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Several phases of metallurgical testwork were undertaken on the Project. These include initial testing conducted by AMAX prior to the involvement of Minera Guanaco in the Project, and programs in 2006, 2007, and 2008 conducted on behalf of Minera Guanaco.

Laboratories and testing facilities involved in the Minera Guanaco testwork programs included:

• SGS Lakefield Research Chile S.A (Lakefield; Chile);

• Ciba Especialidades Químicas Ltda. (Ciba; Brazil);

• Larox Chile S.A. (Larox; Chile);

• Julius Kruttschnitt Mineral Research Center (JKMRC; Australia).

The metallurgical testwork laboratories are independent, but are not certified; this is typical for metallurgical testing facilities. Work completed on behalf of Minera Guanaco included bottle leaching trials, activated carbon tests, sedimentation and filtering tests, comminution testwork, Bond ball milling, Bond rod milling, uniaxial compressive strength (UCS) tests, SMC (laboratory comminution) tests, low energy impact tests, abrasion tests, and JK drop-weight tests.

Mineralogical work was performed by Carmen Pérez of Guarachi Engineers Ltda, based in Chile.

16.1.1 Mineralogical and Analytical Studies

Mineralogical studies were performed at large grain size (6 mesh) in order not to change the gold present due to attrition (ductile and malleable), and to analyze the size and degree of liberation to determine if a gravity concentration circuit was required in the process route. Of the three samples reviewed, all showed the presence of native gold and electrum; two samples hosted native silver. Additional sulphide minerals identified included chalcopyrite, covellite, chalcocite, bornite, and enargite.

Pyrite and limonite traces were also identified.

Gold is 52.5% free and 91.8% associated in the assessed samples, which indicates that gold can be released at a coarse grain size. The minor presence of cyanicides and contaminating elements such as mercury, selenium, and arsenic, indicate that the

mineralization can be classified as metallurgically “clean”; this conclusion was supported by ICP analytical results.

Results of the microscopic analysis of tailings support the recovery data. Conclusions were that the non-recovered gold must be occluded within the grains or associated as electrum, as electrum has slower dissolution kinetics than gold.

Analysis of industrial water collected from the Guanaco Project for tests at Lakefield did not show anions or cations at concentration levels that would impact cyanidation.

16.1.2 Bottle Roll Cyanide Tests

Bottle roll cyanide tests were run at 50% solids and pH = 11 with 2.5 kg of ore for each test. Gold, silver, and copper recovery increased as the particle size of the samples was reduced (fine grain sizes). However; this increase in recovery was less significant when the P80 was reduced from 75 µm and 150 µm. Average recoveries for each element are presented in Table 16-1.

Table 16-1: Metallurgical Average Recovery Results

Area Average Au

Perseverancia 71.9 57.6 55.0

The impact of cyanide concentration on gold and silver recovery was only seen in those samples with a high copper content (Cachinalito Norte and Perseverancia) and the consumption ranged between 10 kg/t and 12 kg/t.

In general terms, the results demonstrated that for ore with low copper grades, satisfactory gold (>87–99%) and silver (>65–94%) recoveries are obtained.

The cyanide consumption for ore with low copper content was in the normal range for an industrial process (0.5 kg/t to 1.3 kg/t). The lime consumption was not impacted by the copper concentration of the samples and also showed consumptions in the normal range for leaching of gold ore, ranging between 0.34 kg/t and 1.2 kg/t.

Leach optimization testwork performed with cyanide in agitated bottle roll tests evaluated the effects of particle size, cyanide concentration, pulp density, and pH.

Results indicated that there was no trend to increase the recovery as particle size was reduced. Gold is released at a size larger than 212 µm. Since the process included an activated carbon circuit, particle sizes greater than 150 µm impacted the activated carbon efficiency and performance. Therefore, a P80 = 150 µm was selected as the optimal particle size for ongoing tests and gave the best results. Dispersion of test results run at optimal conditions were found to be minimal and within the experimental error of the tests and the chemical analysis.

Cyanide concentration was found to have little impact on the Au recovery; however, there was a significant impact on the velocity of gold dissolution. With high cyanide concentrations the reagent consumption was found to increase (other types of minerals start to leach), and the copper extraction increased.

The percentage of solids did not impact Cachinalito Alta Ley and Cachinalito Oeste mineralization recovery. However, for Cachinalito Central, with 35% solids, the recovery increased by 1.2%. A figure of 50% solids was selected as optimal for all three ore types because there are no major differences in the recovery and the equipment sizes are reduced.

Over the pH range 10.5, 11, and 12 there was no impact on Au recovery. A pH 11 was set as the optimal condition for safety reasons.

The minimum estimated design residence time for the leach tanks was 30 hours; after this period the dissolution kinetics curve had reached the plateau.

Mineralogical characterization of the leached solids showed that the non-recovered gold (average size 10 µm) was mostly occluded at P80 = 150 µm, indicating that the obtained recovery is very close to the maximum and that a P80 grind was appropriate.

As a result of these tests, it was concluded that cyanidation was the most feasible process technically and economically for the Cachinalito ores, with recoveries of over 95% for gold and low reagent consumption (1 kg/t of NaCN and 1.1 kg/t of lime).

16.1.3 Comminution Tests

The work index (Wi) results of the comminution testwork are summarized in Table 16-2. In general, ores were classified as hard and abrasive, which is typical for high-silica epithermal mineralization. JK drop weight tests indicated the ore is soft in resistance to fracture by impact. In addition, as the particle size is reduced, the resistance to impact increases.

Table 16-2: Comminution Testwork Results

Low-energy impact Bond test (min) 6.12 kWt/h 6.71 kWt/h Low-energy impact Bond test (max) 11.03 kWh/t 9.92 kWh/t Abrasion index 0.628 g 0.737 g

JK Drop Weight Test 53.60 A

1.29 b

38.8 T10@1kWh/t

0.88 ta

16.1.4 Activated Carbon Tests

Two tests were carried out:

Determination of the adsorption speed constant (r) for Au in extruded vegetal carbon (Norit RO 3515) and coconut shell (Calgon DG-11);

Determination of the equilibrium constant K for activated carbon from coconut shell.

The extruded vegetal carbon displayed better adsorption speeds than the coconut shell carbon. It was noted that the extruded vegetal carbon produced a larger amounts of fines, which could lead to higher gold losses in the tailings under operating conditions. As a consequence, the final design was based on the use of coconut shell carbon.

16.1.5 Sedimentation Testwork

Six flocculants were tested. The flocculant producing the best response was the anionic flocculant Rheomax 1010, which had sedimentation speeds in the free-settling zone between 7.1 m/h and 7.8 m/h for a flocculant concentration of 10 g/t. This flocculant concentration is normal to low for the mining industry. These values were used to model the grinding and counter-current decant (CCD) thickeners. The resulting dimension for a high rate thickener (with 20% design allowance) was 13–

14 m diameter (the normal size for a 1,500–2,000 t/d plant).

16.1.6 Filtration Testwork

Tests were oriented toward use of a vacuum belt filter. Initial tests used a cloth with 28 m3/m2min permeability with a solid P80 of 150 µm. The results of the four samples showed a filtering capacity between 190–330 kg DS/m2h with filtering efficiencies between 60% and 90%. Filter aids tests showed filtering rates of 200–230 kg DS/m2h with washing efficiencies between 80% and 99%. The best washing efficiency was obtained with Orifloc 2020 at a dosage of 40 g/t.