Item 1. Identity of Directors, Senior Management and Advisors
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
Item 3. Key Information
A. Selected Financial Data
The selected financial data and the information of the Company in the following table as at December 31, 2015 and 2014, and for the three years ended December 31, 2015 was derived from the audited consolidated financial statements of the Company presented in this Annual Report on Form 20-F, audited by PricewaterhouseCoopers LLP, independent Registered Public Accountant, as indicated in their report which is included elsewhere in this Annual Report on Form 20-F. The selected financial data and the information of the Company as at December 31, 2013, 2012 and 2011 and for the years ended December 31, 2102 and 2011 in the following table was derived from the audited consolidated financial statements of the Company which are not presented in this Annual Report on Form 20-F.
The selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data should be read in conjunction with our annual audited consolidated financial statements, the notes thereto and the sections entitled “Item 3. Key Information – D. Risk Factors” and ‘‘Item 5 — Operating and Financial Review and Prospects.’’
The table below sets forth selected consolidated financial data under IFRS as issued by the IASB, which differ in certain respects from the principles the Company would have followed had its consolidated financial statements been prepared in accordance with United States generally accepted accounting principles. The information has been derived from our annual audited consolidated financial statements set forth in ‘‘Item 18 — Financial Statements.’’
In this Annual Report on Form 20-F all dollars are expressed in Canadian dollars unless otherwise stated.
|
(in thousands, except for share data)
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
|
December 31,
2011
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
291
|
|
|
$
|
497
|
|
|
$
|
643
|
|
|
$
|
812
|
|
|
$
|
977
|
|
|
(Loss) gain on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
14
|
|
|
Loss from continuing operations
|
|
|
(8,897
|
)
|
|
|
(10,565
|
)
|
|
|
(19,051
|
)
|
|
|
(25,226
|
)
|
|
|
(30,571
|
)
|
|
Gain (loss) from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net (loss) income for the year
|
|
|
(8,897
|
)
|
|
|
(10,565
|
)
|
|
|
(19,051
|
)
|
|
|
(25,226
|
)
|
|
|
(30,571
|
)
|
|
Net (loss) income and comprehensive (loss) income for the year
|
|
|
(8,893
|
)
|
|
|
(10,559
|
)
|
|
|
(19,033
|
)
|
|
|
(25,154
|
)
|
|
|
(30,627
|
)
|
|
Basic and diluted loss per common share from continuing operations
|
|
|
(0.10
|
)
|
|
|
(0.12
|
)
|
|
|
(0.22
|
)
|
|
|
(0.29
|
)
|
|
|
(0.35
|
)
|
|
Basic (loss) income per common share from net (loss) income
and comprehensive
(loss) income for the year
|
|
|
(0.10
|
)
|
|
|
(0.12
|
)
|
|
|
(0.22
|
)
|
|
|
(0.29
|
)
|
|
|
(0.35
|
)
|
|
Diluted (loss) income per common share from net (loss) income
and comprehensive
(loss) income for the year
|
|
|
(0.10
|
)
|
|
|
(0.12
|
)
|
|
|
(0.22
|
)
|
|
|
(0.29
|
)
|
|
|
(0.35
|
)
|
|
Total Assets
|
|
|
22,543
|
|
|
|
31,042
|
|
|
|
40,923
|
|
|
|
56,325
|
|
|
|
72,880
|
|
|
Total Liabilities
|
|
|
331
|
|
|
|
1,168
|
|
|
|
895
|
|
|
|
926
|
|
|
|
1,896
|
|
|
Working Capital
|
|
|
22,153
|
|
|
|
29,790
|
|
|
|
39,897
|
|
|
|
55,235
|
|
|
|
70,765
|
|
|
Share Capital
|
|
|
246,089
|
|
|
|
246,089
|
|
|
|
246,089
|
|
|
|
246,089
|
|
|
|
242,270
|
|
|
Total Equity
|
|
|
22,212
|
|
|
|
29,874
|
|
|
|
40,028
|
|
|
|
55,399
|
|
|
|
70,984
|
|
|
Weighted Average Number of Common Shares Outstanding
|
|
|
88,407,753
|
|
|
|
88,407,753
|
|
|
|
88,407,753
|
|
|
|
88,235,975
|
|
|
|
86,915,354
|
|
Critical Accounting Estimates and Policies
The Company’s accounting policies are discussed in detail in our annual audited consolidated financial statements set forth in ‘‘Item 18 — Financial Statements’’, however, accounting policies require the application of management’s judgment in respect of the following relevant matters:
|
|
(i)
|
use of estimates – the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant areas requiring the use of estimates include accrued liabilities and the determination of the assumptions used in the calculation of share-based compensation expense. Actual results could differ from those estimates used in the financial statements.
|
|
|
(ii)
|
share-based compensation – the Company provides compensation benefits to its employees, directors, officers and consultants through a share-based compensation plan. All share-based awards are measured and recognized based on the grant date fair value. Fair value is determined using the Black Scholes option pricing model. Expected volatility is based on historical volatility of the stock. The Company utilizes historical data to estimate the expected option term for input into the valuation model. The risk-free rate for the expected term of the applicable option is based on the Government of Canada yield curve in effect at the time of the grant.
|
Actual results may differ materially from those estimates based on these assumptions.
Recent Changes in Accounting Policy and Disclosures
New Standards and Interpretations Not Yet Adopted
The IASB has issued the following standards which have not yet been adopted by the Company.
IFRS 9 –
Financial Instruments - classification and measurement
IFRS 9 Financial Instruments (“IFRS 9”) was issued by the IASB in November 2009 with additions in October 2010 and July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted. The Company is currently assessing the impact of the standard on its consolidated financial statements.
IFRS 15 –
Revenue from Contracts with Customers
In May 2014, the IASB published IFRS 15 which replaces IAS 18 Revenue, IAS 11 Construction Contracts and some revenue-related interpretations. IFRS 15 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized at a point in time or over time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. IFRS 15 is effective for reporting periods beginning on or after January 1, 2018. Earlier adoption is permitted. There should be no impact on the Company’s financial statements from this new standard.
IFRS 16 – Leases
In January 2016, the IASB published IFRS 16 which replaces IAS 17, Leases. IFRS 16 establishes how an entity will recognise, measure, present and disclose leases. It is effective for annual periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of the standard on its consolidated financial statements.
Exchange Rates
The following tables set out the exchange rates for one United States dollar (“US$”) expressed in terms of Canadian dollars (“CDN$”) for (i) the average exchange rates (based on the average of the exchange rates on the last day of each month) in each of the years 2011 to 2015 and the low rate in each of those years, and (ii) the range of high and low exchange rates in each of the months October 2015 to March 2016.
The following table sets forth, for the periods indicated, the high, low, end of period and average for period noon buying rates as published by the Bank of Canada, as expressed in the amount of one United States Dollar equal to Canadian dollars.
|
|
2016
(to April 21)
|
2015
|
2014
|
2013
|
2012
|
2011
|
|
High for period
|
1.4589
|
1.3990
|
1.1643
|
1.0697
|
1.0418
|
1.0604
|
|
Low for period
|
1.2627
|
1.1728
|
1.0614
|
0.9839
|
0.9710
|
0.9449
|
|
End of period
|
1.2710
|
1.3840
|
1.1601
|
1.0636
|
0.9949
|
1.0170
|
|
Average for period
|
1.3570
|
1.2787
|
1.1045
|
1.0299
|
0.9996
|
0.9891
|
The following table sets forth, for each period indicated, the high and low exchange rates for one United States dollar expressed in Canadian dollars on the last day of each month during such period, based on the noon buying rate.
|
|
October
|
November
|
December
|
January
|
February
|
March
|
|
|
2015
|
2015
|
2015
|
2016
|
2016
|
2016
|
|
High
|
1.3242
|
1.3360
|
1.3990
|
1.4589
|
1.4040
|
1.3468
|
|
Low
|
1.2904
|
1.3095
|
1.3360
|
1.3969
|
1.3523
|
1.2962
|
Exchange rates are based on the Bank of Canada nominal noon exchange rates. The nominal noon exchange rate on April 21, 2016 as reported by the Bank of Canada for the conversion of one United States dollar into Canadian dollars was US$1.00 = Cdn$1.2710.
|
B.
|
Capitalization and Indebtedness
|
Not Applicable.
|
C.
|
Reasons for the Offer and Use of Proceeds
|
Not Applicable.
D. Risk Factors
In addition to the other information presented in this Annual Report on Form 20-F, the following should be considered carefully in evaluating us and our business. This Annual Report on Form 20-F contains forward-looking statements that involve risk and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed below and elsewhere in this Annual Report on Form 20-F.
Properties in which the Company has or is acquiring an interest in, are all currently at the exploration stage. The activities of the Company are speculative due to the high risk nature of its business which is the acquisition, financing, exploration and development of mining properties. The following risk factors, which are not exhaustive, could materially affect the Company’s business, financial condition or results of operations and could cause actual events to differ materially from those described in forward-looking statements relating to the Company. These risks include but are not limited to the following:
Operations and Mineral Exploration
Risks
The Company operates in the resource industry, which is highly speculative, and has certain inherent exploration risks which could have a negative effect on the Company’s operations.
Resource exploration is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environment protection. Any one or a combination of these factors may result in the Company not receiving an adequate return on its investment capital.
The Company does not have any mineral reserves or water rights.
The Company is at the exploration stage on all of its properties and is engaged in ongoing engineering work in order to determine if any economic deposits exist on its properties. The Company may expend substantial funds in exploring certain of its properties only to abandon them and lose its entire expenditure on the properties if no commercial or economically viable quantities of minerals are found. Even in the event that commercial quantities of minerals are discovered, the exploration properties might not be brought into commercial production. Finding commercially viable mineral deposits is dependent on a number of factors, not the least of which is the technical skill of exploration personnel involved. The commercial viability of a mineral deposit once discovered is also dependent on a number of factors, some of which are the particular attributes of the deposit, such as size, grade, amenability to metallurgical processing, and proximity to infrastructure, availability of power and water, as well as metal prices. The Company’s Caspiche project is located in the Atacama region of Northern Chile which has been experiencing drought conditions for an extended period resulting in considerable stress on available water resources. In addition, the Chilean government is currently reviewing regulations regarding water rights and there is greater uncertainty regarding the potential to secure water rights in the area. While the Company believes that it has discovered significant quantities of water at the Peñas Blancas exploration concessions which may be adequate for the potential development options identified in the PEA Report, it does not have any water rights. In order to obtain water rights it is required to make applications to various government departments including the General Directorate of Water Resources (“DGA”) and the Ministry of Public Land of the Chilean government (“BBNN”). In the event that water rights are secured, the ability to extract and use such water is subject to further permitting appraisal from the authorities and there is no guarantee that such permits will be received. The Company is also continuing to pursue other avenues for acquisition of water resources. The Company is an exploration stage company with no history of pre-tax profit and no income from its operations. There can be no assurance that the Company’s operations will be profitable in the future. There is no certainty that the studies conducted by the Company will result in a commercially viable mining operation. No assurance can be given that any particular level of recovery of mineral reserves will in fact be realized or that the identified mineral deposit will ever qualify as a commercially mineable (or viable) mineral deposit which can be legally and economically exploited. There can be no assurance that minerals recovered in small scale tests or the results of pilot plant operations and metallurgical testwork will be duplicated in large scale tests under on-site conditions or in production. If the Company is unsuccessful in its development efforts, the Company may be forced to acquire additional projects or cease operations.
The Company is required to make advance royalty payments and perform certain other obligations to maintain its interest in the Caspiche project.
If the Company is unable to fulfill the requirements of these agreements, including the requirement to make advance royalty payments and commence commercial production within a fixed period, its interest in its Caspiche project could be lost.
The Company’s operations are subject to the inherent risk associated with mineral exploration, development and production activities.
Mineral exploration, development and production activities generally involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Environmental hazards, industrial accidents, unusual or unexpected geological formations, fires, power outages, labor disruptions, flooding, explosions, cave-ins, land-slides, the inability to obtain suitable or adequate machinery, equipment or labor, and the inability to meet ongoing requirements of various permits required for operations are other risks involved in the operation of mines and the conduct of exploration, development and production programs. Operations and activities in which we have a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of mines, if any, and other producing facilities, damage to life and property, environmental damage and possible legal liability for any or all damage. The occurrence of such risks could cause significant delays in the conduct of the Company’s activities or their cancelation which could negatively impact profitability.
The Company’s operations contain significant uninsured risks which could negatively impact future profitability as the Company maintains no insurance against its operations.
The Company’s development of its mineral properties contain certain risks, including unexpected or unusual operating conditions including rock bursts, cave-ins, flooding, fire and earthquakes. It is not always possible to insure against such risks. The Company currently maintains general liability and director and officer insurance but no insurance against its properties or operations. The Company may decide to take out such insurance in the future if such insurance is available at economically viable rates.
The Company has not surveyed any of its properties, has no guarantee of clear title to its mineral properties and the Company could lose title and ownership of its properties which would have a negative effect on the Company’s operations and valuation.
The Company has only done a preliminary legal survey of the boundaries of some of its properties, and therefore, in accordance with the laws of the jurisdictions in which these properties are situated, their existence and area could be in doubt. If title is disputed, the Company will have to defend its ownership through the courts. In the event of an adverse judgment, the Company would lose its property rights. Some of the Company’s exploration concessions associated with its Caspiche project overlap exploration concessions held by other parties and entitlement to such concessions has not yet been determined and is not assured. Some of the land over which the Company holds exploration concessions may be subject to claims of indigenous populations which have not been resolved. The Company has secured an easement for surface rights for most of the area required for the potential development of Caspiche however the easement is being challenged in court and there is no guarantee that the Company will be successful in maintaining its rights under the easement. In addition the Company will be required to negotiate agreements with indigenous communities over certain areas required for potential development of its project and there is no certainty that such negotiations will be successful.
A shortage of equipment and supplies could adversely affect the Company’s ability to operate its business.
The Company is dependent on various supplies and equipment to carry out its mineral exploration and, if warranted, development operations. Any shortage of such supplies, equipment and parts could have a material adverse effect on the Company’s ability to carry out its operations and therefore limit or increase the cost of potential future production.
Changes in the market prices of gold, copper, silver and other metals, which in the past have fluctuated widely, would affect the future profitability of the Company’s planned operations and financial condition.
The Company’s long-term viability and future profitability depend, in large part, upon the market price of gold, copper, silver and other metals and minerals from potential future production from its mineral properties. The market price of gold, copper, silver and other metals is volatile and is impacted by numerous factors beyond the Company’s control, including:
|
|
●
|
expectations with respect to the rate of inflation;
|
|
|
●
|
the relative strength of the U.S. dollar and certain other currencies;
|
|
|
●
|
interest rates;
|
|
|
●
|
global or regional political or economic conditions;
|
|
|
●
|
supply and demand for jewelry and industrial products containing metals;
|
|
|
●
|
sales by central banks and other holders, speculators and producers of gold, silver, copper and other metals in response to any of the above factors; and
|
|
|
●
|
any executive order curtailing the production or sale of gold, silver or copper.
|
The Company cannot predict the effect of these and other factors on metal prices. A decrease in the market price of gold, silver, copper and other metals could affect the commercial viability of the Company’s properties and its anticipated development of such properties in the future. Lower gold and other commodity prices could also adversely affect the Company’s ability to finance exploration and development of its properties.
Land reclamation requirements for the Company’s properties may be burdensome and expensive.
Although variable, depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance.
Reclamation may include requirements to:
|
|
●
|
control dispersion of potentially deleterious effluents;
|
|
|
●
|
treat ground and surface water to drinking water standards; and
|
|
|
●
|
reasonably re-establish pre-disturbance land forms and vegetation.
|
In order to carry out reclamation obligations imposed on the Company in connection with its potential development activities, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs. If the Company is required to carry out unanticipated reclamation work, its financial position could be adversely affected.
Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on the Company’s business.
A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant costs on the Company, and its suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact the Company’s ability to compete with companies situated in areas not subject to such limitations. Given the emotion, political significance and uncertainty around the impact of climate change and how it should be dealt with, the Company cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by the Company or other companies in its industry could harm its reputation. The potential physical impacts of climate change on the Company’s operations are highly uncertain, and would be particular to the geographic circumstances in areas in which it operates. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. These impacts may adversely impact the cost, potential production and financial performance of the Company’s operations.
The natural resource industry is highly competitive, which could restrict the Company’s growth.
The Company competes with other exploration resource companies, which have similar operations, and many competitors have operations, financial resources and industry experience greater than those of the Company. This may place the Company at a disadvantage in acquiring, exploring and developing properties. Such companies could outbid the Company for potential projects or produce minerals at lower costs which would have a negative effect on the Company’s operations.
Mineral operations are subject to market forces outside of the Company’s control which could negatively impact the Company’s operations.
The marketability of minerals is affected by numerous factors beyond the control of the entity involved in their mining and processing. These factors include market fluctuations, government regulations relating to prices, taxes, royalties, allowable production, imports, exports and supply and demand. One or more of these risk elements could have an impact on costs of an operation and if significant enough, reduce the profitability of the operation and threaten its continuation.
The Company is subject to substantial environmental requirements which could cause a restriction or suspension of Company operations.
The current and anticipated future operations of the Company require permits from various governmental authorities and such operations are and will be governed by laws and regulations governing various elements of the mining industry. The Company’s development activities in Chile are subject to various federal and local laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies.
Exploration generally requires one form of permit while development and production operations require additional permits. There can be no assurance that all permits which the Company may require for future exploration or possible future development will be obtainable on reasonable terms. In addition, future changes in applicable laws or regulations could result in changes in legal requirements or in the terms of existing permits applicable to the Company or its properties. This could have a negative effect on the Company’s exploration activities or its ability to develop its properties.
The Company is also subject to environmental regulations, which require the Company to minimize impacts upon air, water, soils, vegetation and wildlife, as well as historical and cultural resources, if present. The Company is required to comply with the provisions of the International Labour Organisation Convention 169 (“ILO 169”) on Indigenous and Tribal Peoples which sets out requirements for consultation with indigenous communities. Compliance with ILO 169 requirements could result in delays and significant additional expense in obtaining the necessary approvals or agreement with indigenous communities to advance the Caspiche project.
In Chile, exploration activities normally require environmental approval. Early stage exploration activities in the scarcely populated Atacama region do not need an environmental impact declaration (DIA) nor an environmental impact study if they involve less than 40 drill holes or drill platforms. On the other hand if the exploration project considers more work than this, a DIA or EIA is required to be prepared and assessed by the environmental evaluation service department (SEA) within the Ministry of Environment. The SEA can be consulted regarding the complexity of the proposal and which of the two styles of reports is required. Normally exploration programs, even if quite large, require the less complex DIA. Development, construction and operations almost always require an EIA. The appropriate document must be presented to the SEA (usually the branch in the Region) in the correct format and they then consult with other government departments regarding the proposal and arrange public comment. Finally, taking into account the responses they have received, the regional environmental evaluation commission (CEA) which is chaired by the Regional Governor and includes all the various sectorial authorities that were involved in the assessment procedure, issues an environmental qualification resolution (RCA) which allows the proposed works to proceed, subject to any conditions or constraints that it deems to impose.
As the Company is in an exploration phase, the appropriate activities and intentions have been described and approved in DIAs. However if in practice the exploration activities result in negative effects upon the environment, government agencies will usually require the Company to provide remedial actions to correct the negative effects. The requirements of Government that can be imposed on planned operations as a result of the SEA evaluation can require additional facilities,
restrictions on operations, additional capital and operating expenditure and additional regulatory requirements that cannot be reasonably forecast by the Company prior to assessment. In addition, compliance with environmental regulations and the terms of an RCA is supervised by another branch of the Ministry of Environment, the SMA who carry out inspections and respond to 3rd party complaints. In case of breach, the SMA will determine the remedial actions or restrictions and may initiate sanctioning procedures which can include temporary or permanent suspension of activities as well as the imposition of significant fines, none of which can be reasonably forecast by the Company.
In addition various parties can commence court challenges to any permits or authorizations granted by the authorities. Such court challenges if successful can result in significant delays and increased costs for potential project development. Failure to comply with applicable laws, regulations and permitting requirements may result in substantial fines and enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or other remedial actions.
The Company's property interests in foreign countries are subject to risks from political and economic instability in those countries.
Exploration in foreign jurisdictions exposes the Company to risks that may not otherwise be experienced if all operations were domestic. The risks include, but are not limited to: military repression, extreme fluctuations in currency exchange rates, labour instability or militancy, mineral title irregularities and high rates of inflation. In addition, changes in mining or investment policies or shifts in political attitude in foreign countries in which we operate may adversely affect our business. We may be affected in varying degrees by government regulation with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The effect of these factors cannot be accurately predicted. Political risks may adversely affect the Company’s existing assets and operations. The Company does not maintain and does not intend to purchase political risk insurance at this time. Real and perceived political risk in some countries may also affect the Company’s ability to finance exploration programs and attract joint venture partners, and future mine development opportunities.
Financing Risks
The Company has a history of losses and expects losses to continue for the foreseeable future and will require additional equity financings, which will cause dilution to existing shareholders.
The Company has limited financial resources and has no operating cash flow. As of December 31, 2015, the end of the last financial year, the Company had incurred accumulated losses totalling approximately $270 million. Continued development efforts will require additional capital to maintain and advance the studies on the Company’s Caspiche project. Additionally, development of the Company’s Caspiche project would require significant additional capital which the Company may be unable to access. The Company has been required to raise funds through the sale of its common shares and has no current plans to obtain financing through means other than equity financing however should it determine to proceed with development of its properties it may be required to obtain loans or other sources of finance for such development. However, the Company may not be able to obtain additional equity or other financing on reasonable terms, or at all. If the Company is unable to obtain sufficient financing in the future, it might have to dramatically slow development efforts and/or lose control of its Caspiche project. If equity financing is required, then such financings could result in significant dilution to existing or prospective shareholders. These financings may be on terms less favourable to the Company than those obtained previously.
The Company may be subject to risks relating to the global economy.
Global financial conditions have been subject to volatility and access to public financing has been negatively impacted. These conditions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. Access to additional capital may not be available to the Company on terms acceptable to it, or at all. The Company is also exposed to liquidity risks in meeting its operating and capital expenditure requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact the ability of the Company to obtain loans and other credit facilities in the future and, if obtained, on terms favourable to the Company. If these increased levels of volatility and market turmoil continue, the Company’s operations could be adversely impacted and the trading price of the common shares could be adversely affected.
The Company has a lack of cash flow sufficient to sustain operations and does not expect to begin receiving operating revenue in the foreseeable future.
The Company’s properties have not advanced to the commercial production stage and the Company has no history of earnings or cash flow from operations. The Company has paid no dividends on its common shares since incorporation and does not anticipate doing so in the foreseeable future. Historically, the only source of funds available to the Company has been through the sale of its common shares. Any future additional equity financing would cause dilution to current shareholders. If the Company does not have sufficient capital for its operations, management would be forced to reduce or discontinue its activities, which would have a negative effect on the value of its securities.
The Company operates in foreign countries and is subject to currency fluctuations which could have a negative effect on the Company’s operating results.
The Company’s operations at December 31, 2015 were located in Chile which makes it subject to foreign currency fluctuation as the Company’s accounts are maintained in Canadian dollars while certain expenses are numerated in U.S. Dollars, Australian Dollars, and Chilean Pesos. Such fluctuations may adversely affect the Company’s financial position and results. Management may not take any steps to address foreign currency fluctuations that will eliminate all adverse effects and, accordingly, the Company may suffer losses due to adverse foreign currency fluctuations.
Risks Relating to an Investment in the Common Shares of the Company
The market for the Company’s common shares has been subject to volume and price volatility which could negatively affect a shareholder’s ability to buy or sell the Company’s common shares.
The market for the common shares of the Company may be highly volatile for reasons both related to the performance of the Company, or events pertaining to the industry (i.e. mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry such as economic recessions and changes to legislation in the countries in which it operates. In particular, market demand for products incorporating minerals in their manufacture fluctuates from one business cycle to the next, resulting in change in demand for the mineral and an attendant change in the price for the mineral. In the last five financial years, the price of the Company’s common shares has fluctuated between $0.39 and $6.20. The Company’s common shares can be expected to continue to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding the Company’s business, and changes in estimates and evaluations by securities analysts or other events or factors. In recent years the securities markets in the U.S. and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small-capitalization companies such as the Company, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies. For these reasons, the Company’s common shares can also be subject to volatility resulting from purely market forces over which the Company will have no control such as that experienced recently resulting from the economic downturn due to the on-going economic uncertainty in the United States, Europe and elsewhere around the globe. Further, despite the existence of a market for trading the Company’s common shares in Canada, the U.S. and Germany, shareholders of the Company may be unable to sell significant quantities of common shares in the public trading markets without a significant reduction in the price of the common shares.
The Company is dependent upon key management, the absence of which would have a negative effect on the Company’s operations.
The Company depends on the business and technical expertise of its management and key personnel, including Wendell Zerb, President and Chief Executive Officer, Bryce Roxburgh, Co-Chairman, Yale Simpson, Co-Chairman and Cecil Bond, Chief Financial Officer. There is little possibility that this dependence will decrease in the near term. As the Company’s operations expand, additional general management resources will be required. The Company may not be able to attract and retain additional qualified personnel and this would have a negative effect on the Company’s operations. The Company has entered into services agreements with Wendell Zerb, Bryce Roxburgh, Yale Simpson and Cecil Bond and some of its senior personnel. The Company maintains no “key man” life insurance on any members of its management or directors.
Certain officers and directors may have conflicts of interest, which could have a negative effect on the Company’s operations.
Certain of the directors and officers of the Company are also directors and/or officers and/or shareholders of other natural resource companies. While the Company is engaged in the business of exploiting mineral properties, such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law to act honestly and in good faith with a view to uphold the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict must disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.
The Company is likely a "passive foreign investment company" which may have adverse U.S. federal income tax consequences for U.S. shareholders
U.S. shareholders of common shares should be aware that the Company believes it was classified as a passive foreign investment company (“PFIC”) during the tax year ended December 31, 2015, and may be a PFIC in future tax years. If the Company is a PFIC for any year during a U.S. shareholder’s holding period of the common shares, then such U.S. shareholder generally will be required to treat any gain realized upon a disposition of common shares, or any “excess distribution” received on its common shares, as ordinary income, and to pay an interest charge on a portion of such gain or distribution, unless the shareholder makes a timely and effective "qualified electing fund" election (“QEF Election”) or a "mark-to-market" election with respect to the common shares. A U.S. shareholder who makes a QEF Election generally must report on a current basis its share of the Company's net capital gain and ordinary earnings for any year in which the Company is a PFIC, whether or not the Company distributes any amounts to its shareholders. However, U.S. shareholders should be aware that there can be no assurance that the Company will satisfy the record keeping requirements that apply to a qualified electing fund, or that the Company will supply U.S. shareholders with information that such U.S. shareholders require to report under the QEF Election rules, in the event that the Company is a PFIC and a U.S. shareholder wishes to make a QEF Election. Thus, U.S. shareholders may not be able to make a QEF Election with respect to their common shares. A U.S. shareholder who makes a mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the common shares over the taxpayer’s adjusted tax basis therein. This paragraph is qualified in its entirety by the discussion below under the heading “Certain United States Federal Income Tax Consequences.” Each U.S. shareholder should consult its own tax advisors regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.
The Company does not intend to pay dividends.
The Company has not paid out any cash dividends to date and has no plans to do so in the immediate future. As a result, an investor’s return on investment will be solely determined by his or her ability to sell common shares in the secondary market.
Increased costs and compliance risks as a result of being a public company.
Legal, accounting and other expenses associated with public company reporting requirements have increased significantly in the past few years. The Company anticipates that general and administrative costs associated with regulatory compliance will continue to increase with ongoing compliance requirements under the
Sarbanes-Oxley Act of 2002,
as amended (“Sarbanes-Oxley”), the Dodd-Frank Wall Street Reform and Consumer Protection Act,
as well as any new rules implemented by the SEC, Canadian Securities Administrators, the NYSE MKT and the TSX in the future. These rules and regulations have significantly increased the Company’s legal and financial compliance costs and made some activities more time-consuming and costly. There can be no assurance that the Company will continue to effectively meet all of the requirements of these regulations, including
Sarbanes-Oxley Section 404
and
National Instrument 52-109 of the Canadian Securities Administrators
(“NI 52-109”). Any failure to effectively implement internal controls, or to resolve difficulties encountered in their implementation, could harm the Company’s operating results, cause the Company to fail to meet reporting obligations or result in management being required to give a qualified assessment of the Company’s internal controls over financial reporting or the Company’s independent auditors providing an adverse opinion regarding management’s assessment. Any such result could cause investors to lose confidence in the Company’s reported financial information, which could have a material adverse effect on the trading price of the common shares. These rules and regulations have made it more difficult and more expensive for the Company to obtain director and officer liability
insurance, and the Company may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage in the future. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on its board of directors or as executive officers. If the Company fails to maintain the adequacy of its internal control over financial reporting, the Company’s ability to provide accurate consolidated financial statements and comply with the requirements of Sarbanes-Oxley
and/or NI 52-109
could be impaired, which could cause the Company’s stock price to decrease.
Differences in United States and Canadian reporting of reserves and resources.
The disclosure in this Annual Report on Form 20-F, including the documents incorporated herein by reference, uses terms that comply with reporting standards in Canada. The terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be used by the Company pursuant to NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of the measured mineral resources, indicated mineral resources, or inferred mineral resources will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility, pre-feasibility studies or other economic studies, except in rare cases.
Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.
Further, the terms “Mineral Reserve”, “Proven Mineral Reserve” and “Probable Mineral Reserve” are Canadian mining terms as defined in accordance with NI 43-101 and the CIM Standards. These definitions differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and all necessary permits or governmental authorizations must be filed with the appropriate governmental authority.
Accordingly, information contained in this Annual Report on Form 20-F and the documents incorporated by reference herein containing descriptions of the Company’s mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
U.S. investors may not be able to enforce their civil liabilities against the Company or its directors, controlling persons and officers.
It may be difficult to bring and enforce suits against the Company in the United States. The Company is a corporation incorporated in British Columbia under the
Business Corporations Act
. A majority of the Company’s directors and officers are residents of Canada and other countries and all of the Company’s assets and its subsidiaries are located outside of the U.S. Consequently, it may be difficult for U.S. investors to effect service of process in the U.S. upon those directors or officers who are not residents of the U.S., or to realize in the U.S. upon judgments of U.S. courts predicated upon civil liabilities under U.S. securities laws. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities under the United States Securities Act of 1933, as amended.
As a “foreign private issuer”, the Company is exempt from Section 14 proxy rules and Section 16 of the
Securities Exchange Act of 1934
.
The Company is a “foreign private issuer” as defined in Rule 3b-4 under the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the U.S. Exchange Act pursuant to Rule 3a12-3 of the U.S. Exchange Act. Therefore, the Company is not required to file a Schedule 14A proxy statement in relation to the annual meeting of shareholders. The submission of proxy and annual meeting of shareholder information on Form 6-K may result in shareholders having less complete and timely information in connection with shareholder actions. The exemption from
Section 16 rules regarding reports of beneficial ownership and purchases and sales of common shares by insiders and restrictions on insider trading in our securities may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities.
Item 4. Information on the Company
A. History and Development of the Company
General
The Company was incorporated under the name of Square Gold Explorations Inc. on February 10, 1984 under the
Company Act
of the Province of British Columbia (subsequently replaced by the
Business Corporations Act
(British Columbia)) with an authorized capital of 20,000,000 common shares without par value. On July 13, 1987, the Company changed its name to Glacier Resources Inc. and on August 19, 1988 changed its name to Golden Glacier Resources Inc.
On June 10, 2002 shareholders approved (i) a share consolidation on the basis of ten (10) old shares for one (1) new share (the "Consolidation"), (ii) an increase in the authorized share capital post-consolidation from 2,000,000 to 100,000,000 common shares, and (iii) a name change to Exeter Resource Corporation. The Consolidation and name change were made effective October 11, 2002.
On March 11, 2010, shareholders of the Company approved a plan of arrangement to create two independent companies focused on mineral exploration and development in Argentina and Chile, respectively (the “Plan of Arrangement”), and (ii) a change in the authorized share capital from 100,000,000 to an unlimited number of common shares. Under the Plan of Arrangement, which was approved by a final order of the British Columbia Supreme Court on March 12, 2010, Exeter retained all assets relating to the Caspiche gold-copper discovery, together with approximately $45.0 million in working capital, and focused on the advancement of Caspiche. On March 22, 2010 Exeter transferred to Extorre Gold Mines Limited (“Extorre”), its Cerro Moro and other exploration properties in Argentina and approximately $25.0 million in working capital.
The head office of the Company is located at Suite 1660, 999 West Hastings Street, Vancouver, British Columbia, V6C 2W2. The address for service and the registered and records office of the Company is located at Suite 2900, 550 Burrard Street, Vancouver, British Columbia V6C 0A3.
Three Year History
The Company is engaged in the business of acquisition, exploration and development of mineral properties located in the Maricunga Region, Chile; its business development over the last three years is described in the following paragraphs. Unless otherwise noted, Jerry Perkins, Vice President Development and Operations of the Company, a qualified person (“QP”) under NI 43-101, is responsible for the preparation of scientific or technical information in this Annual Report on Form 20-F and Wendell Zerb, President and CEO of the Company, a QP under NI 43-101, is responsible for geological and mineral resource information in this Annual Report on Form 20-F.
2013
In February 2013, the Company announced certain management changes, including the appointment of Wendell Zerb as President & CEO, the transition to Co-Chairman by Bryce Roxburgh, and the retirement of Douglas Scheving from the Board of Directors.
The Company entered into Option and Joint Venture Agreements with San Marco Resources Inc. (“San Marco”), on two properties in Mexico: the Angeles and the La Buena properties.
The Company had the option to earn up to 70% of the Angeles property by incurring expenditures of $10 million over 4 years to earn 51%, and the additional 19% by spending an additional $10 million over the following 3 years. The agreement provided for cash payments of $950,000 staged over 7 years by way of placements in San Marco at a 25% premium to San Marco’s 20 day volume weighted average share price (“VWAP”). Exeter committed to a first year expenditure of $1.0 million (completed). Due to adverse market conditions, the Company terminated its joint venture agreement relating to the Angeles project in December.
The Company had the option to earn 60% of the La Buena property by spending $15 million in expenditures and by making cash payments of $650,000 staged over 5 years by way of placements in San Marco at a 25% premium to its 20 day VWAP. The Company committed to first year expenditures of $1.4 million (completed).
In March 2013, the Company announced that it had completed its first water exploration drill hole to test a potential aquifer located within the Cuenca One tenement for which the Company has filed a new exploration permit application. Water was encountered in drilling and preliminary air lift tests were conducted to establish the initial characteristics and significance of the water encountered. Results released in June from a second exploration drill hole sited approximately 1,200 m northwest of the first drill hole, encountered both similar lithologies and water. Air lift tests completed on this hole provided similar water flows as the first drill hole. The water levels in each of the holes returned to original levels within minutes of the termination of the air lift tests, suggesting the potential for positive recharge within the aquifer.
In June 2013, the Company announced that its Chilean subsidiary, Sociedad Contractual Minera Eton Chile (“Eton Chile”), had entered into a joint venture agreement (“JV”) with the Chilean subsidiary of Canadian company Atacama Pacific Gold Corporation (“Atacama Pacific”). The JV covered the potential exploration for subsurface water associated with water exploration concessions applied for at Peñas Blancas (Laguna Verde), Quebrada El Fraile and at Cuenca Two, all located in northern Chile. The agreement included provisions that each company would own a 50% interest in each water tenement and any water rights granted and would incur 50% of the costs associated with exploration. Exeter’s initial exploration commitments totalled US$500,000.
The Company’s application for surface rights at Caspiche (the “Easement”), was granted by the Chilean Government. The Easement gives the Company the right to carry out work and install all of the infrastructure and surface modifications required for the potential development of a mining operation, including roads, excavations, stockpiles, buildings, pipelines, power lines, tailings storage facilities and the like. The Company already had a lease agreement with the Chilean Government for the surface rights that corresponded to its initial mineral rights in the area, and the Easement extended this area to cover most of its additional tenements as well as surfaces that may be required for Caspiche development. The Easement excluded specific surface rights in areas owned by the indigenous community, the Comunidad Colla Rio Jorquera y sus afluentes (CCRJ). The Company had an access agreement with CCRJ and maintained a good relationships, including open communications with the CCRJ and other indigenous communities in the Maricunga area. It expects these relationships and agreements to continue in the future.
The Company announced the evaluation of a new approach for the potential development of the Caspiche deposit. The new approach considered both a standalone open pit oxide gold operation as well as a similar initial operation that then later combined with underground mining of a central higher grade gold copper sulphide core. Santiago based engineering consultancies, NCL Construccion y Ingenieria (“NCL”) and Alquimia Conceptos S.A. (“Alquimia”) conducted these initial studies which investigated lower capital cost and scaleable mining alternatives rather than a large scale, capital intensive super pit scenario.
These initial studies investigated the concept of mining a central higher grade zone using selective, top-down, open stope mining methods, rather than the much larger scale bottom-up (block cave) underground approach previously evaluated by the Company. The objective was to accelerate access to the higher grade core with lower upfront capital expenditures and a relatively early start to production when compared to block caving. Anticipated advantages to a smaller scale, but higher grade operation included reduced water and power requirements when compared to a large scale open pit scenario.
2014
The Company continued its work on the Caspiche project in an effort to advance the project through the review of lower capital alternatives for the potential development of the project. Options assessed included open pit mining of the near surface oxide zone (gold only), followed by a deepening of the open pit as well as underground mining of the central, higher grade portion of the gold-copper sulphide deposit by open stoping.
In January 2014, Eton Chile negotiated new water exploration agreement terms (“Water Agreement”) with Atacama Pacific. The new terms amended the original agreement entered into between the parties in May 2013 and allowed Eton Chile to earn an additional 40% interest, for an aggregate 90% interest, in water exploration tenements Cuenca Two, Quebrada El Fraile, and Peñas Blancas. Water exploration tenements have a maximum term of two years during which exploration activity can be conducted and are not renewable. A new application is required after two years should future exploration be warranted. In the event that water is discovered an application for water rights must be made within 90 days of the expiry of the water exploration concession.
The objective of the Company’s water exploration program was to identify, evaluate, and secure water sources to support a potential initial heap leach gold stage and a follow-on gold-copper sulphide stage of mining at Caspiche.
In February 2014, Exeter informed San Marco that results from exploration at the La Buena project did not meet Company objectives and that it was terminating the joint venture agreement.
During the first quarter of 2014, Eton Chile was served with a court claim challenging the Chilean Government’s 2013 grant of the Easement. The claim, filed before the Santiago Civil Court, was filed by a private Chilean mineral exploration company, Cerro del Medio. Under Chilean mining law there are provisions which provide for securing necessary surface access for the development of mineral deposits. Cerro del Medio’s claim, cites “non-compliance by the Chilean Government of certain legal formalities required to approve the easement” and “that the easement granted overlaps Cerro del Medio’s Santa Cecilia project mining properties”. A review of the claim by Eton Chile’s Chilean legal counsel has concluded that Cerro del Medio’s claim has no grounds under Chilean law and should be rejected.
In May 2014, the Company released the results of a preliminary economic assessment (PEA) for Caspiche (see details of the technical report filed relating to the PEA below). The PEA reported on the work carried out in evaluating the new approaches to potential development at Caspiche described in the paragraphs above, in this Annual Report. It concentrated on three new low capex potential development options, all of which required modest quantities of water to support mining operations. The Company announced that three large-diameter drill holes completed at the Company’s water exploration concession (option for 90% interest) Peñas Blancas, had intersected potentially significant quantities of water based on preliminary evaluation using airlift testing. Down hole pump testing, a more definitive measurement technique to quantify water flow rates and the recharge rate, was completed on one hole, LV-03. Pump tests on LV-03 confirmed a potentially significant water resource. Tests included a series of variable and fixed-speed pump tests. At each flow rate tested, the water table stabilized and recovered rapidly, suggesting favourable permeability and transmissivity. Flow rates of +40 litres per second (“l/s”) were recorded.
In October 2014, the Company announced an expanded water drilling program at Peñas Blancas. The expanded water exploration program included completing two additional large diameter water bore holes and a series of smaller diameter water monitoring holes together with down hole pump tests and water level measurements to quantify water flow rates and aquifer recharge rates. Results from the pump tests, indicated potential for sustainable flows of over 200 l/s over the five holes tested (two new holes and three from drilling in Q2/14).
New metallurgical column leach results from the Company’s Caspiche oxide gold zone were encouraging, suggesting previous estimates for life of mine heap leach recoveries of approximately 80% might be conservative. The tests on coarsely crushed -50 mm material, indicated some potential for increased metallurgical recoveries in the shallower zones, and hence possibly enhanced project cash flow. Five PQ diamond drill cores provided a total of 74 bottle roll test samples and 17 column test samples, including 10 column tests on -50 mm material. The column test materials were composited level by level to simulate mining intervals of two years within a ten year mine plan. Well mineralized gravels, which overly the oxide zone were also tested. The test work was designed to systematically test the oxide zone such that when considered with earlier results confidence levels would approach the requirements for a final feasibility study.
In December 2014, the Company announced the filing of an amended technical report prepared by Santiago based engineering consultancies, NCL Ingeniería y Construcción and Alquimia Conceptos S.A. titled “Amended NI 43-101 Technical Report on the Caspiche Project, Atacama Region, Chile” dated December 19, 2014 with an effective date of April 30, 2014 (the “PEA Report”). The PEA Report described the three new low capex, potential development options, all of which required modest quantities of water compared with the requirements of a large scale open pit. The PEA Report calculated that the 30,000 tonne per day (“tpd”) standalone oxide operation would require a peak water supply of less than 50 l/s. This option produced an estimated average of 122,000 gold equivalent* ounces annually over a projected ten year mine life, including 148,000 ounces annually in the first five years.
Disclaimer: The economic analysis contained in the 2014 PEA is considered preliminary in nature. No inferred mineral resources were used, nor is there any certainty that the economic forecast outlined in the 2014 PEA will be realized. See Exeter’s website or Sedar for the news release dated December 19, 2014: Amended NI 43-101 Technical Report on the Caspiche Project; Effective date: April 30, 2014.
The PEA Report used prices of: Au US$1,300 US$/oz. Ag US$20/oz. and Cu US$3/lb
* Gold equivalent oz (AuEq) value is based on Au, Ag and Cu revenues (prices and recoveries involved). AuEq oz [troy oz] = [Au g/t * Rec Au *tonnes]/31.1 + [Ag g/t * Rec Ag * tonnes]/31.1* silver price troy oz/ gold price troy oz + [[Cu% * Rec Cu * tonnes]*2204] * copper price lbs/gold price troy oz. Recoveries are adjusted based on metallurgical characteristic of the resource.
The standalone oxide open pit mine plan benefited from lower up front capital requirements and sequenced higher start up grades in the initial part of the mine life. In addition, a low life-of-mine strip ratio (0.27:1) and favorable leach kinetics were positive contributors to the project economics. At US$1,300/oz gold, the pre-tax net present value (“NPV”) was US$355 million, generating an internal rate of return (“IRR”) of 34.7%, and a payback period of 3.4 years from initial construction using a 5% discount rate (after-tax 27% NPV 5% US$252 million, IRR 28.5%). The other two potential development options considered the phased treatment of both oxides and sulphides at 60,000 tpd and 27,000 tpd respectively. One option looked at mining both gold in oxides and gold-copper in sulphides by open pit only. This option required a peak water supply of about 185 l/s. The other option looked at open pit mining of gold in oxides followed by selective high grade underground mining of gold-copper sulphide mineralization by open stoping methods, an option that required a peak supply of 150 l/s.
2015
The Company continued its work on the Caspiche gold-copper project in the Maricunga region of Northern Chile. The main focus through 2015 was the advancement of programs related to securing water for the Caspiche project and the review of lower capital alternatives for the potential development of the project.
In February 2015 the Company announced further positive results from the water exploration drilling program at Peñas Blancas. Drilling results suggested that Peñas Blancas is part of a previously undiscovered, extensive, subterranean aquifer. It is located centrally within a high-altitude basin, where there are no other existing underground water rights. The extensive winter snowfall in the area is believed to be the source of recharge. In the second quarter of 2015 the Company announced completion of the water exploration drilling program. Individual pump testing of the six large diameter exploration wells drilled in Peñas Blancas confirmed strong constant water flows and rapid recharge rates. The aggregate flow rate that was tested at constant rates was over 400 l/s, with individual wells varying from 45 l/s to 85 l/s. This aggregate flow rate was considerably above Exeter’s previously targeted estimate of 200 + l/s.
The Company believes that Peñas Blancas could support any of the three identified low capex, development options for the Caspiche project as outlined in the PEA Report. Importantly, the aquifer could also provide an appropriate long term water resource for other potential users in this arid, largely unpopulated region of Chile.
An application for water rights at Peñas Blancas was filed in August 2015.
Also in August 2015, due to challenging financial markets, the Company announced an initiative to reduce corporate overhead through personnel layoffs and reductions in remuneration payable to directors and officers by up to thirty percent.
In November 2015, the Company applied for access to certain areas at Peñas Blancas covering the area where its water drill holes are located and was granted a provisional easement over the area.
Exeter also reviewed a number of new opportunities during the year with the objective of identifying assets that could be acquired to provide additional value for shareholders.
B. Business Overview
General
The Company is a mineral resource exploration and development company. The Company’s principal property is the Caspiche property in northern Chile.
The Company is in the exploration stage of its corporate development; it owns no producing properties and, consequently has no current operating income or cash flow from the properties it holds, nor has it had any income from operations in the past three financial years. As a consequence, operations of the Company are primarily funded by equity subscriptions.
The progress on and results of work programs on the Company’s principal property is set out “Item 4. Information on the Company – Item D. Property, Plants and Equipment”. At this time, based on the exploration results to-date, the Company cannot project significant mineral production from any of its existing properties.
Specialized Skills
The Company’s business requires specialized skills and knowledge in the areas of geology, drilling, planning, implementation of exploration programs, and compliance. To date, the Company has been able to locate and retain such professionals in Canada and Chile, and believes it will be able to continue to do so.
Competitive Conditions
The Company operates in a very competitive industry, and competes with other companies, many of which have greater technical and financial facilities for the acquisition and development of mineral properties, as well as for the recruitment and retention of qualified employees and consultants.
Business Cycles
Late in 2008 the credit crisis in the United States sent many economies, including the Canadian economy, into a recession. Since then, some of the markets have recovered, however the economies of certain States within the European Economic Union have declined and the commodity market has remained volatile. The gold market, late in 2010, made significant gains in terms of US Dollars but remained volatile throughout 2011 and suffered declines through the latter part of 2012 and through 2015. In addition to commodity price cycles and recessionary periods, exploration activity may also be affected by seasonal and irregular weather conditions in Chile. In particular, exploration on the Company’s Caspiche property at higher altitude is challenging and potentially not possible in winter.
Government Regulations
The Company’s operations are subject to certain governmental laws and regulations. The Company’s properties are affected in varying degrees by government regulations relating, among other things, to the acquisition of land, pollution control and environmental protection, land reclamation, safety and production. Changes in any of these regulations or in the application of the existing regulation are beyond the control of the Company and may adversely affect its operations. Failure to comply with the conditions set out in any permit or failure to comply with the applicable statutes and regulations may result in orders to cease or curtail operations or to install additional equipment. The Company may be required to compensate those suffering loss or damage by reason of its activities. The effect of these regulations cannot be accurately predicted. See “Item 3. Key Information - Risk Factors.”
Mineral Application Process in Chile
There are two types of mining concessions in Chile: exploration concessions and exploitation concessions. The principal characteristics of each are the following:
Exploration Concessions
The titleholder of an exploration concession has the right to carry out all types of mineral exploration activities within the area of the concession. Exploration concessions can overlap or be granted over the same area of land; however, the rights granted by an exploration concession can only be exercised by the titleholder with the earliest dated exploration concession over a particular area.
For each exploration concession the titleholder must pay an annual fee per hectare (“ha”) to the Chilean Treasury and exploration concessions have a duration of two years. At the end of this period, they may (i) be renewed as an exploration concession for two further years in which case at least 50% of the surface area must be renounced, or (ii) be converted, totally or partially, into exploitation concessions.
A titleholder with the earliest dated exploration concession has a preferential right to be granted an exploitation concession in the area covered by the exploration concession, over any third parties with a later dated exploration or exploitation concession request. The titleholder must oppose any applications made by third parties for exploitation concessions within the area for the exploration concession to remain valid.
Exploitation Concessions
The titleholder of an exploitation concession is granted the right to explore and exploit the minerals located within the area of the concession and to take ownership of the minerals that are extracted. Exploitation concessions can only be overlapped by exploration concessions and the rights granted by an exploitation concession can only be exercised by the titleholder with the earliest dated exploitation concession over a particular area.
Exploitation concessions are of indefinite duration and an annual fee is payable to the Chilean Treasury in relation to the number of ha.
Where a titleholder of an exploration concession has applied to convert the exploration concession into an exploitation concession, the application for the exploitation concession and the exploitation concession itself is back dated to the date of the request of the exploration concession. A titleholder to an exploitation concession must apply to annul or cancel any exploitation concessions which overlap with the area covered by its exploitation concession within a certain time period in order for the exploitation concession to remain valid.
In accordance with Chilean law, from the date that an application for an exploitation concession is made to the court, the applicant has the right to transfer or grant an option to purchase the exploitation concession in the process of being constituted and the court has no discretion to refuse the final grant of the concession.
Environmental Protection Requirements
The Company’s operations are subject to environmental regulations promulgated by government agencies from time to time. In Chile, mining operations require the submission and approval of environmental impact assessments. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, and the use of cyanide which could result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. Environmental legislation is evolving in a manner which means stricter standards and enforcement with fines and penalties for non-compliance more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies including its directors, officers and employees. The cost of compliance with changes in governmental regulations has the potential to negatively affect future operations.
Foreign Operations
Mineral exploration and mining activities in Chile may be affected in varying degrees by political instability and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions may adversely affect the Company’s business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety.
Social or Environmental Policies
In March 2008, the Company adopted its “Environment and Corporate Social Responsibility Principles and Policies”. The Company’s “Environment and Corporate Social Responsibility Principles and Policies” sets out the principles that all directors, management and employees are required to adhere to while conducting Company business. The principles are (i) environmental stewardship, which sets the objective of minimizing negative impacts on the environment; (ii) the commitment to conduct due diligence before undertaking material activities on the ground to ensure proper management of issues surrounding these activities; (iii) a commitment to engage host communities and other affected and interested parties by including all parties and providing clear and accurate information; (iv) contribute to community development; (v) upholding Human Rights; (vi) safeguarding the health and safety of workers and local populations by implementing sound health and safety policies; (vii) a commitment to accurate and transparent reporting; and (viii) the commitment to ethical business practices.
C.
Organizational Structure
As of the effective date of this report, the Company has four wholly-owned subsidiaries: Sociedad Contractual Minera Eton Chile (“Eton Chile”), Sociedad Contractual Minera Retexe Chile (“Retexe Chile”), Minera Goldeye Chile Limitada (“Goldeye”) and Eton Mining Corp. (“Eton”). Eton Chile, Retexe Chile and Goldeye are Chilean corporations, registered to conduct the Company’s business in Chile. Eton is a British Columbia corporation, and is not currently active.
D. Property, Plants and Equipment
Presently, the Company is in the exploration stage of its mineral project development (as those terms are considered under Canadian disclosure requirements; under SEC Industry Guide 7 we are an exploration stage company as we don’t currently have any proven and probable reserves under Industry Guide 7 standards, See “Cautionary Note to United States Investors Concerning Reserve and Resource Estimates” above.). It owns no producing properties. The Company’s properties are currently in the exploratory stage. In order to determine if a commercially viable mineral deposit exists in any of such properties, further exploration work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility. The following is a discussion of the Company’s material mineral properties.
Caspiche, Chile
Property Description
By an agreement with Minera Anglo American Chile Limitada and its affiliate Empresa Minera Mantos Blancos S.A. (together “Anglo American”) dated October 11, 2005 and subsequently amended, the Company acquired the right to review a number of properties in the Maricunga region of Chile. Under the terms of the agreement, the Company had the right to acquire a 100% interest in the properties by incurring aggregate expenditures of US$2,550,000 over five years including conducting 15,500 m of drilling.
Having met the requirements to earn its interest in the properties, effective February 14, 2011 the Company exercised its option and acquired the properties subject to a 3% NSR from production from the properties and the vendor’s buy back right by re-paying certain of the Company’s expenditures incurred on the properties if the properties are not put into production within 15 years of exercising the option. In addition, the Company will be required to pay a further 0.08% NSR from production pursuant to an agreement with a private entity. The Company is required to make an advance annual royalty payment of US$250,000 up until March 31, 2020 (US$1,250,000 paid to December 31, 2015) and thereafter US$1 million annually for the period March 31, 2021 to March 31, 2025 or until commencement of commercial production, should production commence prior to March 31, 2025, at which time the advance royalty will cease and NSR will be payable.
The following is based on the Summary section of an independent technical report on the Caspiche property titled, “Amended NI 43-101 Technical Report on the Caspiche Project, Atacama Region, Chile”, with an effective date of April 30, 2014 and an amended and restated date of December 19, 2014 (the “PEA Report”). The NI 43-101 technical report was prepared by Carlos Guzmán, Mining Eng., FAusIMM and registered member of the Chilean Mining Commission; Leticia Conca, Mining Eng., and registered member of the Chilean Mining Commission; Rick Adams, BSc, and member of the Australian Institute of Geoscientists and member of the AusIMM with Chartered Professional (Geology) accreditation all of whom are QPs under NI 43-101. The report is available for viewing on SEDAR at
www.sedar.com
.
Information dated subsequent to the date of the technical report is provided by the Company.
The reader is cautioned that the following is an abridged summary only and is directed to view the full technical report on SEDAR at
www.sedar.com
or EDGAR at
www.sec.gov
.
Location
The Caspiche project is located high in the central Chilean Andes, within the 3
rd
Region of Chile. The property is located 120 km ESE of Copiapó, which has a population of approximately 160,000 people, in northern Chile and is situated at the southern end of the Maricunga metallogenic belt, between the undeveloped Cerro Casale gold-copper project 12 km to the south, and the operating Maricunga Gold Mine (formerly Refugio), 15 km to the north.
Figure 4.1: Caspiche Location Map (Source: Exeter, 2013)
Concessions and Mineral Rights
Chile is a country with a stable mining industry with mature mining laws. There are two types of mining concessions in Chile, exploration concessions and exploitation concessions.
With exploration concessions, the titleholder has the right to carry out all types of exploration activities within the area of the concession. Exploration concessions can overlap or be granted over the same area of land; however, the rights granted by an exploration concession can only be exercised by the titleholder with the earliest dated exploration concession over a particular area. For each exploration concession, the titleholder must pay an annual fee per ha to the Chilean Treasury. Exploration concessions have duration of two years. At the end of this period, they may (i) be renewed as an exploration concession for two further years in which case at least 50% of the surface area must be renounced, or (ii) be converted, totally or partially, into exploitation concessions.
With exploitation concessions, the titleholder has the right to explore and exploit the minerals located within the concession area and to take ownership of the extracted minerals. Exploitation concessions can only be overlapped by exploration concessions and the rights granted by an exploitation concession can only be exercised by the titleholder with the earliest dated exploitation concession over a particular area.
The titleholder must pay an annual fee to the Chilean Treasury of approximately 5.80 US$/ha. Exploitation concessions are of indefinite duration, and therefore do not expire, as long as the annual fee is paid. Concession owners do not necessarily have surface rights to the underlying land; however, they do have the right to explore or exploit the concession and to establish easements over the land according to the Mining Code.
At the effective date of this Annual Report on Form 20-F, the Caspiche property consists of twenty-one granted mining exploitation concessions totalling 3,600 ha and four exploitation concessions in application covering an additional 457 ha. The granted mining exploitation concessions are listed in Table 4-1 and those under application are listed in Table 4-2.
Table 4-1: Exeter Caspiche Mining Exploitation Concessions - Granted
|
Concession Name
|
ROL
|
Hectares
|
Concession Type
|
|
Caspiche 1/10
|
03203–1455–0
|
100
|
Exploitation
|
|
Caspiche Segundo 1/32
|
03203–1494–1
|
312
|
Exploitation
|
|
Vega de Caspiche 1/9
|
03203–1493–3
|
81
|
Exploitation
|
|
Caspiche Tercero 1/10
|
03203–1495–K
|
100
|
Exploitation
|
|
Caspiche IV 1/7
|
03203–4659–2
|
70
|
Exploitation
|
|
Caspiche V 1/20
|
03203–4660–6
|
185
|
Exploitation
|
|
Caspiche VI 1/25
|
03203–4661–4
|
243
|
Exploitation
|
|
Caspiche VII 1/20
|
03203–4662–2
|
169
|
Exploitation
|
|
Caspiche VIII 1 /300
|
03203–6117–6
|
300
|
Exploitation
|
|
Caspiche IV 11
|
03203–4727–0
|
2
|
Exploitation
|
|
Troya 1/12
|
03203–1856–4
|
120
|
Exploitation
|
|
Panorama 1 1/250
|
03203–8292–K
|
250
|
Exploitation
|
|
Panorama 2 1/300
|
03203–6293–8
|
300
|
Exploitation
|
|
Panorama 3 1/100
|
03203–6294–6
|
100
|
Exploitation
|
|
Panorama 4 1/300
|
03203–6295–4
|
300
|
Exploitation
|
|
Panorama 5 1/50
|
03203–6296–2
|
50
|
Exploitation
|
|
Panorama 6 1/200
|
03203–6297–0
|
200
|
Exploitation
|
|
Panorama 7 1/300
|
03203–6298–9
|
300
|
Exploitation
|
|
Panorama 9 1/178
|
03203–6300–4
|
178
|
Exploitation
|
|
Panorama 10 1/160
|
03203–6301–2
|
160
|
Exploitation
|
|
Panorama 8A 1/80
|
03203–6202–0
|
80
|
Exploitation
|
|
TOTAL
|
3,600
|
|
Table 4-2: Exeter Caspiche Exploitation Concessions - In Application
|
Concession Name
|
ROL
|
Hectares
|
Concession Type
|
|
ESCUDO IV 1/240
|
03203–5923–6
|
227
|
Exploitation in application
|
|
ESCUDO V 1/240 1/90
|
03203–5924–4
|
90
|
Exploitation in application
|
|
ESCUDO VI 1/100 1/20
|
03203–5925–2
|
20
|
Exploitation in application
|
|
PANORAMA 8 1/120
|
|
120
|
Exploitation in application
|
|
TOTAL
|
457
|
|
The Caspiche exploitation concessions do not have expiration dates, and are in good standing as of the effective date of this report. Exeter paid the annual license fee for the Caspiche concessions for the period 2015 to 2016 and Exeter expects to make all payments required to maintain the properties in good standing in the future.
At the effective date of this report Exeter had been granted fifty-six mining exploration concessions over the original concessions, vacant ground and those of third parties, totalling 14,700 ha and two exploration concessions in application covering an additional 600 ha. These concessions are valid under Chilean law, but are considered junior to the Caspiche and third party concessions where they overlap. The concessions that overlap the Caspiche concessions were established by Exeter as a safeguard only. The granted Exeter mining exploration concessions are listed in Table 4-3 and those under application are listed in Table 4-4.
Table 4-3: Exeter Exploration Concessions - Granted
|
Concession Name
|
ROL
|
Hectares
|
Concession Type
|
|
ALBACORA 1A
|
03203-D502-1
|
300
|
Exploration
|
|
ALBACORA 2A
|
03203-D503-K
|
300
|
Exploration
|
|
PANORAMA 12A
|
03203-D504-8
|
300
|
Exploration
|
|
PANORAMA 13A
|
03203-D505-6
|
300
|
Exploration
|
|
PANORAMA 14A
|
03203-D506-4
|
300
|
Exploration
|
|
PANORAMA 15A
|
03203-D507-2
|
300
|
Exploration
|
|
PANORAMA 16A
|
03203-D508-0
|
300
|
Exploration
|
|
PANORAMA 17A
|
03203-D509-9
|
300
|
Exploration
|
|
PANORAMA 18A
|
03203-D510-2
|
300
|
Exploration
|
|
PANORAMA 19A
|
03203-D511-0
|
300
|
Exploration
|
|
ESCUDO 7A
|
03203-D524-2
|
300
|
Exploration
|
|
ESCUDO 8A
|
03203-D525-0
|
100
|
Exploration
|
|
ESCUDO 9A
|
03203-D526-9
|
100
|
Exploration
|
|
ESCUDO 10A
|
03203-D527-7
|
300
|
Exploration
|
|
ESCUDO 11A
|
03203-D528-5
|
300
|
Exploration
|
|
ESCUDO 12A
|
03203-D529-3
|
300
|
Exploration
|
|
ESCUDO 13A
|
03203-D530-7
|
200
|
Exploration
|
|
ESCUDO 14A
|
03203-D531-5
|
300
|
Exploration
|
|
ESCUDO 15A
|
03203-D532-3
|
200
|
Exploration
|
|
ESCUDO 16A
|
03203-D533-1
|
200
|
Exploration
|
|
ESCUDO 17A
|
03203-D534-K
|
300
|
Exploration
|
|
ESCUDO 18A
|
03203-D535-8
|
300
|
Exploration
|
|
ESCUDO 19A
|
03203-D536-6
|
100
|
Exploration
|
|
ESCUDO 20A
|
03203-D537-4
|
300
|
Exploration
|
|
ESCUDO 21A
|
03203-D538-2
|
300
|
Exploration
|
|
ESCUDO 22A
|
03203-D539-0
|
300
|
Exploration
|
|
ESCUDO 23A
|
03203-D540-4
|
300
|
Exploration
|
|
ESCUDO 24A
|
03203-D541-2
|
300
|
Exploration
|
|
ESCUDO 25A
|
03203-D542-0
|
300
|
Exploration
|
|
FLAMINGO 1
|
03102-J846-2
|
300
|
Exploration
|
|
FLAMINGO 2
|
03102-J847-0
|
300
|
Exploration
|
|
FLAMINGO 3
|
03102-J848-9
|
300
|
Exploration
|
|
FLAMINGO 4
|
03102-J880-2
|
300
|
Exploration
|
|
FLAMINGO 5
|
03102-J849-7
|
300
|
Exploration
|
|
FLAMINGO 6
|
03102-J850-0
|
300
|
Exploration
|
|
FLAMINGO 7
|
03102-I706-1
|
200
|
Exploration
|
|
FLAMINGO 8
|
03102-I707-K
|
200
|
Exploration
|
|
Concession Name
|
ROL
|
Hectares
|
Concession Type
|
|
FLAMINGO 9
|
03102-I708-8
|
200
|
Exploration
|
|
FLAMINGO 10
|
03102-I709-6
|
200
|
Exploration
|
|
FLAMINGO 11
|
03102-I710-K
|
200
|
Exploration
|
|
FLAMINGO 12
|
03102-I711-8
|
200
|
Exploration
|
|
SALMON 1B
|
03203-D852-7
|
100
|
Exploration
|
|
REINETA 1B
|
03203-D853-5
|
200
|
Exploration
|
|
REINETA 3B
|
03203-D854-3
|
300
|
Exploration
|
|
GLORIA 1A
|
03202-2800-K
|
200
|
Exploration
|
|
GLORIA 2A
|
03202-2801-8
|
200
|
Exploration
|
|
LACUS C 5
|
03201-K055-K
|
300
|
Exploration
|
|
LACUS C 6
|
03201-K056-8
|
300
|
Exploration
|
|
LACUS C 7
|
03201-K057-6
|
300
|
Exploration
|
|
LACUS C 9
|
03201-K058-4
|
300
|
Exploration
|
|
LACUS C 10
|
03201-K059-2
|
300
|
Exploration
|
|
LACUS C 11
|
03201-K060-6
|
200
|
Exploration
|
|
LACUS C 13
|
03201-K061-4
|
300
|
Exploration
|
|
LACUS C 14
|
03201-K062-2
|
300
|
Exploration
|
|
LACUS C 15
|
03201-K063-0
|
300
|
Exploration
|
|
LACUS C 18
|
03201-K064-9
|
300
|
Exploration
|
Table 4-4: Exeter Exploration Concessions – In Application
|
Concession Name
|
ROL
|
Hectares
|
Concession Type
|
|
CORVINA 1B
|
N/A
|
300
|
Exploration in application
|
|
REINETA 2B
|
N/A
|
300
|
Exploration in application
|
Physiography
The Caspiche property is located high in the central Chilean Andes within the region commonly described as the Atacama Desert. The topography within the property is almost entirely volcanic in nature and consists of broad open areas of moderate relief and prominent ridges with limited cliff zones of exposed bedrock. The Caspiche property itself lies within the catchment of the Copiapó river tributary system, however a little further to the north-west an intermediate ridgeline and valley system closes the high Andean drainage resulting in a chain of endorheic saline lakes stretching considerable distances within the high Atacama region.
Vegetation is limited to grasses and small thorny bushes and small marsh areas at the junction of creeks. Wildlife includes guanaco, vicuña, foxes, rabbits, ground squirrels, hawks, condors and small reptiles.
Accessibility
Access to the project is by 183 km of paved and gravel road from Copiapó. The initial 22 km running south from Copiapó through the town of Tierra Amarilla is paved highway which connects to a 161 km treated gravel road that runs east-southeast to the project site. Currently, total driving time from Copiapó to site is approximately 3 hours. The main gravel road serves as a regional transportation route to Argentina and is gradually being upgraded. This route also serves the nearby Maricunga Gold Mine (Kinross Gold Corp.) and Cerro Casale gold-copper project (Kinross Gold Corp. and Barrick Gold Corp.). From this road, several access alternatives exist to the project and other additional access options have been identified if required.
Climate
The climate at Caspiche is typical for the central Andean Cordillera: windy, cold at night with limited precipitation, usually in the form of snow. Day-time temperatures in summer months approach 23 °C, with night-time lows of 5 °C. Day-time
temperatures in winter are around freezing, with night-time temperatures dropping to -15 °C. Exploration field seasons generally run from late October through mid-May. Operating mines in the area, such as the nearby Maricunga Gold Mine, are operated year-round at elevations of 4,200 to 4,500 m above sea level. Upon development, it is expected that the mine would be operated year-round. Exeter operates three automatic weather stations to monitor detailed climatic variations.
Current Infrastructure
Caspiche is a green field site, and thus existing site infrastructure is limited to roads and trails on the property. The property is large enough to host an open pit or underground mining operation, although optimum locations for infrastructure may overlie third party mining claims. Concession owners have the right to establish an occupation easement over the surface as required for the comfortable exploration or exploitation of the concession. The majority of the area required by Exeter is owned by the Chilean government. The process for obtaining permits for easements and water rights is well defined in Chile.
On March 15, 2011, Exeter entered into an occupation agreement with the local Colla community over an area of 1.77 ha where the project camp was located. The initial duration of this agreement was for three years with a right to extend for a further three years. This agreement has been extended to March 15, 2017. On June 16, 2011 the BBNN granted Exeter a surface rights lease (the “Lease”) over a 1,313 ha area covering certain mineral tenements of the Caspiche project. The duration of the Lease is five years from May 3, 2011 and the Company has applied to renew the lease. An annual rental payment is paid quarterly by the Company.
On June 10, 2013 the Chilean government granted a surface land use Easement of approximately 9,600 ha to extend the area required for future potential development of Caspiche. The Easement specifically excludes surface rights in areas owned by the local indigenous communities. This Easement is now also the subject of a court claim initiated by a local Chilean company challenging the Chilean governments granting of the Easement.
Exeter has completed a water drilling program at its concessions in the Peñas Blancas area where it has the option to acquire up to a 90% interest in any water discovered. Water quantities discovered to date are believed to be sufficient for the potential development options outlined in the PEA report. The application process for water rights at Peñas Blancas has been commenced. In addition, initiatives are ongoing to outline additional sources of water.
Power for the existing projects in the Maricunga region is normally sourced from near Copiapó and carried to the mines by private power lines owned by the operating companies. Copiapó and the surrounding areas are serviced by an extensive power grid known as the Central Interconnected System, (SIC), which also services the main population centres around Santiago and further south. Plans are currently being implemented to considerably strengthen the power generation and distribution system in the region and are due to be completed in 2017. Exeter proposes using on site power generation or extending the Maricunga line for the power supply for the heap leach power requirements and then connect to the grid system should the sulphide project be developed.
Water
In January 2014, the Company’s Chilean subsidiary, Eton Chile, negotiated new water exploration agreement terms (“Water Agreement”) with Atacama Pacific. The new terms amended the original agreement entered into between the parties in May 2013. The Water Agreement allows Eton Chile to earn an additional 40% interest, for an aggregate 90% interest, in any water rights granted following the discovery of water near Peñas Blancas (Laguna Verde) in Maricunga region, norther Chile. To earn the additional 40% interest, Eton Chile is required to incur an additional 40% (total of 90%) of all expenditures relating to exploration and potential development on the water tenements. In addition, in the event of approval of water rights by the General Directorate of Water Resources (“DGA”), Eton Chile will assume Atacama Pacific’s obligation to pay Hydro Exploraciones SpA (“Hydro”), an Atacama Pacific affiliate, US$15,000 per l/s of DGA approved water rights. Atacama Pacific will remain obligated to pay Hydro US$15,000 per l/s on its 10% interest. Regardless of the total amount of DGA approved water acquired, payments to Hydro are capped at US$1 million. These payments are not applicable to Eton Chile’s original 50% interest in any water rights acquired. In addition, Eton Chile will pay US$5,000 per month to Hydro from the date of any application for water rights for assisting with securing such water rights. The aggregate of the monthly payments are deductible from any amount payable to Hydro for water rights acquired.
During 2014, three large-diameter drill holes, LV-02, LV-03 and LV-04, completed at Peñas Blancas, intersected potentially significant quantities of water based on preliminary evaluation using airlift testing. Down hole pump testing, a more definitive measurement technique to quantify water flow rates and the recharge rate, was completed on one hole, LV-
03,
prior to the onset of winter. Pump tests on LV-03 confirmed a potentially significant water resource. Tests included a series of variable and fixed-speed pump tests. At each flow rate tested, the water table stabilized and recovered rapidly, suggesting favourable permeability and transmissivity. Flow rates of +40 litres per second (“l/s”) were tested.
Following the winter shut-down in October 2014, the Company commenced an expanded water drilling program at Peñas Blancas which included completing two additional large diameter water bore holes and a series of smaller diameter water monitoring holes together with down hole pump tests and water level measurements to quantify water flow rates and aquifer recharge rates.
In the second quarter of 2015, the Company announced completion of the water exploration drilling program at Peñas Blancas. Testing of the water discovery confirmed aggregate flow rates of over 400 l/s. The ultimate, cumulative flow rate potential of the aquifer remains open and the technical characteristics of the aquifer are considered excellent. Maximum anticipated water requirements based on the 2014 PEA is 185 l/s, less than half of the flow rate tested. The water exploration phase at Peñas Blancas is complete and applications to acquire water rights have been initiated. The timeline for this approval process is not defined by the Chilean water authorities. In Q4 2015, the Company was granted a provisional easement over the area where the water drill holes are located.
Mineralization
Mineralization has been encountered in two main areas of the Caspiche property. These two areas are called Caspiche Porphyry and Caspiche Epithermals.
High-sulphidation epithermal, intermediate-sulphidation epithermal and porphyry-style mineralization occur at Caspiche. High-sulphidation epithermal-style mineralization occurs at Caspiche, and hosts disseminated gold in felsic volcanic rocks and dioritic to quartz dioritic quartz-feldspar porphyry intrusive rocks. Modelling of the mineralization indicates the presence of an upper gold-bearing oxide zone underlain by a lower gold-copper-bearing sulphide zone. Porphyry-style stockwork quartz veining, containing gold and copper mineralization, has been intersected over broad lengths in drill holes. Gold only mineralization from the MacNeill zone partially overprints and upgrades the western edge of porphyry style mineralization and is confined to the underside of the eastward-flared, late-mineral diatreme contact. No porphyry-style mineralization or intermediate-epithermal style mineralization has been observed at surface on the property. This is in part due to the extensive alluvium and colluvium which covers approximately 90% of the Caspiche property area.
Mineralization is hosted primarily by diorite porphyry and mineralized basement and andesitic volcanic rocks, covered by up to 60 m of alluvial material. The upper surficial deposits is generally mineralized only in gold and low level silver, and the onset of copper mineralization generally coincides with the commencement of sulphide mineralization. No significant supergene oxide mineralization has been observed at Caspiche Porphyry. Mineralized intercepts in and around the diorite porphyry appear to have good continuity, and yield consistent intercepts of several hundred metres of porphyry-style, sulphide mineralization grading between 0.3 g/t and 1.4 g/t gold, and 0.1% and 0.5% copper. Near surface, oxide intercepts at Caspiche Porphyry generally range between 20 m and 200 m grading between 0.2 g/t and 1.2 g/t gold and no appreciable copper.
At Caspiche Epithermals, only high-sulphidation epithermal style alteration and mineralization have been observed and intersected by drilling to date. Potential for porphyry-style mineralization at depth remains, because drilling to date at Caspiche Epithermals has mostly targeted near-surface high-sulphidation epithermal mineralization and thus reached only relatively shallow depths in most areas. One deeper drill hole completed in 2009 to the west of the system and an additional two deeper drill holes in the southern portion of the prospect failed to intersect intrusive rocks or proximal porphyry-style alteration and mineralization downgrading the potential for these areas.
Historical Exploration
Anglo American was the first company to explore the Caspiche area. Between 1986 and 1990, Anglo American conducted three field campaigns on the property. The first campaign consisted of rock-chip and grid-soil geochemical surveys, where a total of 842 rock-chip samples and 431 soil samples were collected. These surveys identified a 650 m by 300 m zone of the Caspiche Porphyry area that was strongly anomalous at surface in gold, silver, copper, and arsenic. Eighty rock samples returned values greater than 1 g/t gold, with a high value of 5.45 g/t gold.
During the 1988 field season, Anglo American drilled 568 m in 12 shallow air rotary holes in the Caspiche Porphyry sector. These drill holes targeted near-surface gold mineralization identified in hydrothermally altered volcanic rocks, and delineated by geochemical surveys. Drilling from this campaign intersected significant widths of mineralization in several holes, including 32 m grading 1.10 g/t gold in SHC-4 and 48 m grading 1.03 g/t gold in SHC-5.
During the 1990 season, Anglo American drilled 950 m in six reverse circulation (RC) holes, exploring the Caspiche Porphyry gold system to greater depths. Results from this program yielded narrow intersections of gold mineralization, including 10 m grading 1.09 g/t gold in SPC-02 and 34 m grading 0.63 g/t gold in SPC-05.
During the first field season of an option in 1996-1997, Newcrest conducted geological mapping, rock geochemical surveys, aeromagnetic and IP / resistivity geophysical surveys and drilled 3,298 m in 14 RC drill holes. Twelve holes were drilled at Caspiche Porphyry to follow-up disseminated mineralization discovered by Anglo American and to test targets defined by the geochemical and geophysical surveys. Two holes were drilled in the Caspiche Epithermals area, targeting epithermal-style mineralization indicated by anomalous gold and mercury surface geochemistry.
During the 1997-1998 field season, Newcrest conducted soil geochemical surveys, geological investigations and drilled 4,123 m in 22 RC drill holes in the Caspiche Porphyry and Caspiche Epithermals prospect areas. Porphyry-style gold-copper mineralization was encountered in several of the drill holes at Caspiche Porphyry.
Exeter optioned the property in October 2005. No significant exploration work was reportedly conducted on the property from the end of the Newcrest drill campaign until Exeter began work.
In 2006 and 2007, Exeter compiled historic exploration data into a geographic information system (GIS), reprocessed existing geophysical data, completed geological mapping of the property area, collected rock-chip samples and conducted controlled source audio-frequency magnetotellurics (CSAMT), pole-dipole induced polarization (PDIP), and natural source magnetotellurics geophysical surveys. In 2008 and 2009, Exeter completed property-scale geological mapping, a PIMA
TM
(field portable, infrared spectrometer useful for mineral identification) study of drill core samples, a soil orientation survey over the Caspiche Porphyry area, a reinterpretation of the regional geophysical data and age dating work.
From 2006 through September 2011, Exeter completed over 66,000 m of drilling in 99 drill holes, mostly as deep diamond drill holes in the Caspiche Porphyry area. Other work conducted during this period included geological mapping of the surface of the property, geochemical and geophysical surveying to help guide exploration for additional intrusive centres, geotechnical logging and geomechanical testing of a significant number of oriented drill cores and metallurgical testwork to determine expected metallurgical recoveries and guide process design.
During the drill season between September 2011 to May 2012, Exeter completed 35 diamond holes for 8,666 m, including an extensive geotechnical program, metallurgical test holes and groundwater monitoring holes.
At the end of November 2012, a radiometrics and high resolution helicopter magnetic program was conducted at Panorama and over the VIN properties
,
previously held under option from Xstrata
,
by NewSense Geophysics Ltd.
Sampling and Analysis
Reverse Circulation (RC) and core sampling by the Company was consistently applied throughout the Exeter drill campaigns. Exeter documented their RC and core sampling procedures in a document, written in Spanish, which was used to train drill sampling staff.
RC drill cuttings were sampled using a tricone or hammer bit via a cyclone at 1 m intervals. Sample material was collected at the drill rig in a large plastic bag, weighed, labelled and then transported to the Caspiche camp, located about 8 km from Caspiche Porphyry. At the Caspiche camp, the entire sample was manually split to one-eighth and seven-eighth fractions using a single pass through a triple stage riffle splitter. The one-eighth split was then weighed and set aside for compositing, while the seven-eighth reject sample was bagged. The one-eighth splits from each consecutive 1 m samples were combined to form the 2 m field composite for assaying.
Diamond drilling by Exeter at Caspiche employed HQ (6.35 cm), HQ3 (6.11 cm), NQ (4.76 cm), and NQ3 (4.50 cm) diameter core tools. PQ (8.50 cm) diameter core was employed during the confirmation / metallurgical drill program of the 2009-2010 drill campaign.
HQ3 and NQ3 triple-tube core tools were used with oriented core. The triple-tube splits were removed from the core barrel and rolled into a spare split, followed by Exeter’s trained field technicians fitting the core together, measuring the length of the recovered sample and continuing the oriented line. The angle between the pin and ball mark was transferred to the core from the ring using specifically-designed protractors and marked as a red pencil line. The oriented core was then placed in a wooden core tray, where the end of the run was marked with a core block marked with hole depth. There was always a trained field technician at the rig to perform core orientation and to record the preliminary core run recovery.
Exeter personnel transported the drill core from the drill site to Exeter’s offices in Copiapó where the core was logged and photographed by digital camera. To maintain the integrity of the core, the boxes were packed and fastened with belts in the back of the trucks.
Following logging and photographing, core was sawn in half in uniform 2 m intervals using a diamond saw. One half of the core interval was bagged for assay, and the other half was stored for future reference. Core samples for assay were placed in marked plastic bags, sealed and transported to the assay laboratory by Exeter personnel.
PQ diameter core from the confirmation / metallurgical drill program in 2009-2010 was split differently than the core from the routine drilling programs. To preserve as much of the core as possible for metallurgical testing, the core was divided so that the portion retained for assaying was approximately one-quarter NQ core. In practice, a 1.7 cm split of the 8.5 cm core was used for assaying, and the remainder was retained in the core box for use in later metallurgical testwork.
Average core recovery for the 2007-2008, 2008-2009, 2009-2010 and 2010-2011 drill programs was approximately 98 %.
The various steps taken by Exeter to ensure the integrity of analytical data were appraised and deemed to be consistent with standard industry practice by independent reviews and audits. The sampling procedures were appropriate for the style of mineralization and structural controls for the Caspiche Project. The most recent independent audit and resource calculations were carried out by Cube Consulting Pty. Ltd. (“Cube”). Cube’s examination of drill cores, particularly in regard to the recognition of mineralized intervals, verified the soundness of the core sampling procedure.
Cube most recently undertook a site visit to the Caspiche Project on the 22
nd
,
23
rd
, and 24
th
of October 2013. Cube’s site visit included a field inspection, confirmation of drill hole locations, review of the geological and structural setting and inspection of representative mineralization in diamond drill core. Cube undertook independent sampling and assaying of select drill core intervals during this site visit.
Cube believed that the current database provided an accurate and robust representation of the Caspiche project and was appropriate for use in mineral resource estimation.
Mineral Resources, Mineral Reserves and Preliminary Economic Assessment
The Mineral Resource Estimate (MRE) reported below for the Caspiche Project with an effective date of April 11, 2012 (the “Cube 2012 Mineral Resource”) was prepared by Mr. Ted Coupland, MAusIMM(CP), at the time, Director and Principal Geostatistician of Cube. The Cube 2012 Mineral Resource, was classified in accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves (Nov 2010). Mr. Patrick Adams MAusIMM(CP), Director and Principal Geologist of Cube has reviewed and validated the Cube 2012 Mineral Resource.
The Cube 2012 Mineral Resource reported from within the 'reasonable prospects' resource shell is summarized in Table 1-5 below. The Cube 2012 Mineral Resource may be affected by further infill and exploration drilling that may result in increases or decreases in subsequent resource estimates. The MRE may also be affected by subsequent assessments of mining, environmental, processing, permitting, taxation, socio-economic, and other as yet identified factors. The Cube 2012 Mineral Resource is reported above a gold equivalent (AuEq) cut-off. Oxide material was reported above 0.18 g/t AuEq cut-off and sulphide material was reported above 0.30 g/t AuEq cut-off. Note that the PEA does not include or use the inferred mineral resources.
Table 1-5: Caspiche Mineral Resource Statement April 2012
|
Material
|
Class
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu (%)
|
Ag
(g/t)
|
AuEq
1
(g/t)
|
Au Eq
2
(Moz)
|
|
Oxide
|
Measured
|
66
|
0.46
|
|
1.55
|
0.46
|
1.0
|
|
Oxide
|
Indicated
|
56
|
0.39
|
|
1.63
|
0.40
|
0.7
|
|
Total Oxide
|
Meas + Ind
|
122
|
0.43
|
|
1.58
|
0.43
|
1.7
|
|
Sulphide
|
Measured
|
554
|
0.58
|
0.23
|
1.16
|
1.02
|
18.3
|
|
Sulphide
|
Indicated
|
727.9
|
0.48
|
0.18
|
1.17
|
0.84
|
19.6
|
|
Total Sulphide
|
Meas + Ind
|
1,282.1
|
0.52
|
0.20
|
1.17
|
0.92
|
37.9
|
|
Total Meas+Ind
|
|
1,403.6
|
0.51
|
0.19
|
1.20
|
0.88
|
39.6
|
|
Material
|
Class
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu (%)
|
Ag
(g/t)
|
AuEq
1
(g/t)
|
Au Eq
2
(Moz)
|
|
Oxide
|
Inferred
|
2.5
|
0.23
|
|
1.18
|
0.23
|
|
|
Sulphide
|
Inferred
|
195.6
|
0.29
|
0.12
|
0.91
|
0.52
|
3.3
|
|
Total
|
Inferred
|
198.1
|
0.29
|
0.12
|
0.91
|
0.52
|
3.3
|
|
|
1.
|
The following formula was used on calculating AuEq values in each block of the model:
|
where Au and Cu were the block kriged gold and copper grades, P
Au
and P
Cu
were the gold and copper prices (US$1,150/oz and U.S$2.50/lb, respectively), and R
Au
and R
Cu
are the gold and copper projected metallurgical recoveries, 65% and 85%, respectively for sulphide material and 78% for gold and 11% for copper in the oxide zone.
|
|
2.
|
Au Eq (Moz) = resource tonnes * AuEq
1
|
Both the oxide and sulphide AuEq cut-off grades were selected as appropriate for the reporting of resources intended for open pit exploitation. Cu% grades shown in the oxide portions of the Cube 2012 Mineral Resource are provided for information only. Copper is not considered an economically viable product in the oxide portions of the Cube 2012 Mineral Resource.
For the purposes of the PEA a sub set of the Cube 2012 Mineral Resource including only the sulphide portion of the Cube 2012 Mineral Resource was reported using an updated AuEq formula. The sulphide portions of the Cube 2012 Mineral Resource were reported as shown in Table 1-6 and Table 1-7 above a cut off of 0.75 g/t AuEq. This higher cut off was selected as appropriate for the reporting of mineral resources intended for underground exploitation based on preliminary economic cut off studies commissioned by Exeter during October 2013 (NCL 29/10/2013).
Table 1-6: Caspiche – Transitional Measured and Indicated Mineral Resources - April 2013 above 0.75 g/t AuEq cut off.
|
Material
|
Class
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu
(%)
|
Ag
(g/t)
|
AuEq
1
(g/t)
|
|
Transitional
|
Measured
|
2.8
|
0.93
|
019
|
0.97
|
0.93
|
|
Transitional
|
Indicated
|
0.7
|
1.04
|
0.30
|
1.26
|
1.05
|
|
Total Transitional
|
Meas + Ind
|
3.5
|
0.95
|
0.21
|
1.02
|
0.95
|
|
|
1.
|
The following formula was used in calculating AuEq values in each block of the model:
|
where Au, Ag and Cu are the block kriged gold, silver and copper grades, PAu, PAg and PCu are the gold, silver and copper prices (US$1,250/oz., US$15/oz. and US$2.75/lb, respectively). RAu and RCu are the Au and Cu projected metallurgical recoveries based on a number of S% thresholds.
Table 1-7 details the recovery factors for gold, silver and copper within the oxidized, and sulphide domains and the DP and Non-DP stratigraphic units using a sulphur threshold determined by and provided by Exeter.
Table 1-7: Caspiche – Sulphide Project Measured and Indicated Mineral Resources - April 2013 above 0.75 g/t AuEq cut off.
|
Material
|
Class
|
Tonnes
(Mt)
|
Au
(g/t)
|
Cu
(%)
|
Ag
(g/t)
|
AuEq
1
(g/t)
|
|
Sulphide
|
Measured
|
378.6
|
0.71
|
0.30
|
1.30
|
1.28
|
|
Sulphide
|
Indicated
|
431.6
|
0.64
|
0.27
|
1.40
|
1.16
|
|
Total Sulphide
|
Meas + Ind
|
810.2
|
0.67
|
0.29
|
1.35
|
1.22
|
|
|
1.
|
The following formula was used in calculating AuEq values in each block of the model:
|
where Au, Ag and Cu are the block kriged gold, silver and copper grades, PAu, PAg and PCu are the gold, silver and copper prices (US$1,250/oz., US$15/oz. and US$2.75/lb, respectively). RAu and RCu are the Au and Cu projected metallurgical recoveries based on a number of S% thresholds.
Mining Methods
NCL has been used by Exeter to carry out mine planning and design services for several years. In 2014, NCL was commissioned once again to review possible new development concepts that would require less up front capital expenditure and focus on higher grade or more easily treated components of the resources.
A summary of NCL’s 2014 Scope of Work follows:
|
|
●
|
Develop conceptual mine plans and mine production schedules for the potential life of mine (LOM), for five defined options:
|
|
|
°
|
Option 1:
30 ktpd
open pit
mine for gold and silver oxide mineralization treated by heap leaching
|
|
|
°
|
Option 2:
60 ktpd
open pit
mine for gold and silver oxide mineralization treated by heap leaching and a 27 ktpd
open pit
mine for gold and copper sulphide mineralization treated in a conventional concentrator plant
|
|
|
°
|
Option 3:
60 ktpd
open pit
mine for gold and silver oxide mineralization treated by heap leaching and a 27 ktpd
underground
mine for gold and copper sulphide mineralization treated in a conventional concentrator plant.
|
|
|
°
|
Option 4:
60 ktpd
open pit
mine for gold and silver oxide mineralization treated by heap leaching and a 12 ktpd
open pit
mine for gold and copper sulphide mineralization treated in a conventional concentrator plant
|
|
|
°
|
Option 5:
27 ktpd u
nderground
mine for gold and copper sulphide mineralization treated in a conventional concentrator plant.
|
|
|
●
|
Determine the mine equipment and labour requirements for each of the options.
|
|
|
●
|
Estimate the mine initial and sustaining capital and operating costs for each of the options.
|
Different mining schedules, equipment and labour requirements were prepared and evaluated. Only Measured and Indicated resources were included in the schedules.
|
|
●
|
Option 1 proposed to extract an average of 30 ktpd of mineralized material over a potential project life of 10 years. Total materials movement from the mine did not exceed 15 Mt per year.
|
|
|
●
|
Option 2 considered an expanded open pit to extract oxide and sulphide material. Proposed production averaged 57 ktpd of oxide material for 6 years. From the sixth year of operation, the pit production was up to 27 ktpd of sulphide material for 12 years.
|
|
|
●
|
Option 3 combined an expanded open pit to extract oxide followed by an underground mine to extract sulphide material. Proposed production from the pit averaged 60 ktpd of oxide material for 5 years. Proposed underground mine production averaged 25 ktpd of sulphide material for 38 years.
|
|
|
●
|
Option 4 considered an extended open pit to extract oxide and sulphide material. Proposed production averaged 60 ktpd of oxide material for 6 years. From the sixth year of operation, pit production was up to 12 ktpd of sulphide material for 12 years.
|
|
|
●
|
Option 5 considered an underground mine producing an average of 25 ktpd of sulphide material for 38 years.
|
The open pit options all considered a full diesel fleet, 8m for benches for option 1 and 16m benches for all other options. The underground options included an underground sizer and conveyor belt.
Measured and Indicated mineral resources included in the mining schedules for all options are summarized in Table 1-8.
Table 1-8: Mining Schedule and Mine Life by Option (source: NCL, May, 2014)
The PEA Report shows three potential development options:
|
|
1.
|
A 30,000 tpd heap leach oxide gold project producing a projected average of 122,000 oz AuEq*annually over a planned 10 year mine life, including 148,000 oz AuEq
*
annually in the first five years.
|
Very low strip ratio (0.27:1) and favorable gold recoveries, drive favorable economics.
|
|
●
|
Projected average total cash operating costs US$589/oz AuEq*. AISC US$676/oz AuEq*.
|
|
|
●
|
Pre-tax NPV5% of US$355 million at US$1,300/oz.
|
|
|
●
|
After-tax (27% tax rate) NPV5% of US$252 million, IRR 28.5%.
|
|
|
●
|
Payback period of 3.4 years from initial construction.
|
|
|
●
|
Estimated initial capex US$210 million plus an additional US$41 million in contingencies.
|
|
|
●
|
Required water, 44 l/s.
|
|
|
2.
|
A larger, scalable 60,000 tpd open pit, heap leach oxide gold option followed by expanded open pit mining (27,000 tpd) of the gold copper sulphide zone. Planned mine life is 18 years with projected average annual production of approximately 289,000 oz AuEq
*
per year.
|
|
|
3.
|
A scalable 60,000 tpd open pit, heap leach oxide gold operation transitioning to underground sub level open stope mining (27,000 tpd) of the higher grade gold copper sulphide zone. Projected annual average production is 250,000 oz of Au in years 1-3 and 425,000 oz AuEq* in years 4-13. Over a planned 42 year mine life projected production is 344,000 oz AuEq* per year.
|
Economic Analysis
The economic analysis is based on the estimated CAPEX and OPEX and revenue calculated thereof. The CAPEX and OPEX were developed as noted in Section 21 of the PEA Report. Cash flow and economic analyses were performed from the effective date that equipment was on the project site.
The economic analysis is presented in a pre and post-tax format, and includes the Anglo American and third party royalty totalling 3.08% and the Chilean state royalty. A post-tax discussion is also included in this report but as Alquimia is not a financial advisor these figures should be confirmed with a recognised tax expert. Sensitivities based on commodity price, metals recovery, operating cost and capital expenditure variation were performed and discussed in Section 22 of the PEA Report.
Since the analysis is based on a cash flow estimate, it should be expected that actual economic results might vary from these results. The PEA has been completed to a level of accuracy of ± 35%. The PEA Report is not a preliminary feasibility study or feasibility study as defined by the NI 43-101 guidelines.
The PEA Report used prices of: Au US$1,300 US$/oz. Ag US$20/oz. and Cu US$3/lb
* Gold equivalent oz (AuEq) value is based on Au, Ag and Cu revenues (prices and recoveries involved). AuEq oz [troy oz] = [Au g/t * Rec Au *tonnes]/31.1 + [Ag g/t * Rec Ag * tonnes]/31.1* silver price troy oz/ gold price troy oz + [[Cu% * Rec Cu * tonnes]*2204] * copper price lbs/gold price troy oz. Recoveries are adjusted based on metallurgical characteristic of the resource.
There are no mineral reserves defined by the PEA Report, as the PEA Report is only a conceptual analysis of potential economic viability.
The economic analysis contained in the PEA Report is considered preliminary in nature and there is no certainty that the preliminary economic assessment will be realized. No inferred mineral resources form part of the PEA Report economic evaluation and no mineral reserves for the PEA Report have been established. Mineral resources are not mineral reserves and have not demonstrated economic viability. There is no certainty that economic forecasts outlined in the PEA Report will be realized. The PEA Report and the Cube 2012 Mineral Resource (as defined herein) may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors.
Economic parameters used for the evaluation are shown in Table 1-18.
Table 1-18: Main Economic Parameters