally listed fauna species on the site that will trigger
concern. The closure plan will reduce this disturbance area at closure and
disturbed areas will be rehabilitated with the intent of returning the site to a
productive use (i.e. forestry) resulting in limited long-term impact to the
area.
A closure plan for the bulk sampling was filed with the
Ministry of Northern Development and Mines in October 2009 and the commercial
production closure plan was filed in 2010. In January 2011, Lake Shore Gold
announced the Timmins Mine to be in commercial production. The closure plan has
been amended as required; most recently, the 3rd mine production closure plan
amendment was submitted to ensure site compliance with Ontario Regulation
240/00. At closure, the site will be rehabilitated in accordance with closure
plans filed with the Ministry of Northern Development and Mines.
An Impact and Benefits Agreement (IBA) has been negotiated and
signed (February 17, 2011). The IBA outlines how Lake Shore Gold and the First
Nations communities will work together in the following areas: education and
training of First Nation community members, employment, business and contracting
opportunities, financial considerations and environmental provisions.
Environmental monitoring will be conducted in accordance with
regulatory and due diligence requirements. The monitoring program will be
compiled in a Management System.
Geology and Mineralization
Supracrustal rocks in the Timmins region are assigned as
members of nine tectonic assemblages within the Western Abitibi Subprovince, of
the Superior Province. The seven volcanic and two sedimentary assemblages are of
Archean age. Intrusions were emplaced during Archean and Proterozoic times.
The Timmins West Complex is dominated by mafic volcanic and
sedimentary rocks which are interpreted to be from the Tisdale, Deloro and
Porcupine Groups and occurring within a broad basin like feature which opens to
the east. Rocks within the basin generally strike in an easterly direction and
dip moderately to teeply northwards. Crosscutting the earlier rock units are a
series of ultramafic to felsic intrusions. Key structural features of the
property include the Destor Porcupine Fault Zone (DPFZ) which passes through the
south portion of the interpreted basin and as well as the 144 and Gold River
Trends which occur on the north and south limbs. These two trends represent
intense zones of alteration and deformation and are the host to all of the main
gold occurrences identified on the property to date including the Timmins
Deposit, Thunder Creek Deposit and 144 Gap Deposit.
The Timmins Deposit, Thunder Creek Deposit, and 144 Gap Deposit
all occur along the 144 Trend, a broad and extensive structural corridor that
extends to the southwest from the Timmins Deposit area. Clearly favourable as a
host to gold mineralization, this trend generally coincides with the northeast
trending contact zone between southeast facing mafic metavolcanic rocks of the
Tisdale Assemblage (to the northwest) and dominantly southeasterly facing
metasedimentary rocks of the unconformably overlying Porcupine Assemblage (to
the southeast). The contact dips steeply to the northwest, and is modified and
locally deflected by folds and shear zones that are associated with gold
mineralization.
Gold mineralization occurs in steep north-northwest plunging
mineralized zones which plunge parallel to the local orientations of the L4
lineation features which also plunge parallel to the lineation, including folds
and elongate lithologies. Mineralization occurs within, or along favourable
lithostructural settings in proximity (within hundreds of metres) to the 144
Trend and related structures (i.e., Holmer and Rusk Shear Zones). Mineralization
comprises multiple generations of quartz-carbonate-tourmaline ± albite veins,
associated pyrite alteration envelopes, and disseminated pyrite mineralization.
Textural evidence suggests that veining formed progressively through D3 and D4
deformation. All phases of gold-bearing veins cut and post-date the Alkalic
Intrusive Complex (AIC) and syenitic to monzonitic intrusions, although
mineralization is often spatially associated with ore preferentially developed
within these intrusive suites.
Exploration
Prior to 2003, all exploration on the Timmins West Mine area
was carried-out by previous operators. Since then, exploration on the Timmins,
Thunder Creek, and Highway-144 Gap Deposits by Lake Shore Gold has consisted
primarily of diamond drilling. Other exploration activities from 2003 to present
include basic geological and structural mapping, prospecting, outcrop stripping,
lithogeochemical sampling, and MMI soil geochemical surveys.
Geophysical surveys including airborne magnetics as well as
surface and downhole IP were also completed, along with various research
projects. Some of the work has been contracted out to consultants, while other
work has been done in tandem with universities in the form of sponsored academic
studies. These campaigns have helped solidify the current level of geological
understanding and have provided the necessary framework in order to generate
useful drill targets for advanced exploration of the Timmins West Mine area.
I-26
Sample Preparation, Analysis and Security
The sampling preparation, analysis, and security for the period
of 1998 to 2009 are described in the following Technical Reports: the Updated NI
43-101 on the Timmins Mine Property, Ontario, Canada by Darling et al (2009);
Amended Technical Review and Report of the “Thunder Creek Property” Bristol and
Carscallen Townships, Porcupine Mining Division, Ontario, Canada by Powers
(2009); and the Technical Report on the Initial Mineral Resource Estimate for
the Thunder Creek Property, Bristol Township, West of Timmins, Ontario, Canada
by Crick et al (2011).. A Preliminary Economic Assessment Report and Updated
Mineral Resource Estimate for the Timmins West Mine was released in March 2009
and provided updated protocols up to October 28, 2011 for Thunder Creek, and up
to January 31, 2012 for the Timmins Mine property (Crick et al., 2012). An
updated mineral reserve estimate for Timmins West Mine was released in March
2014 and provided updated protocols up to February 21st, 2014. All of these
reports are filed on SEDAR.
Surface Diamond Drill Programs
For the surface drill programs, the diamond drill contractors
secure the drill core boxes at the drill site and deliver them to the core
logging facilities located at Lake Shore Gold’s exploration office in Timmins,
Ontario. Under the direct supervision of authorized senior geology personnel,
Lake Shore personnel open the boxes, check the metre markers for accuracy, and
label the boxes with metals tags noting hole number, box number, and footage. A
geologist prepares a summary log and the core is racked until it can be
processed further.
The core is then logged by a geologist, by entering data
directly into custom Drill Logger software developed by Geovia GEMS. The logs
are detailed, and describe geology, structure, alteration, and mineralization.
Intervals to be sampled are indicated by the geologist, sample tags are
inserted, rock quality designation measurements (RQD) and photographs are taken,
and the log is printed, reviewed, and edited if required. The core is then given
to a trained and supervised technician for sampling. Once the sampling is
completed, all drill core is stored in racks or square piled in a secure
compound at the core logging facilities or at the Timmins West Mine compound.
The secure chain of custody for diamond drill core and samples
starts at the drill and is completed with the safe return of sample pulps in a
locked storage facility on site. Unscheduled visits to the diamond drill sites
are made to ensure safety, good working practices, and drill core security. The
core from surface drill programs is transported from the field to the core
logging facility by the drill foreman. Core reception, logging, and sample
preparation procedures are followed as previously described in above. The
samples are enclosed within sealed shipping bags, are transferred into larger
shipping bins, and are directly delivered to the selected analytical labs by
Lake Shore Gold employees. The lab employee that receives the sample shipment
signs a chain of custody document that is returned to Lake Shore Gold’s office
for reference and filing. The return assay results are currently processed by
database manager Morgan Verge, GIT, and are reviewed by Ryan Wilson, P. Geo.,
and Kara Byrnes, P. Geo. Data is made available for viewing by authorized
members of the Lake Shore Gold geological and management staff.
Intervals to be sampled are determined by the geologist, and
are based on lithology, alteration, percent sulphides, the presence of visible
gold, and geological contacts. The sample intervals are marked on the core, and
recorded in the drill log. The core is split by trained Lake Shore Gold
technicians using a diamond saw. One half of the core is placed in a plastic
sample bag and the remaining half is returned to the core box. Lake Shore Gold
uses sequentially numbered triplicate sample tags. One portion of the tag goes
in the sample bag along with the split half of the sample, one portion of the
tag is stapled into the core box at the end of the sample interval, and the
third stays in the sample book for archiving. Once the sampling is completed,
the core boxes are either placed in racks or cross-piled for future reference
within the gated area of the core shack. Over the years, most of the core was
dumped except for selective exploration holes drilled outside of known resource
areas.
Since 2007, all samples from surface exploration programs have
been delivered by Lake Shore Gold personnel directly to the ALS Chemex Prep Lab
in Timmins. The pulps were created in Timmins and then shipped to the ALS Chemex
Assay Laboratory in Vancouver, B.C., or Rouyn-Noranda, PQ.
Lake Shore Gold employees are not involved in the sample
preparation or analysis of samples once they have been delivered to the assay
preparation laboratory in Timmins. Samples submitted to ALS Canada Ltd. (ALS)
are assigned a separate client project number, corresponding to Timmins Mine,
HWY-144 or Thunder Creek properties. The laboratory is instructed to maintain
the sample stream, the processing, and analysis by keeping the samples in
sequential order as they are shipped to the lab. As part of ALS Canada Limited’s
internal QA/QC program, a duplicate reject sample was prepared every 50
samples.
The number of internal blanks, standards and duplicate control
samples inserted into the sample stream depends upon rack size. Blank samples
are inserted at a random frequency of one every 1 to 40 samples and are used to
check for possible contamination in the crushing circuit and are not placed
after a standard sample .Standard samples are inserted into the sample stream at
a frequency of one every 1 to 40 samples and are used to check the precision of
the analytical process.
I-27
Underground Diamond Drill Program
The Timmins West Mine secure chain of custody for diamond drill
core and samples starts at the drill and is completed with the safe return of
sample pulps in a locked storage facility on site. All underground core is
transported from the mine site by the drill contractor (under direct supervision
by Lake Shore Gold personnel). Core reception, logging, and sample preparation
procedures are followed as previously described above under “Surface Diamond
Drill Programs”. The samples are enclosed within sealed shipping bags, are
transferred into larger shipping bins, and are delivered directly to the
selected analytical labs by Lake Shore Gold employees. The lab employee that
receives the sample shipment signs a chain of custody document that is returned
to Lake Shore Gold’s office for reference and filing. The return assay results
are currently processed by database manager Morgan Verge, GIT, and are reviewed
by Kara Byrnes, P. Geo., and Ryan Wilson, P. Geo. Data is made available for
viewing by authorized members of the Lake Shore Gold geological and management
staff.
In the spring of 2013, Lake Shore Gold started to progressively
process all core from the Timmins West Mine at its central office and core
logging facility located at 1515 Government Road South, Timmins. This was done
due to a lack of space at the mine site, and in an effort to ensure standardized
core logging and sampling protocols, and to provide closer supervision by Kara
Byrnes, P. Geo., and Ryan Wilson, P. Geo. All drill core is transported from the
mine site by the drill contractor (under direct supervision by Lake Shore Gold
employees).
Core handling, logging and sampling protocols are similar to
those described above. Since May 09, 2013, if a considerable splash or numerous
pinheads of visible gold are noted within a sample it must be noted in the log
using the “VG” check box, the sample must be flagged using orange tape, the
letters “VG” must be clearly written using a red marker on the sample tag which
will accompany the sample to the lab, and the sampler will note the sample
number on a “VG Sample Tracker” sheet, which will then be reported on the
corresponding Sample Submittal Form as a “Special Instruction” requesting a
silica wash (WSH-22). The WSH-22 code for samples processed at ALS implies
special instructions running silica sand once in the crusher and twice in the
pulverizer after the sample was processed, in order to avoid and/or minimize
cross-contamination of subsequent samples.
The samples are placed in plastic bins, and are delivered
directly to various locals labs by Lake Shore Gold employees. For the period
from 2008 to March 18, 2013, the introduction of blank samples, certified gold
standards, and blind coarse duplicates in the sample stream were generally done
at a random frequency of one per every group of 20 samples. As of March 18,
2013, this protocol was changed to “one blank, one coarse duplicate, and one
gold standard for every group of 40 samples”.
Underground Face Chip Channel and Muck Samples
Channel samples are taken across the excavation face honoring
changes in rock type, alteration, vein style, vein intensity, and amounts and
types of sulphides. The chip sample is designed to cross-cut a sub-vertical
vein, sulphide mineralized envelope, or mineralized structures situated in the
central portion of the 5 meter by 5 meter development heading at approximately
1.3 to 1.5 metres above the floor. Samples are taken from left to right of the
left wall-face bracket, across the face, and ending with the right face-wall
bracket. The maximum length of the wall rock (waste bracket) is 0.5 meters;
another waste sample taken after the initial waste sample may have a length of
up to 1.0 meters. Samples of mineralization have a maximum length of 0.5 meters.
Each channel sample extends 50 cm above and 50 cm below the designated sample
height resulting in a 100 cm wide panel. The resultant sample should weigh
approximately 2 kilograms. Descriptions of the samples are recorded and a photo
is taken of the face illustrating the geology, mineralization, and sample
panels.
Underground development miners and LHD operators are charged
with taking muck samples at the request of Lake Shore Gold’s geology department
staff. Samples may be taken from either ore or waste development headings. The
mine operations department begins taking these samples once advance in the
heading approaches the mineralized ore zones and the round has been given a
number designation by the geology staff. The muck samples taken during a shift
along with the appropriately filled out sample description tags are brought up
from underground and deposited in designated locations. The sample number, date,
shift, workplace, employee and comments are recorded, and the information given
to the geology department. This represents approximately 1 sample per 42 tonnes
of mucked material in lateral development rounds.
Samples are submitted for assay as described in the diamond
drill core protocols above.
All underground mucks and chips samples are transported from
the mine site within sealed shipping bags or larger shipping bins, and are
delivered directly to Lake Shore Gold’s Bell Creek Analytical lab. The samples
are transported by Lake Shore Gold personnel and by courier. The lab employee
that receives the sample shipment signs a chain of custody document that is
returned to Lake Shore Gold’s office for reference and filing. Chips, muck and
test holes are identified by sample tags. The sample tags are entered by a
trained geological technician into a “Sample Number Tracker” spreadsheet, and
assays are imported in the Tracker as they are received from Lake Shore Gold’s
Bell Creek Lab. The Tracker then sends out data queries which populate the
face/wall or stope sheets with their corresponding assay results. The results
are manually entered into a “Production Tracker”, which is used to generate
various production and development grade reports.
I-28
Data Management for Surface and Underground Diamond Drill
Programs
Copies of assay certificates are either downloaded from each
lab’s external LIMS system and/or sent via mail and electronic mail to the Lake
Shore Gold database manager, and to the project’s senior geologist. The digital
assay data (in the form of “.csv” files) are checked manually against the final
paper assay certificates for clerical errors, and the results evaluated by a Lab
Logger Version 2.0 program created by Gemcom for all labs, or by an EXCEL query
file if required. The use of the software program ensures that the results from
the QA/QC samples fall within the approved limits of the standard before this
data is imported into the database.
An ACCESS application developed by Gemcom Software
International Inc. called Lab Logger (v2.0) for ALS Lab is used to store sample
assay results, internal QC information, certificate dates, standards, and
duplicate samples, each of which stored in separate QC database tables. The QC
samples in each group are subjected to specific pass or failure criteria, which
determined whether a re-assay of the batch is required. All failed groups of
samples are investigated to attempt to determine the cause of the erroneous
result (analytical or clerical). Potential clerical errors are sometimes
reconciled by checking against original drill log records, sample books or
original laboratory data sheets. After the batch pass/failure criteria is
applied, a geological override may be applied by the project senior geologist on
batches for which re-assay would be of no benefit (i.e. completely barren of
gold assay values and mineralization indicators). Sample groups given a
geological override are not re-assayed.
Sample groups in which the QC samples fall outside the
established control limits that did not receive a geological override are not
imported into the database. Instead, these samples are requested to be rerun at
the analytical lab. In the case where a standard has failed, a re-run on the
pulp is requested back to: a) the last control sample that passed (blank or
standard); b) the first sample for the project in the sequence of samples being
analyzed, or; c) four samples above and below the failed standard, if the assay
results for those samples are deemed significant. In this case, a new standard
is sent to the lab to be analyzed with the samples in question. In the case of a
blank failure, if the surrounding assay results are considered significant, all
samples back to: a) the last blank or standard that passed; b) the first sample
for the project in the sequence of samples being analyzed, or; c) four samples
above and below the failed blank are re-analyzed on the reject material, as this
indicates contamination in the sample preparation stage.
Check Assay Program
For significant drilling periods, or for drill campaigns
leading to resource or reserve calculations, a check assay program is
implemented either during or following completion of drilling. For the purpose
of this report, approximately 5% of the pulps from previously analyzed samples
(excluding pulps from standards) were selected and sent for re-assay to various
neutral labs. In order to make a selection, groups of samples that passed QC
were picked randomly from various drill programs. The pulps were selected
randomly by hole, ensuring that a wide range of original assay values from trace
to high grade were represented.
The samples selected for check analysis were sent to SGS
Mineral Services. The pulps were initially analyzed using the fire assay with an
AA finish method, and for results greater than 10 grams per tonne, a re-assay
was conducted by fire assay using a gravimetric finish.
Mineral Resources
|
|
|
Cautionary Note to Investors Concerning Estimates of
Indicated and Inferred Resources
|
|
|
|
This section uses the terms “Indicated Mineral Resource”
and “Inferred Mineral Resource". The Corporation advises investors that
while these terms are recognized and are required by Canadian regulations
(under NI 43-101
Standards of
Disclosure for Mineral
Projects
), the United States Securities and Exchange Commission does
not recognize them.
Investors are cautioned not to assume that any part
or all of the mineral deposits in these categories will ever be
converted to reserves. In addition, “Inferred Mineral Resources” have a
great amount of uncertainty as to their
existence and economic and
legal feasibility
. It cannot be assumed that all or any part of an
Inferred Mineral Resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of Inferred Mineral Resources may not form
the basis of Feasibility or Pre-Feasibility Studies, or economic studies
except for a Preliminary Assessment as defined under 43-101.
Investors
are cautioned not to assume that part or all of an Inferred Mineral
Resource exists, or is
economically or legally mineable.
|
|
|
The Timmins West Mine Mineral Resource totals 5.77 Mt at 4.87
gpt Au, amounting to 902,600 ounces of gold in the Indicated Mineral Resource
category and 2.67 Mt at 5.00 gpt Au amounting to 429,300 ounces of gold in the
Inferred Mineral Resource category. Subdivision of the Mineral Resource between
the Timmins, Thunder Creek, and 144 Gap Deposit is tabulated below. The estimate
for the Timmins West Mine is based on historical diamond drilling dating back to
March 1984 and drilling completed by Lake Shore between July 2003 and the date
of databases being closed for the current estimate. The database closure date was November 20, 2015 for
the Timmins Deposit, November 23, 2015 for the Thunder Creek Deposit and in very
early 2016 for the 144 Gap Deposit. A total of 1,613 drill holes intersected
mineralization and were used to estimate Mineral Resources for the Timmins
Deposit with 1,068 drill holes used in the Thunder Creek Estimate and 167 used
in the 144 Gap Deposit estimate.
I-29
|
TIMMINS WEST MINE
MINERAL RESOURCE ESTIMATE ABOVE COG
|
|
In-Situ Resource Above Cut-Off Grade
(COG)
|
|
|
Tonnes
|
Grade
|
Ounces
|
|
Timmins Deposit @ 1.5 g/t COG*
|
|
Indicated
|
1,816,000
|
5.08
|
296,000
|
|
Inferred
|
606,000
|
4.75
|
92,600
|
|
Thunder Creek @ 1.5 g/t COG**
|
|
Indicated
|
2,225,000
|
4.27
|
305,700
|
|
Inferred
|
151,000
|
3.62
|
17,500
|
|
144 Gap Deposit @ 2.6 g/t COG
|
|
Indicated
|
1,734,000
|
5.41
|
301,700
|
|
Inferred
|
1,914,000
|
5.19
|
319,200
|
|
Total Timmins West Mine
|
|
Indicated
|
5,775,000
|
4.87
|
903,400
|
|
Inferred
|
2,671,000
|
5.00
|
429,300
|
* Includes Timmins Deposit Broken Ore +
Stockpile
** Includes Thunder Creek Deposit Broken Ore + Stockpile
Mineral Resources were estimated using a total of 291 holes
(176,332 meters) with 146 holes ( 141,680 meters) being from surface drilling
and 145 holes ( 34,652 meters) being from underground platforms established from
the new exploration drift near the 820 Level. The diamond drill hole data base
has been subjected to verification and is considered to be robust and of
adequate quality for the estimation of Mineral Resources.
The mineralized zones defined and used for estimation of
Mineral Resources are focused on material grading 2.6 gpt with lower grade
material included for internal continuity. A base case using a cut–off grade of
1.5 gpt Au is reported for the Timmins and Thunder Creek Deposit in order to
maintain continuity within each zone. For the 144 Gap Deposit a cut-off grade of
2.6 g/t is used. Sensitivities to cut–off were run at 1.0 gpt increments of gold
grade from 1.00 gpt to 5.00 gpt. Continuity at levels at and below a 2.6 gpt cut
off grade is reasonable but sharply reduced at higher levels which imply the
stated Mineral Resources at these higher levels may be difficult to achieve
without a very selective mining approach or incorporating a significant amount
of internal dilution.
Several steps were taken in order to review and validate the
current block model and reported results which included: comparison of solid and
block model volumes, comparison of the block model against diamond drill
results, checking with nearest neighbor methods and comparisons with recent
production data with no significant issues identified. A review was also carried
out by SGS Canada to verify certain aspects of the Mineral Resource estimate for
the Timmins West, Thunder Creek, and 144 Gap Deposits including database
integrity, parameters used in defining zones, grade capping, search ellipse
dimension and orientations, and degree of smoothing. Based on the review of the
Mineral Resource estimate, SGS concludes that “No significant anomalies were
identified during this review and we have no reason to expect any bias or error
in the overall estimate for this deposit.”
A long–term gold price of US$1,100 per ounce and an exchange
rate of US$0.90/ $CDN is assumed.
I-30
Mineral Reserves
|
|
|
Cautionary Note to Investors Concerning Estimates of
Probable Reserves
|
|
|
|
This section uses the term “Probable Mineral Reserves”.
The Corporation advises investors that while this term is recognized and
are required by Canadian regulations (under NI 43-101
Standards of
Disclosure for Mineral Projects
), it differs from the United States
Securities and Exchange Commission’s definition of “reserve” in SEC
Industry Guide 7. Under SEC standards, mineralization may not be
classified as “reserve” unless, among other things, the determination has
been made that the mineralization could be economically and legally
produced or extracted at the time the reserve determination is made.
Accordingly, the mineral reserve estimate disclosed in this section may
not qualify as a “reserve” under SEC standards.
|
|
|
The estimated Probable Mineral Reserves (diluted and recovered)
at December 31, 2015, at the point of delivery to the mill are summarized
below.
|
TIMMINS WEST MINE
ESTIMATED PROBABLE MINERAL RESERVES
|
|
Deposit
|
Tonnes
|
Grade
(g/t)
|
Ounces
|
|
Timmins Deposit
|
1,397,000
|
4.4
|
195,500
|
|
Thunder Creek Deposit
|
1,498,000
|
4.1
|
196,300
|
|
Timmins West Mine Total Reserves Mined to Surface
|
2,895,000
|
4.2
|
391,800
|
Mineral Reserves incorporate a minimum cut-off grade of 2.3
grams per tonne. The cut-off grade includes estimated mining and site G&A
costs of $67.00 per tonne, surface haulage costs of $7.20 per tonne, milling
costs of $22.62 per tonne, mining recovery of 95%, external dilution of 18.0%
for TD and 12.4% for TC, and a metallurgical recovery rate of 97%.
To estimate the Mineral Reserves, the following steps
(summarized at a high level) were used by mine planning personnel. The Indicated
Mineral Resources were isolated (from Inferred Mineral Resource material) from
the Mineral Resource models and assessments were made of the geometry and
continuity of each of the mineralized zones. Geomechanical evaluations were
taken into account in the assessment and assignment of appropriate mining
methods and stope sizes. Individual stope designs (wireframes) were then created
in three dimensions. These stope wireframes were queried against the block
models to determine the in-situ Mineral Resource. This allowed for fair
inclusion of internal dilution from both low grade and barren material.
Additional factors were assigned for external dilution (with or without grade)
dependent on the specific mining method and geometry of each stoping unit being
evaluated. Finally, a recovery factor was assigned to the overall Mineral
Reserves to allow for in-stope and mining process losses.
Stope cut-off grades were estimated to determine which stopes
to include in the Mineral Reserves. Detailed mine development layouts and
construction activities were assigned to provide access to each of the stoping
units. A detailed LOM development and production schedule was prepared to
estimate the annual tonnes, average grade, and ounces mined to surface.
Development, construction, and production costs were estimated to allow an
economic assessment to be made comparing the capital and operating expenses
required for each area to the expected revenue stream to ensure economic
viability.
Mining Operations
The Timmins West Mine is accessed by a production shaft and
portal/ramp from surface. Both facilities are located near the Timmins Deposit.
Mining at the Timmins Deposit was initiated in the second half of 2009 via the
main ramp from surface that had been developed to a depth of 200 vertical metres
(while the production shaft was being constructed). Mining started within the
Vein Zones, Footwall (FW) Zone, and the Main Zone (MZ). In the upper levels,
mining results were largely as anticipated, with narrow quartz-tourmaline veins
that returned low grade and tonnage over short strike lengths as a result of
poor continuity of the mineralized zones at shallow elevations.
In 2010, mining continued in the MZ and Vein Zones from the
ramp between the 140 metre and 270 metre Levels. Mining in the upper part of the
Timmins Deposit has been idle since the second half of 2011; however, the MZ
remains largely untested below the 260 metre Level where some of the best drill
intersections were returned from the west side of the ramp. Following positive
results from recent infill and stope definition drilling completed in the FW2A
Zone, which comprises some of the largest remaining reserve blocks at the
Timmins Deposit, mining in the intermediate to upper portions of the deposit
(accessed via the up-ramp driven from the production shaft) is set to resume
between the 480 metre and 390 metre Levels in early to mid-2016. The first stope in the UM1 Zone
from the 650 metre Level (accessed via the production shaft) was mined in the
fourth quarter of 2010 and was highly successful. Mining a number of the
smaller, structural hanging-wall lenses comprising the UM complex (including the
UM2 and UM1a) has also proven successful despite smaller block sizes, moderately
lower grades, and complex geometries. From 2009 through 2015, 2.09 million
tonnes at an average grade of 4.4 grams per tonne Au (295,707 ounces) have been
mined from the Timmins Deposit.
I-31
Access to the Thunder Creek Deposit was gained by developing
ramps from the Timmins Deposit 200 metre Level (accessing Thunder Creek Rusk
Zone at the 300 metre Level) and 650 metre Level (accessing Thunder Creek
Porphyry Zone at the 730 metre Level). The Rusk horizon was intersected in July
of 2010 and the Porphyry Zone in November 2010. Access within the Thunder Creek
Deposit was greatly improved with the successful “breakthrough” (connection) of
the down-ramp driven from the 300 metre Level and the up-ramp driven from the
730 metre Level achieved in 2015. From 2010 through 2015, 2.01 million tonnes at
an average grade of 4.3 grams per tonne Au (278,957 ounces) have been mined from
the Thunder Creek Deposit.
The 144 Gap Deposit was initially discovered in late 2014 as
part of a successful surface diamond drilling campaign. The Technical Report
includes an Initial Mineral Resource estimate for the Gap, derived from both
surface and underground delineation drilling. Not currently in production, the
Gap deposit is accessible via a 1,317 metre ramp and hanging-wall exploration
drift (820 metre Level) driven to the southwest from the 765 metre Level at
Thunder Creek.
The majority of the main mine infrastructure (surface and
underground) is in place and the Bell Creek Mill expansion project has been
completed to meet current production requirements. The Timmins West Mine
successfully uses the longhole mining method which is commonly used worldwide
for deposits with similar geometry and conditions. The operation also uses
common, proven mining equipment and has experienced management and mine
operations personnel. The Timmins area has a significant, well-established
mining service/supply industry to support the operation. Through five years of
operating experience, the Timmins West Mine has implemented the systems and
programs (i.e. health and safety, environment, training, maintenance, operating
procedures, etc.) necessary to sustain production. This experience has also
provided a solid basis for estimating the capital and operating costs used in
preparation of the LOM plan.
The mine design used for the updated Mineral Reserve estimate
is based on operating experience gained since commercial production commenced in
2011. The majority of the main mine infrastructure (surface and underground) is
in place and the Bell Creek Mill expansion project has been completed to meet
current production requirements. The Timmins West Mine successfully uses the
longhole mining method which is commonly used worldwide for deposits with
similar geometry and conditions. The operation also uses common, proven mining
equipment and has experienced management and mine operations personnel. The
Timmins area has a significant, well-established mining service/supply industry
to support the operation.
Through five years of operating experience, the Timmins West
Mine has implemented the systems and programs (i.e. health and safety,
environment, training, maintenance, operating procedures, etc.) necessary to
sustain production. This experience has also provided a solid basis for
estimating the capital and operating costs used in preparation of the LOM plan.
Production will be approximately 2,680 tonnes per day during
2016 and 2017 and reduce to approximately 2,175 tonnes per day in 2018, before
ramping down and ending in Q2 2019. The production profile is summarized below.
|
ESTIMATED LOM
PRODUCTION PROFILE
|
|
Item
|
2015
Year-End
Inventory
|
2016
|
2017
|
2018
|
2019
(Q2)
|
Total
|
|
Tonnes
|
13,282
|
934,895
|
1,022,249
|
793,973
|
129,880
|
2,894,279
|
|
Average TPD
|
|
2,561
|
2,801
|
2,175
|
1,082
|
|
|
Average Grade
|
4.5
|
4.5
|
4.2
|
4.0
|
3.9
|
Ave 4.2
|
|
Ounces – Upper Range
|
|
147,600
|
150,500
|
113,100
|
17,700
|
|
|
Ounces – LOM Plan Avg
|
1,902
|
134,181
|
136,831
|
102,813
|
16,104
|
391,831
|
|
Ounces – Lower Range
|
|
120,800
|
123,200
|
92,500
|
14,500
|
|
Annual ounce production is presented as a range (Upper and
Lower). The range is based on ±10% variance from the LOM plan to reflect
potential differences in the combination of stopes that may be mined during each
year.
Mineral Processing and Metallurgical Testing
Extensive metallurgical test work was completed prior to
processing any material from the Timmins West Mine. The test work results
indicated that the ore will be very amenable to the Bell Creek Mill conventional
gold milling processes.
I-32
Specifically, the ore was free milling and the gold responded
well to cyanide leaching and CIP recovery. In general, there was found to be
good correlation between the results expected based on test work and the actual
operating results. In some cases, the actual results exceeded expectations.
The Bell Creek Mill Phase 1 expansion was completed in October
2010. Planning for Phase 2 of the mill expansion (increasing throughput capacity
to over 3,000 tonnes per day) was started in the first quarter of 2011. Part 1
of the expansion was completed by the end of of 2012 and increased the plant to
a throughput of 2,500 tpd. The Phase 2 expansion was completed during the third
quarter of 2013. Prior to launching the Phase 2 expansion project, more
comprehensive test work was completed.
Test work was undertaken in 2013 by SGS Minerals to determine
the effect of grind on recovery. It showed a slightly increasing recovery with
finer grinds, as well as lower than expected gravity gold recoveries. Gravity
gold recoveries were 25.7% for Thunder Creek ore, 18.3% for Timmins Deposit, and
38.7% for Bell Creek ore. This shows how variable the ore is within these ore
bodies. In-house test work continues on a regular basis to confirm and increase
the metallurgical performance of the plant, including stripping circuit and
leaching circuits.
Overall, the combination of Lake Shore Gold’s operating history
and the extensive amount of test work conducted provides confidence that the
process design and equipment selection will result in achieving the targeted
recovery and throughput levels.
All ore mined from the Timmins West Mine has been, and will
continue to be processed at Lake Shore Gold’s Bell Creek Mill. The Bell Creek
Mill is located approximately 6.5 kilometres north of Highway 101 in South
Porcupine, Ontario. The Timmins West Mine ore is loaded into surface haul trucks
at the Timmins West Mine and hauled to the mill (approximately 56 kilometres
one-way).
The Bell Creek Mill is a conventional gold processing plant
which consists of a one stage crushing circuit, ore storage dome, one-stage
grinding circuit with gravity recovery, followed by pre-oxidation and
cyanidation of the slurry with CIL and CIP recovery. The Bell Creek Mill
throughput is approximately 3,000 tonnes per day and recovery is approximately
97% for the Timmins West Mine ore.
The actual processing results of Timmins West Mine material
during 2015 are shown below.
|
TIMMINS WEST MINE
MATERIAL PROCESSED IN 2015
|
|
Ore Type
|
Tonnes Processed
|
Grade
(grams Au/tonne)
|
Recovery
|
|
Timmins West Mine
|
1,011,000
|
97%
|
1,022,249
|
Gold recovery from all Timmins West Mine material has met
expectations established by test work completed prior to plant start-up. All
material yields a consistent high recovery and consistent grade. The average
grind size to achieve these recoveries is a P80 of 75 micron. All reagent
consumptions remained at expected levels for the different materials processed.
Gravity recovery averaged 25% to 35% through this operational period.
Tailings Facility
All ore to date from the Timmins West Mine has been milled at
Lake Shore Gold’s existing Bell Creek Mill. All future production from the
Timmins West Mine will also be processed at the Bell Creek Mill.
The Bell Creek tailings facility (BCTF) is part of the Bell
Creek Complex. The facility first received ore from the Bell Creek Mine in 1986
at an initial rate of 300 tonnes per day (tpd) and later increased to 1,500 tpd
by 2002. Production from the Bell Creek Mine ceased in 2002 and the tailings
facility was placed in a state of inactivity (care and maintenance) from 2002 to
2008. The Bell Creek Mill resumed operation in the last quarter of 2008 and the
tailings facility was reactivated. In 2015 the Bell Creek Mill processed ore
from both the Bell Creek Mine and Timmins West Mine at a nominal rate of over
3,581 tpd.
The BCTF is located west of the Bell Creek Mill, covers an area
of approximately 147 ha, and includes: three tailings cells, two clear water
ponds, an ffluent treatment plant and sludge settling pond, and north and south
diversion ditches Tailings are pumped in a conventional slurry stream (40% to
45% solids) from the mill to the tailings facility for deposition.
The Bell Creek Mill is permitted to 5,500 tpd. The Phase 4 Mini
cell was constructed in 2014 and subsequently raised in 2015. Another tailings
expansion is planned for 2016 (Phase 4 North), north of the existing Phase 4
Mini cell. A depositional plan has been completed to allow for deposition within
the existing BCTF footprint for the next 5 years prior to additional expansion.
In 2015 excavation of Phase 3 commenced to provide approximately 130,000 tonnes
of tailings to Timmins West Mine as paste backfill in the underground workings.
I-33
Closure and Reclamation
Mine closure is the orderly safe and environmental conversion
of an operating mine to a “closed-out” state.
The development of a walk-away, no active management scenario
is a primary environmental management goal for this project. The long-term
environmental management issues associated with the project have been identified
in the Mining Act and relate to ore hoisted to surface, waste rock dumps, open
holes to surface and overall construction of permanent structures. Other
secondary issues, such as returning the site to a productive use (i.e. forestry)
will be accommodated within the context of the Closure Plan.
Should Lake Shore identify and require an area to store rock
which poses a metal leaching risk, this will be conducted on the waste-rock
containment pad during the life of the mine. Runoff from this low permeability
pad will be directed to the containment pond, preventing a release of water with
potentially high concentrations of metals. Water from the containment pond will
be recycled for use as process water with the excess being treated and released
to the environment in accordance with regulatory requirements. However, with the
extensive sampling program initiated by the Timmins West Mine facility, the
analytical data collected does not identify any potential acid generating or
metal leaching issues.
At the conclusion of the mine life, the closeout rehabilitation
measures summarized below will be implemented.
|
|
•
|
Removal of surface buildings and associated
infrastructure.
|
|
|
•
|
Dewatering the ponds by pumping treated
effluent through the approved discharge location.
|
|
|
•
|
Breaching of existing ponds to all natural
flows and remediated site drainage to their background watersheds.
|
|
|
•
|
Allowing the underground workings to naturally
submerge with local groundwater.
|
|
|
•
|
Securing of mine openings in accordance with
regulatory requirements.
|
|
|
•
|
Contouring of waste rock.
|
|
|
•
|
Contouring, covering, and re-vegetating
disturbed areas using available overburden.
|
Infrastructure will be removed from the site and any other
disturbed areas associated with the project will be re-vegetated, mainly through
natural regeneration using seed banks in the overburden stored on site.
Operating Costs
The estimated capital and operating costs have been based on
operating experience at the Timmins West Mine and the Bell Creek Mill. The costs
for 2016 have been developed through the Timmins West Mine 2016 annual budget
exercise and the costs from 2017 through 2019 comprise the remaining LOM plan.
The estimated LOM capital and operating costs are summarized below.
|
ESTIMATED LOM
CAPITAL AND OPERATING COSTS
|
|
Cost Item
|
Total Costs
(millions)
|
|
Capital Cost
|
$82.6
|
|
Operating Cost
|
$296.0
($102.2 per tonne)
|
The costs and productivities used as the basis for estimating
the Mineral Reserves have been based on actual performance metrics of the
operation in 2011 through 2015. These factors are considered low risk to the
Mineral Reserve estimate. In addition, social, political, and environmental
factors are all considered to be low risk factors for the continued operation of
the Timmins West Mine and to the Mineral Reserves estimate.
Conclusions and Recommendations
The authors of the Timmins West Technical Report made the
following recommendations for Mineral Resource estimation and Mineral Resource
development:
|
|
•
|
Continue to evaluate alternate estimation
methods such as ordinary or indicator kriging to assess whether they
provide any improvements for grade estimation can on a local scale.
|
|
|
•
|
Evaluate the use of spherical search ellipsoids
for certain zones at the 144 Gap Deposit in order to reduce artifacts in
grade estimation caused by a drill hole orientations.
|
|
|
•
|
Complete some additional studies to evaluate
capping levels for various zones at the 144 project.
|
I-34
|
|
•
|
Collect some additional specific gravity data for
mineralized zones. Work to date suggests that all three of the deposits at
the Timmins West Mine have a variety of rock types and that the SG within
the rock types can vary considerably so more data would be beneficial for
Mineral Resource estimates.
|
|
|
•
|
Implement definition drilling of Indicated Mineral
Resources to refine shapes and grade estimates as necessary for detailed
mine planning. Review this program on an annual basis. Proposed drilling
for each deposit in 2016 is provided below:
|
Proposed Definition Drilling for 2016
The authors of the Timmins West Technical Report made
recommendations for proposed definition drilling (a) at the Timmins Deposit for
a total of 44,250 m of drilling at an average cost of $84.89/m, for a total
budget of $3,756,000; (b) at the Thunder Creek Deposit for a total of 38,210 m
of drilling at an average cost of $84.89/m, for a total budget of $3,244,000;
and (c) at the 144 Gap Deposit for a total of 46,000 m of drilling at an average
cost of $84.78/m, for a total budget $3,900,000.
Proposed Exploration Drilling for 2016
The authors of the Timmins West Technical Report recommended
continued underground exploration drilling at a total of 5,600 metres of
drilling at an average cost of $107.14/m. , for a total budget $600,000, noting
that it has the potential to define new mineralization to add to the growing
Mineral Resource base on the Thunder Creek-144 trend. The authors also
recommended continued surface exploration including total 7,000 metres of
drilling at an average cost of $128.57/m (for a total budget $900,000) to (a)
test the top of the 144 Gap Deposit where infill surface drilling in late 2015
intersected mineralization that is open up-dip and (b) follow-up on significant
surface intersections from the 144 North and South Zones, located between 0.5
-1.6 kilometers southwest of the 144 Gap Zone.
Bell Creek Complex
The following descriptions of Tahoe’s Bell Creek Complex are
summarized from a technical report prepared for Lake Shore Gold by Eric Kallio,
P. Geo, and Natasha Vaz, P. Eng, in compliance with NI 43-101 entitled “NI
43-101 Technical Report, Updated Mineral Reserve Estimate For Bell Creek Mine,
Hoyle Township, Timmins, Ontario, Canada” dated March 27, 2015 (the “
Bell
Creek Technical Report
”). Natasha Vaz, P.Eng, and Eric Kallio, P.Geo, have
reviewed and approved the scientific and technical disclosure contained in this
prospectus related to Bell Creek Complex.
All defined terms used but not defined in the summary below
shall have the meanings ascribed to them in the Bell Creek Technical Report.
Project Description, Location and Access
The Bell Creek Mine Property is made up of the Bell Creek
claims, the adjacent Schumacher claim and two “northern claims” totaling 12
leases and five patented Boer War Vet lots. The Bell Creek claims consist of 12
leased and two patent Boer War “Vet” lots covering a total area of approximately
320 ha; the Schumacher property and the two northern claims are also Boer War
“Vet” lots each covering an area of approximately 64 ha. To maintain these
claims in good standing, yearly Lease Rents and Land Tenant Taxes are required
to be paid for the leased claims, while Land Taxes and municipal taxes are
required for the “Vet” lots. Of the 12 leased claims, eight are due for renewal
on September 30, 2025 with the remaining four due for renewal on September 30,
2027.
The Bell Creek property is located in Hoyle Township, Porcupine
Mining Division, approximately 20 km by road, northeast of Timmins, Ontario.
Access to the property is gained via Florence Street, a 6.7 km long all-weather
asphalt and gravel road north of Ontario Provincial Highway 101. The project is
situated approximately 564 km north-northwest of Toronto, Ontario.
A map showing the location and access to the Bell Creek Mine
Property is provided under the heading “Timmins West Mine – Project Description,
Location, Access and Infrastructure”.
Within the property limits are the Bell Creek Deposit, mine
infrastructure including shaft, ramp, Bell Creek Mill, tailing facilities as
well as office, warehouse, and dry facilities. All–weather road access and
electrical power transmission lines are established and operational to Bell
Creek Mine. The Bell Creek Mine area, and the City of Timmins experience a
Continental Climate with an average mean temperature range of –16.8°C (January)
to +17.5°C (July) and annual precipitation of approximately 834.6mm.
History
Historical records indicate that gold was discovered in the
Timmins area in the early part of the twentieth century. However, it was only
with increased access to the region following the development of rail
infrastructure in the 1900s that world class deposits were found near the
Porcupine and Nighthawk Lakes. The Vipond, Dome, and Hollinger Mines were
discovered in 1909.
I-35
Gold mineralization was first discovered on the Bell Creek
property through a joint venture between Rosario and Dupont between 1980 and
1982. Between 1986 and 1991, Canamax Resources Inc. explored and developed the
Bell Creek Mine. Falconbridge operated the mine between 1991 and 1992, followed
by Kinross in 1993 and 1994 when mining operations ceased. The mine was kept on
care and maintenance until 2001, when a decision was made to allow the
underground workings to flood.
In 2002, the Porcupine Joint Venture (PJV), a joint venture
between Placer Dome Canada Ltd. (Placer) and Kinross, was formed and in 2005 the
property was reactivated. Goldcorp Inc. (Goldcorp) acquired Placer’s interest
later that year and became the operator of the PJV (Butler, 2008). Acquisition
of the property by Lake Shore Gold was finalized on December 18, 2007.
In November 2005, Lake Shore Gold (Lake Shore Gold) signed a
20-year lease agreement securing a leasehold interest in the surface and mining
rights on the Schumacher property. The lease is renewable for an additional
20-year term. Acquisition of the Bell Creek claims by Lake Shore Gold from the
previous owner, PJV, was finalized on December 18, 2007. The two “northern
claims” were acquired by Lake Shore Gold from the previous owner in December
2009.
On January 1, 2012 Lake Shore Gold announced the Bell Creek
Mine to be in commercial production.
Mineral Tenure, Surface Rights and Royalties
In November 2005, Lake Shore Gold signed a 20-year lease
agreement giving it a leasehold interest in the surface and mining rights on the
Schumacher property. The lease is renewable for another 20-year term. The
property is a Boer War Vet Lot and, as such, is a freehold patent with both
surface and mining rights (granted by the Crown before May 6, 1913). As the
property is a Boer War “Vet” Lot in a surveyed township, its boundaries are
fixed for an area of approximately 64 ha. It is bounded to the west by Bell
Creek and the east by the Vogel property. Lake Shore Gold is required to make an
annual advanced royalty payment of C$25,000 in years four to six of the lease
and C$50,000 thereafter (indexed to inflation) and to pay a 2% NSR once
commercial production begins (internal company documents).
On January 31, 2007, Lake Shore Gold entered into an agreement
with Goldcorp, manager of the PJV, to acquire the Bell Creek Mine. The
acquisition was finalized on December 18, 2007. The agreement is subject to a 2%
Net Smelter Return (NSR) royalty payable to the PJV comprised of Goldcorp and
Kinross. Kinross has subsequently assigned its rights under the agreement to
Goldcorp. Underlying royalty agreements affect some of the Bell Creek claims
including two agreements with net profit interests that can be purchased
outright for relatively small amounts.
The two “northern claims” were acquired from Goldcorp in 2009
as part of the “Bell Creek West” acquisition. These claims are both Boer War Vet
lots, located in a surveyed township and as such have fixed boundaries for an
area of approximately 64 ha. These claims are subject to various royalties.
To the best of the author’s knowledge there is no significant
factor or risk that may affect access, title, or the right or ability to perform
work on the property.
Permits
The required permits and approvals for operations at the Bell
Creek Mine have been acquired. These include the following Provincial and
Federal Permits: Ministry of Northern Development and Mines (MNDM); Ministry of
the Environment (MOE); Ministry of Natural Resources (MNR); Ministry of
Transportation (MTO); Technical Standards and Safety Authority (TSSA); Ministry
of Labour (MOL); Occupational Health and Safety; Explosives; Notification of
Commencement of Construction and Operation; Department of Fisheries and Oceans
Canada (DFO); Natural Resources Canada (NR CAN) – Explosives Regulatory Division
(ERD); and Environment Canada (EC).
Environment
Water management and protection of the natural environment
surrounding the Bell Creek Complex were recognized from the onset of the project
as primary environmental concerns.
All construction and works conducted at Bell Creek passes
through extensive screening by both Lake Shore Gold staff and a third party
consultant to minimize impact to Bell Creek and best manage water and air
releases as per Lake Shore Gold’s operating permits. Detailed engineering
reports assist staff in managing the above mentioned concerns from the site.
The development of the mine will create a disturbance footprint
on the terrestrial environment. Baseline work did not identify the possibility
of provincially or federally listed fauna species on the site that will trigger
concern. The Closure Plan will reduce this disturbance area at closure and
disturbed areas will be rehabilitated with the intent of returning the site to a
productive use (i.e. forestry) resulting in limited long–term impact to the
area.
Environmental monitoring will be conducted in accordance with
regulatory requirements. The monitoring program will be compiled in a database
to assure compliance with all regulations.
I-36
Geological Setting, Mineralization and Deposit Types
The Bell Creek deposit is located in the western part of the
Archean aged Southern Abitibi Greenstone Belt, a supracrustal complex of
moderately to highly deformed, usually greenschist facies, volcanic-dominated
oceanic assemblages that are approximately 2.7 million years in age.
Supracrustal rocks in the Timmins region are assigned as members of seven
volcanic and two sedimentary assemblages within the Western Abitibi Subprovince
of the Superior Province. Intrusions were emplaced during the Archean and
Proterozoic eons.
Keewatin Series greenstone volcanics are found in spatially
discrete groupings and contain tholeiitic volcanic lineages as well as other
volcanic assemblages that were tectonically combined with spatially discrete
komatiite-rich assemblages, banded iron formations, and turbidite-bearing
sedimentary basins. Unconformably overlying the Keewatin Series are younger
sub-aqueous to sub-aerial volcanic-sedimentary rocks of the Timiskaming Series.
These rocks occur along the margins of late regional tectonic deformation zones
that are near strike-parallel shears and/or faults which commonly show high
strain and tight, vertically verging folding.
Batholiths and stocks found in the Southern Abitibi are
approximately sequential from tonalite-monzonite-granodiorite through massive
granodiorite, granite, feldspar ±quartz porphyry to syenite.
The Bell Creek properties are underlain by carbonate altered,
greenschist facies Archean-aged, metavolcanic and clastic metasedimentary rock
units belonging to the Tisdale and Porcupine assemblages. The metavolcanic
portion of the stratigraphy represents the lower portion of the Tisdale Group,
with the ultramafic metavolcanic rocks belonging to the Hershey Lake Formation
(Brisbin, 1997) or Pyke’s (1982) lowermost unit, Formation IV. The mafic
metavolcanic variolitic and iron tholeiitic flow units are interpreted as being
characteristic of Pyke’s (1982) middle unit, Formation V. The Krist Formation,
Pyke’s upper unit, is absent from Hoyle Township (Berger, 1998). The lithologies
generally strike east-west, to west-northwest, and are steeply dipping.
In the Porcupine Camp, gold-bearing structures most commonly
form in relatively competent volcanics intruded by felsic porphyry stocks and
dykes prior to the deposition of the Timiskaming assemblages. Porphyries dating
from 2691 ± 3 Ma to 2688 ± 2 Ma intruded the already folded and faulted
greenstone sequences and initiated the mesothermal systems with the formation of
associated albitites. Observations of pyrrhotite and gold-mineralized clasts at
both Pamour and Dome mines within Timiskaming conglomerates suggest a prolonged
gold deposition event from the creation of the steep south dipping DPFZ up to
the latest episode of crustal stabilization.
Fracture intensity and alteration increase toward mineralized
zones. Alteration consists of bulk and fracture-controlled sericite, Fe-dolomite
to ankerite, quartz, and dark green to black chlorite. Microfractures contain
late chlorite and carbonate veinlets. Distal carbonatization, resulting in grey
carbonate zones, is quite common.
Gold mineralization in the Bell Creek area has been described
as occurring along selvages of quartz veins and wall rocks, in stylolitic
fractures in quartz veins, in fine grained pyrite, and in association with
amorphous carbon. High grade gold mineralization occurs within quartz veins
contained in alteration zones. The alteration zones are characterized by
carbonate, graphitic and amorphous carbon, fine grained pyrite, sericite, and/or
paragonite and are enriched in Au, As, Bi, and W. This style of alteration is
referred to by mine geologists as “grey zones” and is an exploration target in
Hoyle Township.
Exploration
Lake Shore Gold has been actively exploring in the Bell Creek
area since the Schumacher property acquisition in 2005. To date the bulk of the
exploration work has been focused on delineating, defining and extending the
mineralization contained within the North A and North B zones which were
previously identified or exploited underground. Initial exploration activity led
to the preparation of NI 43-101-compliant Mineral Resource estimate in 2010. The
main objective of the Bell Creek Mine exploration program for 2016 is to extend
known mineralization and grow the current Inferred and Indicated resource base
with a proposed total of 17,500 meters of underground and surface drilling at a
total cost of $2.1M.
Diamond drilling in the general vicinity of the Bell Creek
deposit has been conducted by several entities with the first recorded drill
hole assessment files being completed in 1940. Early drilling records lack assay
results or identifiable collar locations. For this reason, the description of
diamond drill programs begins with the Rosario Resources Canada Ltd. drilling
completed in 1978. Drilling completed prior to the acquisition of the previously
described claim group by Lake Shore Gold (Lake Shore Gold) is described as
historic drilling, and consists of 73,294 metres in 546 holes.
Below is a summary of drill programs completed by various
operators prior to Lake Shore Gold interests in Bell Creek:
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1978-1981 (Rosario): consisting primarily of North to
South oriented drill holes (360 degree azimuth). Drilling in 1978 and 1979
was in the general area with no drill holes collared within 1,000 metres
of future mine workings;
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I-37
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1982-1990 (Amax and Canamax): surface drilling completed
at 30 metre centres on a north south oriented grid presently referred to
as the Bell Creek Mine grid;
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1988-1991: underground diamond drilling (Canamax);
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1991-1994 (Falconbridge): completed from diamond drill
cut-outs with various collar azimuths and dips to provide coverage.
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All work performed on the Bell Creek Complex is referenced to
the Bell Creek Mine grid which has been extended eastward through the Schumacher
and Vogel properties.
Drill holes completed from surface and underground are
monitored downhole in 30 and/or 50 metre intervals. As with most properties
drill holes at Bell Creek deviate, both in azimuth and dip, furthermore the
longer the holes the greater the deviation. Tracking the deviation in shorter
holes can be accomplished by using a magnetic downhole survey tool to measure
dip and azimuth (relative to magnetic north). Over the course of the Bell Creek
drilling, these downhole surveys were accomplished using either of the “EZ-SHOT”
or “EZ-TRAC” survey instruments manufactured by Reflex™.
Generally, the rocks at Bell Creek are non-magnetic so
acquiring an accurate measure of deviation for short holes can be acquired using
these instruments. For longer holes where deviation is more excessive
determining the location of a hole becomes problematic, especially if the
drilled rock contains magnetic material, consequently a gyroscopic survey tool
is used to acquire the downhole survey data.
Diamond drilling has identified 16 mineralized zones (14
sub-parallel and two splay zones) that comprise the North A and North B vein
systems and which extend from surface to a vertical depth of approximately 1,700
metres. Mineralization remains open down plunge and to the east at depth.
Sampling, Analysis and Data Verification
It has not been possible to locate the records pertaining to
procedures and practices employed by the various operators prior to Lake Shore
Gold’s involvement. However, in the opinion of the author, the procedures and
practices employed by the various operators at Bell Creek prior to Lake Shore
Gold’s involvement conform to industry standards that predate the adoption of NI
43-101, and this information is suitable for use in resource estimation.
In the opinion of the author, the procedures and practices
employed by Lake Shore Gold conform to or exceed industry standards. Details are
summarized in the following sections.
Drill core obtained from surface diamond drill programs was
delivered daily to Lake Shore Gold’s core logging facility at either the 1515
Government Road or the 216 Jaguar Road exploration offices in Timmins, Ontario.
Under the direct supervision of the Senior Project Geologists,
Stephen Conquer, P. Geo. or Richard Labine, P. Geo., Lake Shore Gold personnel
open the boxes; check the metre markers for accuracy and errors; label the boxes
with the hole number, box number and footage; prepare a quick log of the
contained major geological, alteration and mineralization features. Drill core
is then photographed prior to logging or sampling.
A detailed log of the diamond drill hole was completed by a
graduate geologist or geological technician and entered directly into a computer
database using the Geovia GEMS Logger custom drill hole logging software. The
logs document rock characteristics such as lithology, alteration,
mineralization, veining, as well as documenting sample numbers, intervals and
assay results. Sample intervals are marked directly on the drill core with china
marker and a sample tag inserted. Sample intervals range from 0.3 metres to 1.5
metres in length, with an average sample length of 0.8 metres. The core sample
length is determined by the geologist based upon lithology, alteration, percent
sulphides and the presence of visible gold. Samples do not cross the geological
boundaries as determined by the geologist. Duplicate, blank, and standard
samples are inserted at this point.
After geological logging is complete, the core is given to a
trained and supervised core technician. Core to be sent for analysis is cut in
half longitudinally using a diamond blade core saw. One half of the core is
placed in a plastic sample bag along with a uniquely numbered sample tag. The
remaining half of the core is returned to the core box for reference, with the
other half of the sample tag stapled into the core box.
All diamond drill core is archived in core racks or cross-piled
in a secure systematically indexed core farm at the Lake Shore Gold office
compound, or securely cross-piled at the enclosed security patrolled Bell Creek
Mine site. The sawn core half not sent for assay is available for reference,
metallurgical testing and check-assaying.
All samples are analyzed for gold at various independent
laboratories using fire assay with an atomic absorption finish, except for
samples sent to SGS Labs, which provided an ICP finish. For samples that return
a value greater than 3.0 g/t Au (changed to greater than 10 g/t Au on March
15
th
, 2011), another aliquot from the same pulp is taken and Fire
Assayed (FA) with a gravimetric finish. Occasionally for samples which may
include visible gold analysis is requested to be completed using a pulp metallic
method. In reporting assay results, the protocol utilized by Lake Shore Gold
stipulates that Metallic Assay results override FA with a gravimetric finish,
which in turn overrides FA with an atomic absorption or ICP finish.
I-38
Drill core obtained from underground drill programs is
subjected to the core handling and logging procedures as the core from the
surface programs with some exceptions.
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During the period mid-2009 to mid-2013 drill core was
logged on-site at the Bell Creek Mine core logging facilities under the
supervision of the Chief Mine Geologist (Ralph Koch, P. Geo., 2010 to
2011, and Ivan Langlois, P. Geo., 2011 to 2013).
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Since 2013 core from underground drilling at Bell Creek
has been handled and logged at the Lake Shore Gold Government Road
exploration office under the supervision of Keith Green, P. Geo., 2013 to
2014 and by Stephen Conquer, P. Geo., 2014).
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Due to the density of drilling and the large amount of
core being generated by the underground programs, most holes are whole
core sampled. Select exploration holes are retained for future reference
with core being cut and sampled as per the normal Lake Shore Gold process.
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For both surface and underground drill set-ups, the diamond
drill contractor secures the drill core at the drill site. The drill foreman or
Lake Shore Gold core technicians bring the drill core to the designated logging
facility daily. Both surface and underground core logging facilities are
considered secure. The exploration facilities have limited access and are locked
and alarmed overnight. Mine site facilities have limited day time access, are
locked overnight and are located within the gated mine site.
Samples to be sent for analyses are placed in shipping bags
that are sealed with a numbered security seal by Lake Shore Gold personnel.
These bags are shipped to the assay facility utilizing Lake Shore Gold
personnel. Lake Shore Gold personnel are not involved in any aspect of sample
preparation after core specimens are delivered to the assay laboratory.
Lake Shore Gold has implemented a quality-control program to
ensure best practice in the sampling and analysis of the drill core. The QA/QC
program involves inserting one blank, one CRM standard and one pulp duplicate in
the sample stream. Prior to June 2012 the QA/QC material was inserted for every
20 to 25 samples submitted for analysis, post June 2012 the process was changed,
inserting the QA/QC samples for every 40 core samples. Drill core from a local,
barren diabase dyke is used as a blank sample medium.
Prior to May 2010, ALS had been instructed to take one reject
duplicate after every 25 samples processed. The sample number was tracked
through the analytical process with the suffix “dup”. The method of selecting
reject duplicates was further modified starting May 2010 in order to make a
blind duplicate sample, where the sample would receive its own sample number
sequential to the sample stream.
The QA/QC results are reviewed by one of the QPs who have the
discretion to override the re-assay protocol if there is sufficient evidence to
warrant.
The author is satisfied that the procedures followed are
adequate to ensure a representative determination of the metal contents of any
sampled intervals in the drill core and that the results are acceptable for use
in preparation of this Mineral Resource estimate.
Chip samples are taken across the development heading “face”,
along walls and across the “back” honoring changes in rock type, alteration,
vein style, vein intensity, and amounts and types of sulphides. The chip samples
are designed to crosscut a sub-vertical vein, sulphide mineralized envelope, or
mineralized structures situated in the central portion of the development
heading at approximately 1.3 to 1.5 metres above the floor. Samples are taken
from left to right across the face. Samples of mineralization have a maximum
length of 0.5 metres. Each chip sample extends 0.5 metres above and 0.5 metres
below the designated sample height resulting in a 1 metre wide panel. The
resultant sample should weigh approximately 2 kilograms.
Descriptions of the samples are recorded and a photo is taken
of the face illustrating the geology, mineralization, and sample panels. Samples
are submitted for assay as described in the diamond drill core protocols section
of this report.
For the Bell Creek deposit, chip samples are taken to aid in
defining the shape and grade of the mineralized zones. Face, wall and back
samples may be taken depending on the orientation and location of the zone with
respect to the current face location in the ore zone. This helps in identifying
any mineralized material which may need to be slashed (i.e. excavated) prior to
establishing the final ore zone geometry. Chip sampling on the Bell Creek
deposit generally represents the full mineralized zones as the zones are often
less than the maximum 7 metre development round width (per the Bell Creek ground
support policy).
Underground miners are required to take muck samples in
development headings at the direction of the geology group. Samples are
generally taken only from ore headings, but can be collected from waste headings
if they have been properly identified as part of the round numbering system.
Four muck samples are collected per 3.0 metre wide x 3.0 metre high x 2.8 metre
long development round which represents approximately 75 tonnes. The muck
samples taken during a shift along with the appropriately filled out sample description tags are
brought up from underground and deposited in designated locations. The sample
number, date, shift, workplace, employee, and comments are recorded and the
information given to the geology department.
I-39
When mining from longhole stopes, the LHD operator is
instructed to take a sample every 40 tonnes of muck. All underground muck, chip
and test hole samples are transported from underground directly to Lake Shore
Gold’s Bell Creek Analytical Lab for analysis.
Underground miners are required to drill test holes in the
walls of “ore” development rounds at the rate of one hole per wall per round. As
these holes are being drilled, the drill “cuttings” are collected every two feet
for four samples per hole. One part of a two part numbered tag is placed in the
sample bag. The other portion of the numbered tag is labeled with round number,
left or right wall, downhole interval (i.e. 0-2ft), date and miner’s name which
is given to the geology department to document the test hole process. The test
hole samples are transported from underground directly to Lake Shore Gold’s Bell
Creek Analytical Lab for analysis.
Chips, muck, and test holes are identified by sample tags. The
information from the sample tags is entered by a trained geological technician
into a “Sample Data Tracker” Excel spreadsheet, with assays being added to the
“Tracker” as they are received from Lake Shore Gold’s Bell Creek Lab. Sample
numbers are manually entered into the development round “face/wall” sheets. The
Sample Data Tracker then sends out data queries which populate the development
round face/wall sheets with their corresponding assay results.
Historical diamond drill data was acquired by Lake Shore Gold
in the form of electronic databases (varying software format) with the
accompanying hand-written and/or typed diamond drill log from a range of
previous claim holders. For the most part, original laboratory certificates and
surveying records are not available. It cannot be confirmed to what extent
double entry of log entries was utilized to check for typographical errors at
the time of entry.
Lake Shore Gold has not directly conducted a check on the
electronic database however, as part of the initial Mineral Resource Estimate;
Scott Wilson RPA has reviewed this data set and considers it appropriate for use
in the preparation of Mineral Resource estimates.
The data generated by all drill programs is added to the
database either manually or by digital data import into the GEMS database. All
drill results are checked using the Validate Drill Data tool in Geovia GEMS v
6.5. Tests are run on collar coordinates, downhole surveys, lithology, and assay
data to check for errors.
Validation of the numerical values or actual data occurs on an
ongoing or “in-program” basis as holes are completed, by viewing drill holes on
screen using Geovia GEMS v 6.5 both in 2 and 3D modes and through printed copies
of plans and sections. Any discrepancies in collar location, downhole survey
data, lithology and assay data are communicated with to the Database Manager who
makes the necessary changes to the database.
Mineral Processing and Metallurgical Testing
Prior to 2011, metallurgical testing on Bell Creek
mineralization had not been completed by Lake Shore Gold. Reliance had been
placed on historical test work conducted prior to the construction of the Bell
Creek Mill and on historical milling experience.
Metallurgical testing on Bell Creek mineralization was first
completed for Canamax in 1983 by Lakefield Research of Canada Ltd.
(Lakefield).
Test work was conducted on four samples and included mineral
characterization (head assays, emission specifics, specific gravity (SG)
determination, gold occurrence test), trial grinds, flotation tests, and
cyanidation of the ore. A fifth sample was used for settling and filtration
tests.
The Bell Creek Mill Phase 1 expansion was completed in October
2010. Phase 2 of the mill expansion was completed during the third quarter of
2013. Prior to launching the Phase 2 expansion project, more comprehensive test
work was completed involving seven companies. Overall, the combination of Lake
Shore Gold’s operating history and the extensive amount of test work conducted
provides confidence that the process design and equipment selection will result
in achieving the targeted recovery and throughput levels.
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Mineral Resource and Mineral Reserve Estimates
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Cautionary Note to Investors Concerning Estimates of
Reserves and Estimates of
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Measured, Indicated and Inferred Resources
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This section uses the terms “Measured Mineral Resource”,
“Indicated Mineral Resource” and “Inferred Mineral Resource". The
Corporation advises investors that while these terms are recognized and
are required by Canadian regulations (under NI 43-101
Standards of
Disclosure for Mineral Projects
), the United States Securities and
Exchange Commission does not recognize them.
Investors are cautioned
not to assume that any part or all of the mineral deposits in these
categories
will ever be converted to reserves. In addition,
“Inferred Mineral Resources” have a great amount of uncertainty as
to their existence and economic and legal feasibility
. It
cannot be assumed that all or any part of an Inferred Mineral Resource
will ever be upgraded to a higher category. Under Canadian rules,
estimates of Inferred Mineral Resources may not form the basis of
Feasibility or Pre-Feasibility Studies, or economic studies except for a
Preliminary Assessment as defined under 43-101.
Investors are cautioned
not to assume that part or all of an Inferred Mineral Resource exists,
or is economically or legally mineable.
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This section also uses the terms “Proven Mineral
Reserves” and “Probable Mineral Reserves”. The Corporation advises
investors that while these terms are recognized and are required under NI
43-101, theyt differ from the United States Securities and Exchange
Commission’s definition of “reserve” in SEC Industry Guide 7. Under SEC
standards, mineralization may not be classified as “reserve” unless, among
other things, the determination has been made that the mineralization
could be economically and legally produced or extracted at the time the
reserve determination is made. Accordingly, the mineral reserve estimates
disclosed in this section may not qualify as “reserves” under SEC
standards.
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Lake Shore Gold has prepared an updated Resource Estimate for
the Bell Creek Mine with an effective date of December 31, 2015. The estimate is
based on both historic diamond drilling and drilling completed by Lake Shore
Gold. The Mineral Resource for the Bell Creek Mine occurs within sixteen
mineralized domains of which four, the North A, North A2, North B and North B2,
account for 91% of the total ounce content. The bulk of this mineralization is
centered about section 5950 E between 975 metre elevation and 1375 metre
elevation.
The updated resource estimates at Bell Creek include 4,812,000
tonnes at an average grade of 4.4 gpt for 679,900 ounces in the measured and
indicated categories and 4,124,000 tonnes at an average grade of 4.4 gpt for
584,000 ounces in the inferred category. The new resource estimates compare to
the previous estimates of 4,904,000 tonnes at an average grade of 4.4 gpt for
686,700 ounces in the measured and indicated categories and 4,399,000 tonnes at
an average grade of 4.8 gpt for 685,000 ounces in the inferred category. Proven
and probable reserves at Bell Creek are estimated at 2,131,000 tonnes at an
average grade of 4.5 gpt for 309,300 ounces, which compares to the previous
estimate of 263,600 ounces (1,792,000 tonnes at an average grade of 4.6 gpt).
Mineral Resources
|
In-Situ Resource
above cut-off grade (“COG”)
|
|
Bell Creek @ 2.2 gpt COG
|
Tonnes
|
Grade (gpt
)
|
Ounces
|
|
Measured
|
390,000
|
4.5
|
56,100
|
|
Indicated
|
4,422,000
|
4.4
|
623,800
|
|
Measured and Indicated
|
4,812,000
|
4.4
|
679,900
|
|
Inferred
|
4,124,000
|
4.4
|
584,000
|
|
|
1.
|
Mineral resource estimates have been classified according
to CIM Definitions and Guidelines.
|
|
|
2.
|
Mineral resources are reported inclusive of mineral
reserves.
|
|
|
3.
|
Mineral resources incorporate a minimum cut-off grade of
2.2 gpt for the Bell Creek Mine.
|
|
|
4.
|
Cut-off grade is determined using a weighted average gold
price of US$1,100 per ounce and an exchange rate of CDN$/US$
$1.00/US$0.90.
|
|
|
5.
|
Cut-off grades assume mining and G&A costs of up to
$82 per tonne and/or processing costs of $22 per tonne at Bell Creek Mine.
Assumed metallurgical recoveries are 95% for Bell Creek Mine.
|
|
|
6.
|
Mineral resources have been estimated using Inverse
Distance Squared estimation method and gold grades which have been capped
between 20 and 120 grams per tonne based on statistical analysis of each
zone.
|
|
|
7.
|
Assumed minimum mining width is two
metres.
|
I-41
|
|
8.
|
The mineral resources were prepared under the supervision
of, and verified by, Eric Kallio, P.Geo., who is a qualified person under
NI 43-101 and an employee of Tahoe.
|
|
|
9.
|
Tonnes information is rounded to the nearest thousand and
gold ounces to the nearest one hundred. As a result, totals may not add
exactly due to rounding.
|
The following general constraints and assumptions were used in
creating the block model Mineral Resource estimate for the Bell Creek Mine:
|
|
•
|
The locked down date for the inclusion of diamond drill
or development data is December 31, 2015.
|
|
|
•
|
All work associated with the estimate, database
compilation and verification, geologic modeling, and grade interpolation
is completed using Geovia GEMS v 6.5 geological modeling software.
|
|
|
•
|
Geological interpretation and definition of mineralized
domains is defined using diamond drill results in conjunction with
underground mapping and sampling.
|
|
|
•
|
It is assumed the general orientations or relationships
of mineralized domains delineated through underground development do not
fundamentally change at depth.
|
|
|
•
|
Only diamond drill assay information is used in grade
interpolation, (chip and muck sample results are not used).
|
Mineral Reserves
|
|
Tonnes
|
Grade (gpt)
|
Ounces
|
|
Bell Creek Mine (Proven)
|
162,000
|
4.2
|
21,800
|
|
Bell Creek Mine (Probable)
|
1,969,000
|
4.5
|
287,500
|
|
Total Bell Creek Mine (Proven and Probable)
|
2,131,000
|
4.5
|
309,300
|
|
|
1.
|
The effective date of the mineral reserves is December
31, 2015.
|
|
|
2.
|
The mineral reserve estimates are classified in
accordance with the Canadian Institute of Mining Metallurgy and
Petroleum’s “CIM Standards on Mineral Resources and Reserves, Definition
and Guidelines” as per Canadian Securities Administrator’s National
Instrument 43-101 requirements.
|
|
|
3.
|
Mineral reserves are based on a long-term gold price of
US$1,100 per ounce and an exchange rate of CDN$/US$
$1.00/US$0.80.
|
|
|
4.
|
Mineral reserves are supported by a mine plan that
features variable stope thicknesses, depending on zone, and expected cost
levels, depending on the mining methods utilized.
|
|
|
5.
|
Mineral reserves at Bell Creek Mine incorporate a minimum
cut-off grade of 2.5 gpt. The cut-off grade assumes estimated mining and
site G&A costs of $82.50 per tonne, processing costs of $22.62 per
tonne, mining recovery of 95%, external dilution of 15% and a
metallurgical recovery rate of 95%.
|
|
|
6.
|
The mineral reserves were prepared under the supervision
of, and verified by, Natasha Vaz, P. Eng., who is a qualified person under
NI 43-101 and an employee of Tahoe.
|
|
|
7.
|
Tonnes information is rounded to the nearest thousand and
gold ounces to the nearest one hundred. As a result, totals may not add
exactly due to rounding.
|
The calculation of mineral resources and mineral reserves has
taken into account environmental, permitting, legal, title, taxation,
socio-economic, marketing and political factors and constraints, none of which
are considered to have the potential to affect materially the development of the
Bell Creek Mine. The mineral resource and mineral reserve estimates may be
materially impacted by assumptions used for commodity prices, operating and
capital costs, rock mechanics (geotechnical) constraints, constant underground
access to all working areas, and metal recovery.
Mining Operations
The Bell Creek Mine design has been based on the Resource Block
Model prepared by Lake Shore Gold geology staff. The mine design considers
resource in the measured and indicated category between the 240L and 1220L.
Engineering and cost assessment work has been completed on this measured and
indicated resource material. The designs and cost estimates consider existing
surface and underground infrastructure, mining methods, and operating experience
at the Bell Creek Mine to support the updated proven and probable reserves for
the property.
The naming convention for underground sublevels at the Bell
Creek Mine is expressed in metres below the existing mine shaft collar (i.e.
1220L is nominally 1,220 metres below surface). The measured and indicated
mineralized resource between 240L and 1220L consists of nine steeply dipping
narrow zones. The zones strike nominally east-west with varying strike
lengths.
I-42
The primary access to the mine will continue to be via the
existing portal and main ramp from surface. The main ramp is 5 metres wide x 5
metres high and currently extends to the 895L. All active production levels in
the mine will be accessed via the ramp (i.e. no captive levels) and personnel,
materials, and ore and waste rock will be transferred via the ramp. Secondary
access/egress to/from the underground to surface will be via the existing manway
in the shaft. Below the existing access to the shaft at the 240L station, the
main ramp and internal raises equipped with escapeways will provide two access
routes to the 240L.
The existing shaft is a 6.3 metre by 2.6 metre rectangular,
three-compartment timbered shaft. The shaft collar is at 2,288 metre elevation
and the shaft bottom at 1,998 metre elevation (290 metres deep). A main shaft
station exists at the 240L. The headframe and hoisting facilities remain in
place but are currently not being used. There are no plans to
recondition/refurbish or deepen the shaft for production use for the reserves.
Regular shaft manway inspections will continue to maintain second egress. There
are existing compressed air (152 mm) and dewatering piping (203 mm) and
electrical cables in the shaft that feed the 120L and 240L Pump Stations.
Narrow Vein Longitudinal Longhole with delayed unconsolidated
rock fill (Longhole) stoping has been the primary mining method used to date at
the Bell Creek Mine. Longhole is a widely used and proven mining method that
involves common industry equipment and labour skill sets.
In current active mining areas, sublevels have been established
at 15 to 20 metre vertical intervals (floor to floor) and this sublevel spacing
will be maintained for remaining sublevels to the 1165L. On each sublevel, the
resource will generally be accessed near the centre (along strike) and stope
undercut and overcut sills developed to the east and west extents. Stope lengths
will generally be 20 metres along strike; however, stopes abutting waste or low
grade material may be marginally longer or shorter to optimize recovery.
Longitudinal mining will retreat from the furthest stope from the access, toward
the initial access point.
The resource will be mined “top down” in blocks as ramp
development advances to 1220L. To maintain steady production rates, a mining
front will generally be established at every third sublevel (i.e. 45 to 60 metre
high blocks). Where a stope will be mined up to a previously mined stope in the
block above, sill pillar recovery will be required. Sill pillar recovery will
require working on top of backfill and mining uppers stopes, leaving a permanent
sill pillar (1:1.25 pillar width to pillar height ratio) in place below the
stope above to contain the unconsolidated rock fill. The uppers stopes will not
be backfilled, and 3 metre thick rib pillars will be left to support the
hangingwall (and footwall) between stopes.
Two sources of dilution have been considered in establishing
the Bell Creek Mine reserves. Planned dilution includes low grade material
and/or waste rock that will be mined and will not be segregated from the ore.
Sources of planned dilution include:
|
|
•
|
Waste rock or low grade material that is drilled and
blasted within the drift profile of ore sills and the overall grade of the
“muck” justifies delivery to the mill.
|
|
|
•
|
Waste rock or low grade material within the confines of
the stope limits. This includes internal waste pockets and footwall and/or
hangingwall rock that has been drilled and blasted to maximize ore
recovery and/or maintain favourable wall geometry for stability.
|
Wireframes have been designed for each stope in the mine plan.
Planned dilution is directly reported from block model data within stope
wireframes.
Unplanned dilution includes low grade resource, waste rock,
and/or backfill from outside the planned drift profile or stope limits that
overbreaks or sloughs and is mucked with the ore and delivered to the mill.
Unplanned dilution has been calculated for each stope based on the local stope
dimensions and geometry.
Development and stoping activity schedules have been completed
for the Bell Creek Mine using MS Project. Mining activities are resourced in the
schedule and dumped into MS Excel spreadsheets for reporting.
The Bell Creek mine will operate two shifts per day, seven days
per week. Underground crews and maintenance workers will work 10.5 hour shifts.
Management, administration, and technical services staff will work eight-hour
days from Monday to Friday, with appropriate coverage as required during
weekends. Annual production has been based on operating 363 days per year.
Production will average 850 tonnes per day in Year 1 and slowly
begin to increase to 1,000 tonnes per day by Year 4 while capital and operating
development activities continue down to the 1220L. New mining blocks developed
will contain more tonnes than previously mined blocks, providing an opportunity
to bring multiple blocks in production simultaneously. In Year 5 through Year 7,
development activities will reduce and development personnel and equipment will
transition to support production activities.
The existing development, production, and auxiliary underground
equipment fleet will continue to be used, with 50 tonne capacity underground
haul trucks added to the fleet to support hauling from deeper in the mine.
I-43
Ventilation requirements have been estimated based on providing
0.06 cubic metres per second (cms) of fresh air per kilowatt (kW) of mobile
equipment diesel power (including factors for availability and utilization), for
the equipment anticipated to be operating.
An existing group of management, environmental, technical
services (engineering/geology), administration, maintenance, supervisory, and
production personnel will continue to operate the site.
The underground mine services include electrical power
distribution and communications, compressed air, service water, and dewatering.
The Bell Creek Mine is well positioned in the established
Timmins mining district. Consumable materials and external services required to
support the mining operation will continue to be sourced from local businesses
or from other nearby mining centres. A number of contracts have been established
to support current site activities and these will be amended as required to meet
production demands.
There are existing maintenance facilities on surface to support
maintenance of surface equipment and equipment brought to surface from
underground. Mobile equipment will be brought to the shop for servicing,
preventive maintenance, and repairs. A mechanic will be available (each shift)
to service certain mobile equipment (such as longhole drills and jumbos)
underground and tend to minor breakdowns in the field.
The site has existing health and safety programs in place as
required by the Ontario Occupational Health and Safety Act and Regulations for
Mines and Mining Plants. There is an existing Joint Health and Safety Committee
and Mine Rescue Team and training facilities.
There is currently a full time Safety Coordinator on site
(shared with the mill) and this position will remain filled for life of mine
operations. The Safety Coordinator will maintain site safety programs and
initiatives. There will be a trainer on staff.
Lake Shore Gold contracts Mine Design Engineering (MDEng) for
geomechanical engineering support for the Bell Creek Mine. In May 2013, MDEng
completed a review of the minimum ground support standards, sill pillar
stability, and stope dilution potential. The review included a geotechnical data
collection program of the 550, 565, 580, 595, 610, and 625 Levels.
Processing and Recovery Operations
Ore from the Bell Creek Mine is milled exclusively at the Bell
Creek Mill located approximately 6.7 kilometres north of Highway 101 in South
Porcupine, Ontario. The current 3,300 tonne per day processing plant consists of
a one stage crushing circuit, ore storage dome, one-stage grinding circuit with
gravity recovery, followed by pre-oxidation and cyanidation of the slurry with
CIL and CIP recovery. Ore from the Timmins West Mine is also trucked to the Bell
Creek Milling facility for processing.
The Bell Creek Mill was established as a conventional gold
processing plant utilizing cyanidation with gravity and CIP recovery. Between
1987 and 1994 the mill processed 576,017 short tonnes of Bell Creek ore grading
0.196 ounce per short tonne Au (112,739 recovered ounces). The historical gold
recovery was approximately 93 percent. Additional tonnage from the Marlhill
Mine, Owl Creek open pit, and Hoyle Pond Mine was processed prior to the mill
being placed on care and maintenance in 2002. During this period several
improvements and additions were implemented to increase tonnage throughput from
the original 350 tonnes per day to 1,500 tonnes per day. Lake Shore Gold
purchased the mill in 2008 and re-commissioned the mill for operation in 2009 at
1,000 tonnes per day. The mill was expanded to 2,000 tonnes per day in the
fourth quarter of 2010 and was further expanded to 2,500 tonnes per day in 2011.
Phase 2 of the mill expansion (increasing throughput capacity to 3,300 tonnes
per day) was completed in the third quarter of 2013.
Ore from the Bell Creek Mine is dumped directly onto a 16” by
16” grizzly at the truck dump and a remote controlled rockbreaker is used to
break up the oversized material. The ore is fed with an apron feeder to a series
of conveyors reporting to a scalping grizzly feeder in the crushing building.
The openings between the fingers on the grizzly feeder are 3.5”, with the
oversize reporting to a 44” x 34” C110HD Metso jaw crusher. The jaw crusher is
set to a closed side setting of 4”. The discharge from the crusher is combined
with the -3.5” material from the grizzly feeder and conveyed to the ore storage
dome. The dome has a 20,000MT storage capacity, 6,000MT of which is live. Three
apron feeders pull ore from the dome and convey it to the SAG mill building.
The grinding circuit consists of one 22’ diameter by 36.5’
length low aspect ratio Metso SAG mill and is powered by twin 6,250 hp (4,600
kW) motors. The SAG mill is a repurposed ball mill converted to a SAG by
installing ½” grates and a trommel with ¾” openings. Oversize from the trommel
reports to a collection bin which is fed back into the SAG mill feed chute.
Undersize from the trommel reports to a pumpbox which feeds a cyclopac equipped
with 6 outlets. Four of the outlets are fitted with 20” Krebs gMAX cyclones, and
the other two outlets are capped and available for possible future expansion.
The SAG cyclone overflow reports to the thickener feed box and the underflow
reports back to the SAG mill. A portion of the cyclone underflow is fed to a 30”
Knelson. Knelson concentrate is collected in a hopper and is pumped daily to the refinery for further treatment, while the Knelson
tails flow by gravity back to the SAG mill. Target grind is 80% passing 200
mesh.
I-44
Flocculent is added to the cyclone overflow and is pumped to a
20 meter diameter thickener. The slurry from the cyclones is 25-35% solids by
weight with the thickener underflow at 55% solids by weight. The thickener
overflow water is pumped to the process water tank and reused in the grinding
process. The thickener underflow slurry is pumped to the leach circuit. The
leach circuit consists of five agitated tanks in series with a total volume of
1,940 cubic meters. Pure oxygen is sparged into the first three leach tanks to
passivate the contained pyrrhotite in the ore, as well to maintain a target
dissolved oxygen level, which is required for efficient gold dissolution in
cyanide. Cyanide is then added to leach tank #4, or #5.
There are three carbon-in-leach (CIL) tanks equipped with Kemix
screens having a total volume of 7,500 cubic meters. The first tank (CIL #5)
operates without carbon, so it is essentially a leach tank. The second (CIL #2)
and third (CIL #1) tanks contain roughly 8 grams of carbon per liter of slurry.
The circuit will reach equilibrium for loading of the carbon with the grade of
the loaded carbon in the range of 2,500 to 4,500 grams per tonne. Loaded carbon
is pumped from CIL #2, screened, washed, and then transferred to the loaded
carbon tank. Carbon in the CIP and CIL tanks is advanced counter-current to the
flow of slurry in the circuits.
The slurry from CIL #1 tank reports to the carbon-in-pulp (CIP)
circuit, and is split into two trains of three CIP tanks in parallel with
approximately 45 grams of carbon per liter of slurry. Recovery of the gold from
the carbon is a batch process with carbon being stripped at a rate of 3.5 tonnes
per batch. The turnaround time between batches is 24 hours. Carbon can be
cleaned with acid, reactivated with the kiln and reused in the circuit.
The loaded solution from the strip circuit is passed through
two electro-winning cells in the refinery. The gold collects on the cathodes in
a sludge form. The cells are washed weekly and the sludge is collected in filter
bags and dried. The dried sludge is then mixed with reagents and melted in the
induction furnace. Gold bullion bars are poured when the melt is completed.
The gravity gold material collected from the Knelson
concentrator is transferred to the refinery and a gravity table is used to
increase the gold content. The concentrate is then dried, reagents are added and
the material is melted in the induction furnace. The gravity concentrate and the
CIP gold sludge are melted separately due to the differing amounts of reagents
used in each, and to more accurately determine recoveries in each circuit.
A metallurgical balance is conducted daily based on the tonnage
from the 4 roller belt weightometer located on the feed conveyor to the SAG
mill. The total tonnage, corrected for moisture, and assays from the daily
sample campaign are used to produce the balance. All samples are assayed in
accordance with typical assay standards and a QA/QC program is in place to
ensure the integrity of the assay lab processes.
The main components used to calculate the daily balance are the
thickener underflow solids and solution, the weight of gravity gold collected,
the estimated grade and moisture content of the gravity gold collected, and the
tailings sample solids and solution. The daily metallurgical balance is a best
estimate of daily production which must then be reconciled with the circuit
inventory and bullion poured (this reconciliation is performed on a monthly
basis). All areas of the circuit are sampled for tank level, percent solids,
solids grade, solutions grade, carbon concentrations and grade (where
applicable). As the carbon contains the majority of the gold in inventory,
strict care is taken to ensure sampling is performed correctly.
The final clean out of the electro-winning cell is completed by
the refiner or his designate, under security control. All sludge is collected
and dried. The washed cathodes from the cells are weighed and the weights are
recorded to determine whether any plating buildup is occurring. The dried cell
sludge and the gravity concentrate collected over the same period are smelted
and bullion bars are poured. The bars are stamped and their weights are recorded
and verified. Bullion samples are taken and are assayed at the Bell Creek Lab.
These sample results are used in the metallurgical balance.
The actual processing results of Bell Creek Mine material are
shown in the table below.
|
Bell Creek Mine
Material Processed in 2015
|
|
Ore Type
|
Tonnes
Processed
|
Grade
(grams
Au/tonne)
|
Recovery
|
|
Bell Creek
|
296,200
|
4.4
|
95.4%
|
Gold recovery from all Bell Creek Mine material has met
expectations established by test work completed prior to plant start-up. All
material yields a consistent high recovery and consistent grade. The average
grind size to achieve these recoveries is a P80 of 75 micron. All reagent
consumptions remained at expected levels for the different materials processed.
Gravity recovery averaged 25% to 30% through this operational period.
I-45
Infrastructure, Permitting and Compliance Activities
Provincially, the Ministry of Northern Development and Mines
(MNDM) is the lead agency for mining projects in Ontario. Mine production
triggers requirements under Part VII of the Mining Act. These requirements
include notifications, public and First Nations consultation, closure plans and
financial assurance. Approval of a closure plan provides rights for the company
to proceed under the Mining Act. Mine production is not allowed on unpatented
mining claims and public notice is mandatory for mine production.
The Ministry of the Environment and Climate Change (MOECC)
issues permits to take water (both surface and groundwater), emit noise and
dust, and discharge into water, land and the atmosphere. The MOECC will
administer the following permits for the Bell Creek Complex:
|
|
•
|
Wastewater treatment and effluent discharge from the mine
process water, including construct and operate tailings impoundment –
Ontario Water Resources Act (OWRA).
|
|
|
•
|
Water taking permits – OWRA.
|
|
|
•
|
Industrial Sewage Works Permit – OWRA.
|
|
|
•
|
Solid waste management (waste generator registration) –
Ontario Environmental Protection Act (EPA).
|
|
|
•
|
Noise/air emissions – EPA.
|
Currently, the Bell Creek Complex operates under the following
permits issued by the MOECC:
|
|
•
|
Permit to Take Water No. 6153-84WPMB issued April 28,
2010
|
|
|
•
|
Amended Environmental Compliance Approval (Industrial
Sewage) No. 9641-9SSJTH issued January 16, 2015
|
|
|
•
|
Amended Environmental Compliance Approval (Air) No.
0303-9G8RUY issued March 21, 2014
|
|
|
•
|
Waste Generator No. ON7562685.
|
The Ministry of Natural Resources and Forestry (MNRF) issues
land use permits and work permits under the Public Lands Act and the Lakes and
Rivers Improvement Act, respectively. The MNRF will administer the following
permits for the Bell Creek Complex:
|
|
•
|
Forest Resource Licenses which are issued for the cutting
of crown owned timber (Crown Forest Sustainability Act
|
|
|
•
|
Land use permits for such things as effluent
ditches/pipelines, access roads, camps, etc., where the acquisition of
crown lands is required – Public Lands Act (PLA).
|
|
|
•
|
Work permits for such things as creek crossings or
impoundment structures (dams) - Lakes and Rivers Improvement Act (LRIA).
|
Water management and protection of the natural environment
surrounding the Bell Creek Complex were recognized from the onset of the project
as primary environmental concerns.
All construction and works conducted at Bell Creek passes
through extensive screening by both Lake Shore Gold (Lake Shore Gold) staff and
a third party consultant to minimize impact to Bell Creek and best manage water
and air releases as per Lake Shore Gold’s operating permits. Detailed
engineering reports assist staff in managing the above mentioned concerns from
the site.
The development of the mine will create a disturbance footprint
on the terrestrial environment. Baseline work did not identify the possibility
of provincially or federally listed fauna species on the site that will trigger
concern. The Closure Plan will reduce this disturbance area at closure and
disturbed areas will be rehabilitated with the intent of returning the site to a
productive use (i.e. forestry) resulting in limited long-term impact to the
area.
Environmental monitoring will be conducted in accordance with
regulatory requirements. The monitoring program will be compiled in a database
to assure compliance with all regulations
Effluent treatment reagents (i.e. lime, flocculent, etc.) will
be stored in designated areas. Currently these materials are stored within the
ETP and warehouse in accordance with their respective Material Safety Data
Sheets (MSDS).
Bulk containers of petroleum products are stored in designated
areas within Maintenance area. Spill trays are utilized for containment.
Fuel will be stored and handled in accordance with the Liquid
Fuels Handling Code. Gasoline and diesel fuel will be stored in the tank farm
and in portable, double-hulled tanks that are located within containment areas
to contain incidental spillage. Propane is stored in above ground tanks.
There are no PCBs at the Bell Creek Complex.
I-46
With the exception of silica dust from development rock, there
will be no designated substances at the Bell Creek Complex, as defined in the
Occupational Health and Safety Act.
Explosives will be brought to the Bell Creek Complex on an
as-needed basis. All explosives are stored in powder magazines in the
underground workings of the Bell Creek Mine.
As part of the Safety and Environment Program, Lake Shore Gold
has prepared a Spill Prevention Contingency and Response Plan (SPCR) for the
Bell Creek Complex. This document provides a practical guide for preventing,
controlling and responding to spills. It has been prepared using guidelines
provided by the Liquid Fuels Handling Code, the Canadian Environmental
Protection Act, the Ontario Environmental Protection Act, the North American
Emergency Response Guidebook, as well as standardized response procedures from
petroleum product suppliers. Copies of this document are available from the
Environmental Department.
Mine closure is the orderly, safe and environmental conversion
of an operating mine to a “closed-out” state.
The development of a walk-away, no active management scenario
is a primary environmental management goal for this project. The long-term
environmental management issues associated with the project have been identified
in the Mining Act and relate to ore hoisted to surface, waste rock dumps, open
holes to surface and overall construction of permanent structures. Other
secondary issues, such as returning the site to a productive use (i.e. forestry)
will be accommodated within the context of the Closure Plan.
Currently, with the extensive sampling program initiated by the
Bell Creek Complex, the analytical data collected does not identify any
potential acid rock drainage issues.
At the conclusion of the mine life, the closeout rehabilitation
measures summarized below will be implemented.
|
|
•
|
Removal of surface buildings and associated
infrastructure.
|
|
|
•
|
Removal of holding ponds by converting into
naturally draining ponds
|
|
|
•
|
Sloping and covering any and all waste
rock/tailings with native grasses
|
|
|
•
|
Securing mine opening as per O. Reg. 240/00
|
|
|
•
|
Ensuring water quality as per monitoring
program submitted in Closure Plan
|
Consultation is being undertaken with regulatory agencies, the
general public, the Métis Nation of Ontario, Wabun Tribal Council and the First
Nation communities of Flying Post First Nation, Mattagami First Nation, and
Matachewan First Nation, who are represented by Wabun Tribal Council, and also
Wahgoshig First Nation. Consultation provides an opportunity to identify and
address the impacts of Lake Shore Gold’s activities on external stakeholders and
to expedite the authorization process.
The consultations have been held in order to comply with Lake
Shore Gold corporate policy, the provincial requirements of Ontario Regulation
240/00 and the Environmental Bill of Rights.
An Impact and Benefits Agreement (“IBA”) is currently being
negotiated. The IBA will outline how Lake Shore Gold and the First Nations
communities will work together in the following areas: education/training of
First Nation community members, employment, business and contracting
opportunities, financial considerations and environmental provisions.
Capital and Operating Costs
The estimated capital and operating costs have been based on
operating experience at the Bell Creek Mine and the Bell Creek Mill. The costs
for 2016 have been developed through the 2016 annual budget exercise and the
costs from 2017 through 2022 comprise the remaining LOM plan. The estimated LOM
capital and operating costs are summarized in the table below:
|
Cost Item
|
Total Costs
(millions)
|
Cost per
Tonne
|
|
Capital Cost
|
$77.8
|
$36.6/tonne
|
|
Operating Cost (not including royalties)
|
$220.0
|
$103.65/tonne
|
Exploration, Development and Production
The main objective of the Bell Creek Mine exploration program
for 2016 is to extend known mineralization and grow the current Inferred and
Indicated resource base with a proposed total of 17,500 meters of underground
and surface drilling at a total cost of $2.1M.
The underground program (11,390 meters) will test four target
areas within and proximal to the mine, while the surface drilling (6,110 meters)
will test the North Zone stratigraphy west of the diabase dyke and approximately
250 meters west of the mine.
I-47
The surface portion of the drill program will focus on the
North Zone stratigraphy west of the diabase dyke (WOD) below the 775m level.
This drilling will test the unexplored down-dip portion of the North Zones along
a 550 meter strike length, which starts approximately 250 meters west of the
Bell Creek deposit. This work will follow-up on results from the recently
completed BC-15-106 (3.96gpt/4.0m and 3.92gpt/4.1m) as well as previously
drilled BC-08-06 (4.15gpt/3.1m) and BC-08-08 (5.02gpt/4.8m) .
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Corporation pursuant to the applicable provisions of the
Business
Corporations Act
(British Columbia) and our by-laws, the Corporation has
been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.