Caariaco Project, Lambayeque Department, Peru,

NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Peru

Prepared for:
Candente Copper Corporation
Prepared by:
David G. Thomas, P.Geo., MAusIMM
Jay Melnyk, P.Eng.
Tony Lipiec, P.Eng.
Alexandra Kozak, P.Eng.
j
No. 165270
Project
Effective Date: 18 January 2011

CERTIFICATE OF QUALIFIED PERSON

David G. Thomas, P. Geo.
AMEC Americas Limited
111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057
[email protected]
I, David G. Thomas, P.Geo., am employed as a Senior Geologist with AMEC Americas Ltd.
This certificate applies to the technical report entitled Candente Copper Corporation, Caariaco
Project, Lambayeque Department, Peru, NI 43-101 Technical Report on Prefeasibility Study
Progress Report (the Technical Report), dated 18 January 2011.
I am a Professional Geologist registered in British Columbia (P.Geo NRL # 149114) and a member
of the Australiasian Institute of Mining and Metallurgy (MAusIMM # 225250). I graduated in 1993
from Durham University, in the United Kingdom with a Bachelor of Science degree and in 1995 from
Imperial College, University of London, in the United Kingdom with a Master of Science degree.
I have practiced my profession for over 15 years. In that time I have been directly involved in review
of exploration, geological models, exploration data, sampling, sample preparation, quality
assurance-quality control, databases, and mineral resource estimates for a variety of mineral
deposits, including porphyry copper deposits.
As a result of my experience and qualifications, I am a Qualified Person as defined in National
Instrument 43101 Standards of Disclosure for Mineral Projects (NI 43101).
I have visited the Canariaco Project between 7 and 11 June 2010.
I am responsible for Sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, and 17, and those portions of the
Summary, Conclusions and Recommendations that pertain to those sections of the Technical
Report.
I am independent of Candente Copper Corporation as independence is described by Section 1.4 of
NI 43101.
I have previous involvement with the Project during 2010, and prepared the following technical report
in 2010:
Thomas, D., and Lipiec, T., 2010: Candente Copper Corporation, Caariaco Project, Lambayeque
Department, Peru NI 43-101 Technical Report: technical report prepared by AMEC Americas Ltd for
Candente Resource Corp., effective date 8 November 2010
I have read NI 43101 and this report has been prepared in compliance with that Instrument.

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

As of the date of this certificate, to the best of my knowledge, information and belief, the technical
report contains all scientific and technical information that is required to be disclosed to make the
technical report not misleading.
Signed and sealed
David G. Thomas P.Geo
4 March 2011

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

CERTIFICATE OF QUALIFIED PERSON

Jay Melnyk, P.Eng.
AMEC Americas Limited
111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel
(604) 664-3030
Fax
(604) 664-3057
[email protected]

I, Jay Melnyk, P.Eng, am employed as a Principal Mining Engineer with AMEC Americas Ltd.
This certificate applies to the technical report entitled Candente Copper Corporation, Caariaco
Project, Lambayeque Department, Peru, NI 43-101 Technical Report on Prefeasibility Study
Progress Report (the Technical Report), dated 18 January 2011.
I am a Professional Engineer in the province of British Columbia (P.Eng #25975). I graduated from
the Montana Technical Institute with a Bachelor of Mining Engineering degree in 1988, and from the
British Columbia Institute of Technology with a Diploma in Mining Technology in 1984.
I have practiced my profession for 22 years. I have been directly involved in open pit mining
operations, and design of open pit mining operations in Indonesia, Canada, the United States, Chile,
Peru and Mexico.
As a result of my experience and qualifications, I am a Qualified Person as defined in National
Instrument 43101 Standards of Disclosure for Mineral Projects (NI 43101).
I have not visited the Canariaco Project.
I am responsible for Sections 19.1 to 19.4 of the Technical Report and those portions of the
Summary, Conclusions and Recommendations that pertain to those sections.
I am independent of Candente Copper Corporation as independence is described by Section 1.4 of
NI 43101.
I have been involved with the Canariaco Project since August 2010, during preparation of a
Prefeasibility Study Progress Report and this Technical Report.
I have read NI 43101 and this report has been prepared in compliance with that Instrument.
As of the date of this certificate, to the best of my knowledge, information and belief, the technical
report contains all scientific and technical information that is required to be disclosed to make the
technical report not misleading.
Signed and sealed
Jay Melnyk, P.Eng.

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

Dated: 4 March 2011

www.amec.com

CERTIFICATE OF QUALIFIED PERSON

Ignacy (Tony) Lipiec (P.Eng.)
AMEC Americas Ltd.,
Suite 400, 111 Dunsmuir St
Vancouver, BC., Canada
Tel: 604-664-3130;
Fax: 604-664-3057
E-mail: [email protected]
I, Ignacy (Tony) Lipiec (P.Eng.) am employed as a Principal Process Engineer with AMEC Americas
Ltd.
This certificate applies to the technical report entitled Candente Copper Corporation, Caariaco
Project, Lambayeque Department, Peru, NI 43-101 Technical Report on Prefeasibility Study
Progress Report (the Technical Report), dated 18 January 2011.
I am a Professional Engineer in the province of British Columbia. I graduated from the University of
British Columbia with a B.A.Sc. degree in Mining & Mineral Process Engineering, in 1985.
I have practiced my profession for 25 years, and have previously been involved with metallurgical
design and process engineering for base metal and disseminated sulphide projects in North America
and South America.
As a result of my experience and qualifications, I am a Qualified Person as defined in National
Instrument 43101 Standards of Disclosure for Mineral Projects (NI 43101).
I have not visited the Caariaco Project.
I am responsible for Section 16 and those portions of the Summary, Conclusions and
Recommendations that pertain to that section of the Technical Report.
I am independent of Candente Copper Corporation as independence is described by Section 1.4 of
NI 43101.
I have previous involvement with the Project during 2010, and prepared the following technical report
in 2010:
Thomas, D., and Lipiec, T., 2010: Candente Copper Corporation, Caariaco Project, Lambayeque
Department, Peru NI 43-101 Technical Report: technical report prepared by AMEC Americas Ltd for
Candente Resource Corp., effective date 8 November 2010
I have read NI 43101 and this report has been prepared in compliance with that Instrument.

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

As of the date of this certificate, to the best of my knowledge, information and belief, the technical
report contains all scientific and technical information that is required to be disclosed to make the
technical report not misleading.
Signed and sealed
Ignacy (Tony) Lipiec (P.Eng.)
4 March 2011

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

CERTIFICATE OF QUALIFIED PERSON

Alexandra J. Kozak, P.Eng.
AMEC Americas Limited
111 Dunsmuir Street, Suite 400
Vancouver, BC
Tel: (604) 664-4578
Fax: (604) 664-3057
[email protected]
I, Alexandra J. Kozak, P.Eng., am employed as Manager, Process Engineering with AMEC
Americas Limited.
This certificate applies to the technical report entitled Candente Copper Corporation, Caariaco
Project, Lambayeque Department, Peru, NI 43-101 Technical Report on Prefeasibility Study
Progress Report (the Technical Report), dated 18 January 2011.
I am a member of the Association of Professional Engineers and Geoscientists of British Columbia
(APEGBC). I graduated from the University of Alberta with a Bachelor of Science degree in Mineral
Process Engineering in 1985.
I have practiced my profession continuously since 1985 and have been involved in operations in
Canada and Guyana and preparation of scoping, pre-feasibility, and feasibility level studies for gold,
base metals and diamond properties in Canada, United States, Peru, Mexico, Mongolia, Ghana, and
New Guinea. I am currently a Consulting Engineer and have been so since September 1996.
As a result of my experience and qualifications, I am a Qualified Person as defined in National
Instrument 43101 Standards of Disclosure for Mineral Projects (NI 43101).
I have not visited the Canariaco Project.
I am responsible for Sections 1, 2, 3, 18, 19.5 to 19.10, 20, 21, 22, and 23 of the Technical Report.
I am independent of Candente Copper Corporation as independence is described by Section 1.4 of
NI 43101.

I have been involved with the Canariaco Project since May 2010 as part of preparation of this
Technical Report and as manager of the Prefeasibility Study Progress Report that the Technical
Report is based on.
I have read NI 43101 and this Technical Report has been prepared in compliance with that
Instrument.

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

As of the date of this certificate, to the best of my knowledge, information and belief, the
Technical Report contains all scientific and technical information that is required to be disclosed
to make the Technical Report not misleading.

Signed and sealed

Alexandra J. Kozak, P.Eng.

Dated: 4 March 2011

AMEC Americas Limited

111 Dunsmuir Street, Suite 400
Vancouver, B.C. V6B 5W3
Tel (604) 664-3030
Fax (604) 664-3057

www.amec.com

IMPORTANT NOTICE
This report was prepared as a National Instrument 43-101 Technical
Report for Candente Copper Corporation (CCC) by AMEC Americas
Limited (AMEC). The quality of information, conclusions, and estimates
contained herein is consistent with the level of effort involved in AMECs
services, based on: i) information available at the time of preparation, ii)
data supplied by outside sources, and iii) the assumptions, conditions, and
qualifications set forth in this report. This report is intended for use by CCC
subject to the terms and conditions of its contract with AMEC. This
contract permits CCC to file this report as a Technical Report with
Canadian Securities Regulatory Authorities pursuant to National Instrument
43-101, Standards of Disclosure for Mineral Projects. Except for the
purposes legislated under provincial securities law, any other uses of this
report by any third party is at that partys sole risk.

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

CONTENTS
1.0

SUMMARY ................................................................................................................................... 1-1

1.1
Principal Outcomes ......................................................................................................... 1-1
1.2
Terms of Reference ......................................................................................................... 1-2
1.3
Location and Access ....................................................................................................... 1-2
1.4
Mineral Tenure, Surface Rights, and Royalties ............................................................... 1-3
1.5
Permits and the Environment .......................................................................................... 1-3
1.6
Geology and Mineralization ............................................................................................. 1-4
1.7
History and Exploration ................................................................................................... 1-5
1.8
Drilling .............................................................................................................................. 1-5
1.9
Analyses and Quality Assurance/Quality Control ............................................................ 1-6
1.10 Data Verification .............................................................................................................. 1-7
1.11 Metallurgical Testwork ..................................................................................................... 1-7
1.12 Recoveries ....................................................................................................................... 1-8
1.13 Mineral Resources........................................................................................................... 1-8
1.14 Mineral Resource Statement ........................................................................................... 1-9
1.15 Projected Mine Plan ...................................................................................................... 1-10
1.16 Proposed Process Route............................................................................................... 1-11
1.17 Proposed Tailings Management .................................................................................... 1-11
1.18 Proposed Water Management ...................................................................................... 1-12
1.19 Proposed Workforce ...................................................................................................... 1-12
1.20 Infrastructure ................................................................................................................. 1-12
1.21 Projected Capital Costs ................................................................................................. 1-13
1.22 Projected Operating Costs ............................................................................................ 1-13
1.23 Financial Analysis .......................................................................................................... 1-14
1.24 Alternative Financial Cases ........................................................................................... 1-15
1.25 Exploration Potential...................................................................................................... 1-16
1.26 Conclusions ................................................................................................................... 1-17
1.27 Recommendations......................................................................................................... 1-17

2.0

INTRODUCTION .......................................................................................................................... 2-1

2.1
Terms of Reference ......................................................................................................... 2-1
2.2
Qualified Persons ............................................................................................................ 2-3
2.3
Effective Dates ................................................................................................................ 2-3
2.4
Previous Technical Reports............................................................................................. 2-4
2.5
References ...................................................................................................................... 2-5
2.6
Technical Report Sections and Required Items under Form 43-101F1 .......................... 2-5

3.0

RELIANCE ON OTHER EXPERTS .............................................................................................. 3-1

3.1
Mineral Tenure ................................................................................................................ 3-1
3.2
Surface Rights ................................................................................................................. 3-1
3.3
Royalties .......................................................................................................................... 3-2

4.0

PROPERTY DESCRIPTION AND LOCATION ............................................................................ 4-1

4.1
Property and Title in Peru ................................................................................................ 4-1
4.1.1 Mineral Tenure ................................................................................................... 4-1
4.1.2 Surface Rights .................................................................................................... 4-2
4.1.3 Royalties ............................................................................................................. 4-3

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

4.2
4.3
4.4
4.5
4.6
4.7
4.8

4.1.4 Environmental Regulations ................................................................................ 4-3

Mineral Tenure ................................................................................................................ 4-6
4.2.1 Tenure History .................................................................................................... 4-6
4.2.2 Current Tenure ................................................................................................... 4-6
Surface Rights ................................................................................................................. 4-1
Royalties .......................................................................................................................... 4-1
Permits............................................................................................................................. 4-1
Environmental .................................................................................................................. 4-2
Socio-Economics ............................................................................................................. 4-3
Comment on Section 4 .................................................................................................... 4-4

5.0

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY ......................................................................................................................... 5-1
5.1
Access ............................................................................................................................. 5-1
5.2
Climate............................................................................................................................. 5-1
5.3
Local Resources and Infrastructure ................................................................................ 5-1
5.3.1 Local Resources ................................................................................................. 5-1
5.3.2 Existing Infrastructure ......................................................................................... 5-2
5.3.3 Planned Infrastructure ........................................................................................ 5-2
5.3.4 Port ..................................................................................................................... 5-5
5.4
Physiography ................................................................................................................... 5-8
5.5
Comment on Section 5 .................................................................................................... 5-9

6.0

HISTORY ...................................................................................................................................... 6-1

7.0

GEOLOGICAL SETTING ............................................................................................................. 7-1

7.1
Caariaco Norte Deposit Geology................................................................................... 7-3
7.1.1 Lithologies .......................................................................................................... 7-4
7.1.2 Alteration ............................................................................................................ 7-6
7.1.3 Structures ......................................................................................................... 7-10
7.2
Prospects ....................................................................................................................... 7-11
7.2.1 Caariaco Sur................................................................................................... 7-12
7.2.2 Quebrada Verde ............................................................................................... 7-12
7.3
Comment on Section 7 .................................................................................................. 7-12

8.0

DEPOSIT TYPES ......................................................................................................................... 8-1

8.1
Comment on Section 8 .................................................................................................... 8-2

9.0

MINERALIZATION ....................................................................................................................... 9-1

9.1
Comment on Section 9 .................................................................................................... 9-2

10.0

EXPLORATION .......................................................................................................................... 10-1

10.1 Grids and Surveys ......................................................................................................... 10-1
10.2 Geological Mapping ....................................................................................................... 10-1
10.3 Geochemistry ................................................................................................................ 10-3
10.4 Pits and Trenches.......................................................................................................... 10-3
10.5 Geophysical Surveys ..................................................................................................... 10-3
10.6 Drilling ............................................................................................................................ 10-4
10.7 Bulk Density ................................................................................................................... 10-4
10.8 Geotechnical and Hydrogeology ................................................................................... 10-4
10.9 Other Studies ................................................................................................................. 10-5
10.10 Exploration Potential...................................................................................................... 10-5
10.11 Comment on Section 10 ................................................................................................ 10-5

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

11.0

DRILLING ................................................................................................................................... 11-1

11.1 Drill Contractors ............................................................................................................. 11-1
11.2 Drill Methods .................................................................................................................. 11-1
11.3 Geological Logging ........................................................................................................ 11-4
11.4 Collar Surveys ............................................................................................................... 11-4
11.5 Down-hole Surveys ....................................................................................................... 11-4
11.6 Recovery........................................................................................................................ 11-5
11.7 Caariaco Norte Drilling ................................................................................................ 11-5
11.8 Comment on Section 11 ................................................................................................ 11-6

12.0

SAMPLING METHOD AND APPROACH .................................................................................. 12-1

12.1 Geochemical Sampling.................................................................................................. 12-1
12.2 Pit and Trench Sampling ............................................................................................... 12-1
12.3 Core Sampling ............................................................................................................... 12-1
12.4 Quality Assurance and Quality Control ......................................................................... 12-1
12.5 Density/Specific Gravity................................................................................................. 12-1
12.6 Comment on Section 12 ................................................................................................ 12-2

13.0

SAMPLE PREPARATION, ANALYSES, AND SECURITY ........................................................ 13-1

13.1 Analytical Laboratories .................................................................................................. 13-1
13.2 Sample Preparation and Analysis ................................................................................. 13-2
13.2.1 CCC .................................................................................................................. 13-2
13.3 Quality Assurance/Quality Control Programs ................................................................ 13-3
13.3.1 CCC .................................................................................................................. 13-4
13.4 Databases ..................................................................................................................... 13-6
13.5 Sample Security ............................................................................................................ 13-6
13.6 Sample Storage ............................................................................................................. 13-6
13.7 Comment on Section 13 ................................................................................................ 13-7

14.0

DATA VERIFICATION ................................................................................................................ 14-1

14.1 Currie, 2004 ................................................................................................................... 14-1
14.2 MineFill, 2007 ................................................................................................................ 14-1
14.3 SRK, 2008 ..................................................................................................................... 14-1
14.4 AMEC, 2010 .................................................................................................................. 14-2
14.5 Comment on Section 14 ................................................................................................ 14-2

15.0

ADJACENT PROPERTIES ........................................................................................................ 15-1

16.0

MINERAL PROCESSING AND METALLURGICAL TESTING .................................................. 16-1

16.1 Metallurgical Testwork ................................................................................................... 16-1
16.1.1 Leach Tests ...................................................................................................... 16-1
16.1.2 Mineralogy ........................................................................................................ 16-2
16.1.3 Comminution Tests........................................................................................... 16-3
16.1.4 Flotation Tests .................................................................................................. 16-3
16.1.5 Concentrate Generation ................................................................................... 16-6
16.1.6 Testwork Results .............................................................................................. 16-8
16.2 Recoveries ..................................................................................................................... 16-9
16.3 Proposed Process Route............................................................................................... 16-9
16.3.1 Process Description.......................................................................................... 16-9
16.3.2 Crushing/Conveying ....................................................................................... 16-10
16.3.3 Coarse Ore Storage and Reclaim .................................................................. 16-10
16.3.4 Grinding .......................................................................................................... 16-14

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

16.4
16.5
16.6
16.7

16.8

16.3.5 Flotation .......................................................................................................... 16-15

16.3.6 Concentrate Dewatering ................................................................................. 16-16
16.3.7 Tailings Thickening and Disposal ................................................................... 16-16
16.3.8 Roasting and Stabilization .............................................................................. 16-17
Reagents and Grinding Media ..................................................................................... 16-20
16.4.1 Process Water ................................................................................................ 16-21
Process Control, Sampling, and Assay ....................................................................... 16-21
Concentrate Receiving and Loadout at Port Site ........................................................ 16-22
Proposed Tailings Management Facility ..................................................................... 16-22
16.7.1 Location .......................................................................................................... 16-22
16.7.2 Design Considerations ................................................................................... 16-23
16.7.3 Starter Embankment....................................................................................... 16-24
16.7.4 TMF Embankment .......................................................................................... 16-24
16.7.5 Seepage Collection Impoundment ................................................................. 16-25
16.7.6 Construction Diversion Structures .................................................................. 16-25
16.7.7 Scorodite Management Facility ...................................................................... 16-26
16.7.8 Closure ........................................................................................................... 16-26
Comment on Section 16 .............................................................................................. 16-26

17.0

MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES............................................. 17-1

17.1 Database ....................................................................................................................... 17-1
17.2 Topography ................................................................................................................... 17-1
17.3 Models ........................................................................................................................... 17-1
17.4 Composites .................................................................................................................... 17-3
17.5 Exploratory Data Analysis ............................................................................................. 17-3
17.6 Variography ................................................................................................................... 17-4
17.7 Grade Capping .............................................................................................................. 17-4
17.8 Estimation Methodology ................................................................................................ 17-5
17.9 Density ........................................................................................................................... 17-5
17.10 Model Validation ............................................................................................................ 17-6
17.11 Mineral Resource Classification .................................................................................... 17-6
17.12 Assessment of Reasonable Prospects of Economic Extraction.................................... 17-7
17.13 Mineral Resource Statement ......................................................................................... 17-9
17.14 Comment on Section 17 .............................................................................................. 17-11

18.0

ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORT ON DEVELOPMENT

PROPERTIES AND PRODUCTION PROPERTIES .................................................................. 18-1

19.0

OTHER RELEVANT DATA AND INFORMATION ..................................................................... 19-1

19.1 Proposed Mining Operation ........................................................................................... 19-1
19.1.1 Dilution .............................................................................................................. 19-1
19.1.2 Pit Geotechnical Design Recommendations .................................................... 19-2
19.1.3 Pit Hydrogeology .............................................................................................. 19-2
19.1.4 Pit Optimization ................................................................................................ 19-4
19.1.5 Mine Production Schedule ............................................................................... 19-4
19.2 Waste Rock Management Facility ................................................................................. 19-8
19.3 Proposed Equipment ..................................................................................................... 19-9
19.4 Proposed Water Management .................................................................................... 19-11
19.5 Capital Costs ............................................................................................................... 19-13
19.6 Operating Costs ........................................................................................................... 19-14
19.7 Markets ........................................................................................................................ 19-16

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.7.1 Treatment Charges......................................................................................... 19-16

19.7.2 Concentrates .................................................................................................. 19-18
19.7.3 Acid ................................................................................................................. 19-18
19.7.4 Contracts and Agreements ............................................................................. 19-19
19.8 Taxation ....................................................................................................................... 19-19
19.9 Financial Analysis ........................................................................................................ 19-20
19.9.1 Basis of Base Case Financial Analysis .......................................................... 19-21
19.9.2 Results of Base Case Financial Analysis ....................................................... 19-22
19.9.3 Base Case Sensitivity Analysis ...................................................................... 19-22
19.9.4 Alternative Cases ........................................................................................... 19-25
19.10 Risks and Opportunities .............................................................................................. 19-26
20.0

INTERPRETATION AND CONCLUSIONS ................................................................................ 20-1

21.0

RECOMMENDATIONS .............................................................................................................. 21-1

22.0

REFERENCES ........................................................................................................................... 22-1

23.0

DATE AND SIGNATURE PAGE ................................................................................................ 23-1

TABLES
Table 1-1: Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cut-off Grade (David
Thomas P. Geo., Effective Date 8 November 2010) ........................................................... 1-10
Table 1-2: Summary of Capital Costs ................................................................................................... 1-13
Table 1-3: Average Operating Costs ..................................................................................................... 1-14
Table 1-4: Results of Financial Analysis for Base Case (base case is highlighted) ............................. 1-15
Table 1-5: Results of Financial Analysis for Alternative Cases............................................................. 1-16
Table 2-1: QPs for the Report ................................................................................................................. 2-2
Table 2-2: Contents Page Headings in Relation to Form 43-101F1 Prescribed Item Headings ............ 2-6
Table 4-1: Summary of Environmental Requirements for Mining Exploration Programs ....................... 4-5
Table 4-2: Caariaco Concessions held by Candente Copper Corp. (as at 26 November 2010) .......... 4-7
Table 7-1: Project Stratigraphic Column ................................................................................................. 7-4
Table 10-1: Exploration Summary Table ................................................................................................. 10-2
Table 11-1: Drill Summary Table............................................................................................................. 11-2
Table 11-2: Drill Hole Intercept Summary Table ..................................................................................... 11-6
Table 12-1: Bulk Density Values used in the 2010 Mineral Resource Estimate ..................................... 12-2
Table 16-1: Metallurgical Testwork Summary Table ............................................................................... 16-1
Table 16-2: Key Process Design Criteria .............................................................................................. 16-11
Table 17-1: Estimation Domains ............................................................................................................. 17-3
Table 17-2: Outlier Thresholds for Copper, Gold and Silver ................................................................... 17-5
Table 17-3: Optimization Parameters for Resource Pit Shell ................................................................. 17-8
Table 17-4: Copper Process Recoveries ................................................................................................ 17-8
Table 17-5: Marginal Cut-Off Calculation ................................................................................................ 17-8
Table 17-6: Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cut-off Grade (David
Thomas P. Geo., Effective Date 8 November 2010) ......................................................... 17-10
Table 17-7: Mineral Resource Statement for Caariaco Norte Showing Sensitivity to Various Cut-offs
(David Thomas P. Geo., Effective Date 8 November 2010). ............................................. 17-10

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-1: Design Sector Slope Recommendations ............................................................................. 19-3

Table 19-2: LOM Production Schedule ................................................................................................... 19-6
Table 19-3: Mine Equipment Requirements.......................................................................................... 19-10
Table 19-4: Summary of Capital Costs ................................................................................................. 19-15
Table 19-5: LOM Mining Cost by Category ($000) ............................................................................... 19-16
Table 19-6: Average Annual Processing Costs .................................................................................... 19-17
Table 19-7: Summary of G&A Cost Estimate........................................................................................ 19-17
Table 19-8: Base Case Metal Prices ..................................................................................................... 19-21
Table 19-9: Base Case Cashflow Analysis ........................................................................................... 19-23
Table 19-10: Results of Sensitivity Analysis for Base Case with NPV @ 8% .................................. 19-25
Table 19-11: Results of Financial Analysis for Alternative Cases .................................................... 19-26
FIGURES
Figure 2-1:
Figure 4-1:
Figure 5-1:
Figure 5-2:
Figure 5-3:
Figure 7-1:
Figure 7-2:
Figure 7-3:
Figure 7-4:
Figure 7-5:
Figure 7-6:
Figure 9-1:

Project Location Map ............................................................................................................. 2-2

Caariaco Concessions held by Candente Copper Corporation ........................................... 4-8
Caariaco Property Access Routes and Infrastructure.......................................................... 5-2
Planned Layout, Major Project Facilities ................................................................................ 5-3
Proposed Mine Site General Arrangement ............................................................................ 5-4
Regional Geology Map .......................................................................................................... 7-2
Regional Stratigraphic Column .............................................................................................. 7-3
Geological Map, Caariaco Norte .......................................................................................... 7-7
Geological Drill Section 9,326,300N ...................................................................................... 7-8
Geological Drill Section 690,800E ......................................................................................... 7-9
Prospect Location Plan and Geological Map ....................................................................... 7-11
Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Cu (%)
Ranges Overlapping Lithological Interpretation ..................................................................... 9-3
Figure 9-2: Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Au (ppb)
Ranges ................................................................................................................................... 9-4
Figure 9-3: Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Ag (g/t)
Ranges ................................................................................................................................... 9-5
Figure 11-1:Drill Hole Location Plan, Caariaco Norte ........................................................................... 11-2
Figure 11-2:Drill Hole Location Plan, Caariaco Sur and Quebrada Verde ............................................ 11-3
Figure 16-1:Process Overview General Diagram............................................................................... 16-13
Figure 16-2:Process Overview Block Diagram................................................................................... 16-13
Figure 16-3:Partial Roasting and Arsenic Removal Circuit ................................................................... 16-19
Figure 19-1:Pit Design Sectors................................................................................................................ 19-3
Figure 19-2:Proposed Pit Phases (figure looks northeast) ..................................................................... 19-5
Figure 19-3:Material Movement by Period .............................................................................................. 19-7
Figure 19-4:Mill Feed Characteristics by Year ........................................................................................ 19-7
Figure 19-5:Proposed Layout, WRF ........................................................................................................ 19-8
Figure 19-6:Layout Plan, Proposed Water Management Structures .................................................... 19-12
Figure 19-7:Graph of Sensitivity Analysis Results for Base Case ........................................................ 19-25

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

1.0

SUMMARY
AMEC Americas Limited (AMEC) was commissioned by Candente Copper Corporation
(CCC) to prepare an independent Qualified Persons Review and NI 43-101 Technical
Report (the Report) on the Pre-Feasibility Study Progress Report which includes a
Preliminary Assessment (PA) update for the wholly-owned Caariaco Norte Copper
Project (the Project) located in the Lambayeque Department, Peru. The Project
contains the Caariaco Norte copper deposit, and the Caariaco Sur and Quebrada
Verde prospects.
CCC will be using the Report in support of disclosures in the CCC press release dated
7 March 2011, entitled Candente Copper Files NI 43-101 Technical Report and
Updates Key Financial Results for the Caariaco Norte Copper Project Pre-Feasibility
Study Progress Report, and the CCC press release dated 18 January 2011, entitled
Candente Copper Announces Positive Pre-Feasibility Progress Report for the
Caariaco Norte Copper Project.

1.1

Principal Outcomes

After-tax NPV of US$1,063.4 million for base case with US$2.25 per pound
copper, US$1,015 per ounce gold, US$15.85 per ounce silver, and eight percent
discount rate

After-tax IRR of 18.8 percent for base case with US$2.25 per pound copper,
US$1,015 per ounce gold, and US$15.85 per ounce silver

Payback of preproduction capital in 2.9 years (on a pre-tax basis)

Cash operating cost of US$0.99 per pound of copper including all on-site and offsite costs, toll treatment/refinery (TCRC) charges, net of by-product credits

Average metal production of 262 million pounds (119,000 tonnes) copper per year,
37,000 ounces of gold per year, and 850,000 ounces of silver per year

Average production of 295 million pounds (139,000 tonnes) copper per year for the
first three years of production

Pre-production capital cost of US$1.437 billion based on leased mining equipment

and including contingency of 20 percent

All in capital cost of US$1.565 billion based on leased mining equipment and
including working capital, life-of-mine sustaining capital, and closure cost

Processing rate of 95,000 tonnes per day using conventional crush/grind and
flotation technology

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

1.2

Waste to ore strip ratio of 0.98 to 1

Average life-of-mine metal recoveries of 89.7 percent for copper, 55 percent for
gold and 50 percent for silver

Concentrate grades average approximately 30 percent copper, three grams per

tonne gold and 73 grams per tonne silver

22 year mine life, with potential for extension by mining additional resources
identified below proposed pit

Caariaco Norte is located at a moderate elevation with pit centroid and process
plant at approximately 3,000 metres above sea level;

Connection to national power grid; distance of approximately 57 kilometres

New access road to major paved highway; distance of approximately 42 kilometres

Significant potential for discovery of additional resources at nearby Caariaco Sur

and Quebrada Verde targets.

Terms of Reference
AMEC was requested to complete a Pre-Feasibility Study for CCC on the Caariaco
Norte Project. The study that is the subject of this Report is considered to be a Prefeasibility Study Progress Report, because:

Additional geotechnical drilling and rock quality assessment is required to complete

the open pit slope design to a level consistent with pre-feasibility requirements; this
drilling has been planned

Geotechnical investigations are required in the area where above-ground

structures are proposed as part of tailings management facility (TMF) design.
Information from the planned geotechnical program may result in modifications to
the design.

The mine plan is based on Measured and Indicated mineral resources only, with
Inferred mineral resources considered as waste. The economic analyses based on
these mineral resources, although modelled to a level consistent with a pre-feasibility
study, are considered to be a PA under NI 43-101.

1.3

Location and Access

The Caariaco Project is approximately 700 kilometres northwest of Lima, the capital
of Peru, and approximately 110 kilometres to the northeast of the city of Chiclayo.
Project access is either via the Pan-American Highway (700 kilometres, 11-hour trip),

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

or one of the thrice-daily commercial airline flights can be taken from Lima to Chiclayo.
The route from Chiclayo to the Caariaco Project is currently a 149 kilometre, six-hour
trip along mostly unimproved roads via Incahuasi.

1.4

Mineral Tenure, Surface Rights, and Royalties

The Project currently consists of 16 Caariaco concessions, covering a total area of
13,400 hectares and four Jehumarca claims, of 3,600 hectares, for a total Project area
of 16,390 hectares. Mining legislation in Peru does not require location of concession
boundaries on the ground. The boundary limits are defined by UTM coordinates. To
maintain the property in good standing, annual property payments of $17,500
commenced in June 2002. AMEC was provided with information from legal advisors
retained by CCC that all required property payments have been made, and the
concessions are in good standing. Providing the annual property payments are made
in a timely manner, the concessions will not expire.
The owner of the surface rights is the Comunidad Campesina San Juan Bautista de
Caaris (the Campesina). Under Peruvian Law 24656, CCC is required to have a
valid agreement with the Campesina to undertake exploration. The previous
agreement expired in December 2009, and CCC is in the process of negotiating a
new, three-year, access agreement.
There are no royalties payable to any third parties on any of the concessions that
currently comprise the Project.
It is expected that the Project will incur a three percent royalty payable to the
Government of Peru once production commences. AMEC notes that if changes to the
royalty legislation currently being considered by the Peruvian Government are made,
then the royalty burden may increase.

1.5

Permits and the Environment

Exploration activities to date have been undertaken in accordance with the appropriate
Peruvian regulations. A number of permits will be required to support project
development and operation, and the main permit requirements have been identified to
support any proposed construction and mining operations.
CCC is carrying out environmental baseline studies and monitoring under the direction
of AMEC Earth and Environmental of Lima, Peru. Baseline data collected in 2007
indicated a diverse flora and fauna were present in the Project area, and identified
several new flora and fauna species. AMEC notes that in many areas of Peru the

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

biodiversity assessments are not yet complete, and therefore it is not uncommon for
detailed environmental impact investigations to identify new species. CCC has
instigated two conservation projects that encompass the relocation of protected
orchids found at the site and the identification of an area for conservation and
environmental management.
A social and environmental impact assessment study framework has been prepared
and is being fulfilled. Studies include determining the geochemical characteristics of
the waste and mineralized rock, assessing the vicinity of the planned mine area for
potential water supplies, and reviewing social and community conditions. Once these
studies are completed to levels in accordance with the requirements of the Peruvian
Government and meet the guidelines set out in the Equator Principles, then the
process of obtaining all the required environmental, construction and mining permits
will be undertaken.
At this stage of the Project, environmental liabilities are limited to those expected for
an exploration-stage project, and include drill pads and access roads.

1.6

Geology and Mineralization

The Caariaco Norte polyphase intrusive complex is approximately 1.7 kilometres in
strike extent, 1.1 kilometres wide, and has been drill-tested to a depth of 770 metres.
The deposit remains open at depth. It is a typical example of an Andean porphyry
copper complex.
The country rocks hosting the intrusive complex comprise andesitic pyroclastic rocks
and flows on the western, northern and southern sides of the intrusive complex where
elevations are higher, and comprise dacite and rhyolite volcanic rocks on the eastern
side of the intrusive complex where elevations are lower. Host rocks have been
intruded along faults and zones of structural weaknesses by three main intrusive
phases. The intrusions are cut by three late mineral breccias. Intrusive units comprise
approximately 5560 percent of the deposit, breccias approximately 3035 percent
and pre-mineral volcanic rocks approximately 510 percent. The deposit is capped by
a leached zone with a variable thickness ranging from 0 metres to 120 metres thick,
thick and averaging approximately 40 metres to 50 metres in thickness, where copper
mineralization has been leached out.
The primary copper minerals are chalcopyrite, covellite, and chalcocite. Other copper
sulphide minerals that may be present include enargite, bornite, and tennantite.
Copper sulphide minerals are mainly associated with pyrite and other sulphide gangue
minerals. Copper minerals and pyrite are disseminated, veined, and fracture-hosted,
with copper grades directly related to the intensity of fracturing and the alteration type

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

and intensity. Higher grades are associated with potassic, phyllic, and argillic
alteration and less commonly with propylitic and silicic alteration.

1.7

History and Exploration

Prior to CCCs involvement, exploration was conducted by the Peruvian Servicio
Nacional de Geologa y Minera (Ingemmet), Placer Dome Exploration Inc. (Placer
Dome), and Billiton Exploration and Mining Per B.V. (Surcusal Peruana), from 1967
to 2000. Work completed by these companies included stream sediment sampling,
geological mapping, rock chip and grab sampling, trenching and pitting, induced
polarization (IP), resistivity, and ground magnetic surveys, petrographic studies, core
drilling, mineral resource estimation, and very preliminary leach testwork.
Candente Copper Corp., through its wholly-owned Peruvian subsidiary Exploraciones
Milenio S.A. (EMSA), acquired 100 percent ownership of the Project in February 2002.
Since that date, CCC has completed geological mapping, prospecting, ground
magnetic, resistivity and magnetic geophysical surveys, rock chip sampling,
petrographic studies, bulk sampling for metallurgical testing, re-logging and resampling of historic drill core, core drilling, and mineral resource estimation.
The exploration programs discovered the Caariaco Norte copper deposit, and the
Caariaco Sur and Quebrada Verde prospects.
A preliminary assessment (PA) was undertaken in 2006 on the Caariaco Norte
deposit, and was updated in 2008. The updated PA in this report supersedes the 2008
PA, and the 2008 PA is considered to be no longer relevant.
In November 2010, CCC released an updated mineral resource estimate; this estimate
forms the basis for the 2011 PA update.

1.8

Drilling
A total of 263 core holes (75,672.31 m), including geotechnical, metallurgical, and
hydrogeological drilling for all three targets, Caariaco Norte, Caariaco Sur, and
Quebrada Verde, have been completed.
Core was logged for geological and geotechnical parameters. Drill collar locations
were picked up by a surveyor, using a total station instrument. Down-hole surveys
were performed using either a Pajari, Sperry Sun, or Reflex EZ-Shot instrument.
Drill core generated by Ingemmet and Placer Dome was halved by personnel from
these operators; there is no information as to the typical sample intervals taken by

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

either company. The Surcusal Peruana and CCC drill core was halved and sampled
on 2 m intervals by personnel from these operators.
A total of 9,424 bulk density readings were taken by CCC personnel on core, and an
additional 550 specific gravity determinations were performed by ALS Chemex (Lima).

1.9

Analyses and Quality Assurance/Quality Control

Several primary assay laboratories have been used for routine analyses over the
Project history. Ingemmet used the Plenge Laboratory in Lima and the Ingemmet
internal laboratory, also located in Lima. Placer Dome utilized the SGS-XRAL (SGS)
laboratory in Lima. For the Surcusal Peruana sampling, sample preparation was
undertaken by ALS Chemex in Trujillo, and primary analysis by ALS Chemex in Lima.
Limited information is available on the sample preparation and analysis methods for
Ingemmet or Placer Dome. Ingemmet samples were analyzed for copper and
molybdenum, and more rarely gold and silver, using a colorimetric analytical method.
Surcusal Peruana samples were 200 gram splits of a one kilogram, 200 mesh
homogenized sample. A split from each sample pulp was assayed for gold (fire assay
with atomic absorption finish, 10 parts per billion detection limit) and copper, lead, zinc,
molybdenum and arsenic (multi-acid, total digest), with an atomic absorption (AA)
finish for each element. SGS completed check assays on a split of one in 20 pulps
using the same analytical procedures as the initial analysis performed by ALS
Chemex.
Activation-Skyline Laboratories (Actlabs) in Lima, Peru performed all of the sample
preparation and the majority of the analyses for the CCC programs. Inductivelycoupled plasma (ICP) analyses were performed by the Ancaster, Canada, Actlabs
laboratory. Some analyses for the re-analysis of pre-2008 core samples for gold and
ICP were undertaken by ALS Chemex in Lima. ACME Laboratories (ACME), Lima
were used as a check laboratory for pulp analyses.
Each CCC sample was subject to total copper and sequential copper leaching
analysis, using a three-acid digest and AA finish. Gold used an aqua regia digest, with
a fire assay and AA finish. Depending on the sample, a 36-element suite was
analysed by Actlabs using inductively-coupled plasma optical emission spectrometry
(ICP-OES), or a 33-element suite was analysed by ALS Chemex using an ICP atomic
emission spectroscopy (AES) method.
There is limited currently-available information on any quality assurance/quality control
(QA/QC) programs for the Ingemmet and Placer Dome work programs. Surcusal

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Peruana used blanks, standard reference materials (SRMs) and check assays. The
CCC QA/QC program used field, pulp and coarse reject duplicates, blanks, and SRMs.

1.10

Data Verification
All data in the field are recorded in written form in field books, log books, sample
sheets, logging forms or shipping forms. All field data is hand-entered into Excel
tables. Data from third parties such as laboratories or survey contractors are generally
supplied in digital and printed form. All data are verified by CCC personnel.
A number of data verification programs and audits have been performed over the
Project history, primarily in support of technical reports. No errors or omissions were
noted during these reviews.
Drill data collected from the Ingemmet, Placer Dome, and Surcusal Peruana
campaigns were re-logged by CCC personnel, and nine of the drill holes have been
re-assayed. Based on the correlations between the historical grades and the CCC reassay grades, all of the historical data were accepted into the final database.
Three pairs of twinned holes were drilled by CCC to verify grade uniformity at short
distances. In general, similar average grades were noted over the same depth
intervals.

1.11

Metallurgical Testwork
Initial metallurgical testwork was focused on leachable copper. However, as the
Project has developed, and the mineralization was confirmed as primarily sulphide,
conventional milling was determined to be a more appropriate process. Testwork has
included Qemscan examination, comminution and variability comminution tests, tests
on the effects of grind sizes, collectors and pH, sulphidization, cleaner flotation tests
and locked cycle tests. Concentrates were also produced for proof-of-concept testing
to show that As and Sb levels in concentrate could be reduced by using a roaster step,
resulting in an enhanced concentrate which would have low or no penalty elements
and would be broadly marketable.
The currently-envisaged process route uses conventional technology and proven
equipment. The route will include crushing and conveying, rougher flotation,
regrinding, cleaning, thickening, filtration, concentrate roasting, and agglomeration.
Pyrite will be floated and removed prior to tailings discharge. Gas from the roaster
step, which contains sulphur dioxide, will be treated to produce upgraded, saleable,
sulphuric acid.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

1.12

Recoveries
Recoveries used to support Mineral Resource estimation and plant design were
variable for copper, based on the copper grade, ranging from 58.8 percent at 0.1
percent copper to 93.1 percent at 0.6 percent copper, 55 percent for gold and 50
percent for silver.

1.13

Mineral Resources
The estimation database comprises 225 core holes (67,485.06 m of core, of which
66,584.29 m have assay intervals) from the Ingemmet, Placer Dome, Surcusal
Peruana, and CCC drill programs and has a cut-off date of for information to be
included in the Report of 18 July, 2010.
Lithological and alteration interpretations were provided as sections by CCC; AMEC
created bench polygons and models from these. Estimation domains were defined
following evaluation of statistical distributions of lithological and alteration units. AMEC
created a total of seven domains for copper and four domains for gold and silver.
Domains for arsenic, which is a contaminant in the metallurgical process, were based
on low- and high-grade populations considering a 250 ppm arsenic threshold as the
upper limit for low-grade arsenic data.
AMEC regularized the assay intervals by compositing the drill hole data into six metre
lengths using no geological or domain boundaries. Exploratory data analysis
comprised basic statistical evaluation of the six metre composites for copper, gold,
silver and arsenic. Sage2001 software was used to construct down-hole and
directional correlograms for the estimation domains for copper, gold, silver and
arsenic. Probability plots were evaluated to define grade outliers for copper, gold, and
silver and by estimation domains. Copper, gold, and silver grades were capped in
each domain; arsenic values were not capped.
The block model consists of regular blocks (15 metres by 15 metres by 15 metres) and
no rotation is used. The block size was chosen such that geological contacts are
reasonably well reflected and to support an open pit mining scenario.
AMEC estimated copper, gold, silver and arsenic grades by estimation domains using
ordinary kriging (OK) interpolation for the majority of domains. Inverse distance
weighting to the second power (ID2) was used to interpolate gold and silver in domains
where variography was not considered sufficiently robust. Indicator kriging was also
used to estimate the probabilities of low- and high-grade arsenic values within blocks.
Density values were assigned to blocks based upon the lithological codes.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

The Caariaco Norte block model was validated to ensure appropriate honouring of
the input data, including construction of a nearest neighbour (NN) model to validate the
OK model. No biases or errors were noted with the model.
AMEC used the following criteria to pre-classify blocks into categories as:

Measured mineral resources: require composites from a minimum of three drill

holes within 75 metres radius from a block centroid, or samples from two drill holes
with the closest sample within 25 metres of the block centroid.

Indicated mineral resources: samples from a minimum of two drill holes within
110 metre distance of the block centroid.

Blocks that were not classified as Measured or Indicated categories, but had a
composite within 135 metres from the block centroid were classified as Inferred.
Remaining blocks were not classified. A semi-automated process was used to smooth
the initial classification and avoid islands or isolated blocks of different categories.
Reasonable prospects of economic extraction were assessed by applying preliminary
economic constraints within an open pit shell. Mining and process costs, as well as
process recoveries were defined from on-going AMEC studies for the Project. AMEC
defined a cut-off value of 0.2 percent copper for reporting mineral resources from
these parameters.

1.14

Mineral Resource Statement

Mineral Resources for the Project were classified under the 2005 CIM Definition
Standards for Mineral Resources and Mineral Reserves by application of a cut-off
grade that incorporated process-related operating costs and recovery parameters, and
constraint of the Mineral Resources to a pit shell based on commodity prices, recovery
parameters and operating costs. Mineral Resources are tabulated in Table 1-1.
The Qualified Person for the Mineral Resource estimate is David Thomas, P.Geo.
Mineral resources are reported at a cut-off grade based on the assumption of longterm metal prices as follows: copper price of US$2.50 per pound, a gold price of
US$1,035 per ounce and a silver price of US$17.25 per ounce, and have an effective
date of 8 November 2010. Mineral resources that are not mineral reserves do not
have demonstrated economic viability.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 1-1:

Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cut-off

Grade (David Thomas P. Geo., Effective Date 8 November 2010)

Grade
Contained Metal
Tonnage
Cu
Au
Ag
Copper
Gold
Silver
Category
Mt
%
g/t
g/t
(Blb)
(Moz)
(Moz)
Measured
406.6
0.44
0.07
1.9
3.977
0.958
24.656
Indicated
596.5
0.38
0.06
1.6
4.964
1.081
30.403
Measured + Indicated
1,003.0
0.40
0.06
1.7
8.941
2.039
55.059
Inferred
293.3
0.33
0.05
1.5
2.165
0.448
13.547
Notes to accompany Mineral Resource Table:
1. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
2. Mineral Resources base case is reported at a 0.2% Cu cut-off grade
3. Mineral Resources are reported as undiluted.
4. A LerchsGrossmann pit shell was used to constrain the Mineral Resources to assess reasonable prospects
of eventual economic extraction.
5. Mineral Resources are reported using assumed long-term prices as follows: copper price of US$2.50/lb,
gold price of US$1,035/oz and silver price of US$17.25/oz.
6. Rounding as required by reporting guidelines may result in apparent summation differences between
tonnes, grade and contained metal content.
7. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces,
contained copper pounds as imperial pounds.

1.15

Projected Mine Plan

The mine plan is based on diluted Measured and Indicated mineral resources
contained in a Lerchs-Grossmann (LG) optimized pit shell generated at metal prices of
$2.25 per pound copper, $930 per ounce gold, and $15 per ounce silver.
Large-scale conventional bulk open pit mining was selected for Caariaco, featuring
311 millimetre diameter blast hole drills, 43 cubic metre rope shovels, and 290 tonne
haul trucks working on 15 metre benches. A single pit with internal phases will provide
process feed at a rate of 95,000 tonnes per day.
Diluted net smelter return (NSRD) values were calculated for cut-off application and
block valuation during pit optimization. An average mining cost of $1.42 per tonne
mined was estimated. A combined mill feed-based cost of US$3.57 per tonne milled
was used for pit optimization: this also represents the marginal breakeven cut-off
grade. The input parameters utilized for the mine plan development included a target
mine life between 18 years and 22 years, a life-of-mine (LOM) head grade of no less
than 0.40 percent copper, and a strip ratio of less than 1:1.
The mine plan results in a total of 728.2 million tonnes of mill feed and 713.5 million
tonnes of waste (0.98:1 strip ratio) over a 22-year mine operating life. Average life-ofmine head grades to the process plant will be 0.40 percent copper, 0.067 grams per
tonne gold and 1.71 grams per tonne silver. The mine grades during the first three
years of production will be higher, with average feed grades of 0.48 percent copper,
0.086 grams per tonne gold and 2.14 grams per tonne silver.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

A single elongated waste rock management facility (WRMF) will be developed

adjacent to the pit.

1.16

Proposed Process Route

The process design is for a concentrator with a nominal processing capacity of
95,000 tonnes per day of mineralization from the open pit. The mineral processing
and the roasting/acid plants are based on conventional technology and industryproven equipment.
Run-of-mine (ROM) ore from the open pit will be crushed and conveyed to the
concentrator where the ore will be ground to liberate the mineral values from the host
rock and then separated by flotation. The bulk copper-silver-gold sulphide concentrate
produced will be filtered and introduced into the roasting plant. There the concentrate
will undergo a partial oxidative roast, which will remove the arsenic and part of the
sulphur into the gaseous phase. The gas will be scrubbed to capture particulate
matter and the arsenic into solution. This solution will report to a stabilization circuit
that will remove any valuable copper and convert the arsenic into scorodite, which will
be filtered and transferred to the tailings management facility (TMF).
After removal of the arsenic, the gas containing sulphur dioxide will be processed
through a modular plant to produce saleable sulphuric acid.
The copper precipitate and solid calcine produced from the roaster and its cyclones
will be agglomerated and stockpiled. Trucks will transport the combined concentrate
to the port facilities, where it will be placed on ocean-going vessels for transport to
overseas smelters.

1.17

Proposed Tailings Management

The TMF presented in this report is designed to manage tailings for mine operations at
a processing rate of 95,000 t/d for 19 years as per the preliminary mine plan.
Subsequent to completion of this facility design, an updated mine plan was developed
that extended the mine life to 22 years. To accurately reflect this change, the TMF
design will be updated during the next phase of project study. However, the current
facility represents a reasonable assessment of the associated costs for the project
based on the known conditions.
The main components of the TMF are as follows:

Starter embankment.

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TMF embankment
Seepage collection (SC) impoundment
Construction diversion structures
Scorodite management facility.

Design criteria utilized are commensurate with appropriate governance literature

and/or as appropriate, industry standards for this level of study. The facility is
proposed to be constructed in the Quebrada Yerma valley, following a trade-off study
on locations.
Water from the TMF will be reclaimed to the process plant during operations. The
process plant will require 166 cubic metres per day of reclaim water from the TMF and
18 cubic metres per day of fresh water make-up to replace water losses from
operations.

1.18

Proposed Water Management

The surface water management plan for the Caariaco Norte project will preserve to
the maximum extent possible the non contact status of surface waters. Waters that
become affected by project activities, or contact waters, will be contained, and if
necessary, treated, so that waters that are released to the environment always meet
the applicable water quality regulatory guidelines. A system of impoundments,
embankments, diversions, and spillways will be developed immediately as construction
commences to handle run-off from construction related activities. This system will
continue to be developed through construction and operations activities to ensure
water discharged to the environment always meets the guidelines.

1.19

Proposed Workforce
The total workforce is estimated at 600 persons. The work schedule assumes
production will operate 24 hours a day, seven days a week, 365 days a year.

1.20

Infrastructure
The mine site facilities are divided into three general areas: the mine, the plant site,
which includes buildings and structures for repair and maintenance of mine and plant
equipment repair and maintenance, and the camp area, which includes facilities for
personnel accommodations, administration, and security. Other support facilities and
services include site access, power supply and distribution, water supply, explosive
storage and handling, communications systems and waste disposal facilities at the
site.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Project infrastructure will also include facilities at the Marine Terminal Muchik (MTM), a
planned development by Lumina Copper Corporation (Lumina) in northern Peru.
Here, CCC will have its own dedicated concentrated receiving, storage, and reclaim
facilities and will share general site services and ship berthing/loadout equipment with
Lumina.

1.21

Projected Capital Costs

The capital cost estimate for the financial model base case assumes open pit mining
by the owner with leased supply of mobile mining equipment including scheduled
additions and replacements. All other project costs are the responsibility of the owner
including process and infrastructure preproduction capital, life of mine sustaining
capital, and closure costs. The estimate covers the direct field costs of executing the
project, plus the Owners indirect costs associated with design, construction, and
commissioning. All costs were expressed in third quarter (Q3) 2010 U.S. dollars. No
allowance has been included for escalation, interest or financing fees, taxes or duties,
or working capital during construction. The level of accuracy for the estimate is 20
percent of estimated final costs, as per AACE Class 4 definition. Capital costs are
summarized in Table 1-2, and total $1.599 billion.
Table 1-2:

Summary of Capital Costs

Area
Pre-stripping
Mining Infrastructure & Equipment
Processing Plant & Acid Plant
On Site Infrastructures
Tailings Management
Project Access Road
Water Diversion and Reservoir
Port Site Facilities
Total Direct
Owners Cost
Indirects
Total Indirects
Contingency
Total Capital Cost
Escalation (excluded)
Working Capital (included in Financial Analysis)
Total

1.22

2010 ($000)
70,008
101,942
381,277
133,444
101,527
38,795
50,753
26,887
904,633
52,899
243,076
295,975
236,522
1,437,160

1,437,160

Projected Operating Costs

The operating costs for the Caariaco Norte project are based on an Owner-operated
mining fleet and process facility and have been prepared in third quarter 2010 U.S.
dollars. The operating cost estimates were assembled by area and component, based
on estimated staffing levels, consumables, and expenditures, according to the mine

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

plan and process design. Average operating costs over the LOM are shown in Table
1-3.
Table 1-3:

Average Operating Costs

Area

1.23

Unit

US$

Unit

US$/lb Cu

Mining

$/t processed

2.74

$/lb Cu

0.360

Processing

$/t processed

3.11

$/lb Cu

0.408

General & Administration

$/t processed

0.43

$/lb Cu

0.056

Total Operating Costs

$/t processed

6.28

$/lb Cu

0.824

Financial Analysis
The results of the economic analyses discussed in this section represent forwardlooking information as defined under Canadian Provincial securities law. The results
depend on inputs that are subject to a number of known and unknown risks,
uncertainties and other factors that may cause actual results to differ materially from
those presented here. The economic analysis is based on the evaluation of Measured
and Indicated Mineral Resources. Mineral resources are not mineral reserves, and do
not have demonstrated economic viability.
The Project has been valued using a discounted cash flow (DCF) approach. Net
annual cash flows are discounted back to the date of valuation in end-of-year 2010
dollars and totalled to determine NPVs at the selected discount rates. The payback
period is calculated as the time needed to recover the initial capital spent. All
monetary amounts are presented in US dollars.
The pre-tax cumulative cash flow for the base case is $5,998 million with an IRR of
26.8 percent. The cash flow analysis shows that the Project will generate a positive
cash flow in all years except Year -2 and Year -1 on a pre-tax basis. The annual
positive cash flow results in a payback period of 2.9 years. At an eight percent
discount rate, the pre-tax NPV of the project is $1,983 million.
The after-tax cumulative cash flow for the base case is $3,855 million with an IRR of
18.8 percent. The cash flow analysis shows that the project will generate a positive
cash flow in all years except Year -2 and Year -1 on an after-tax basis. The annual
positive cash flow results in a payback period of 4.1 years. At an eight percent
discount rate, the NPV of the project is $1,063 million.
The financial analysis results for the base case are summarized in Table 1-4.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 1-4:

Results of Financial Analysis for Base Case (base case is highlighted)

Summary of Cash Flow

Pre-Tax

After Tax

US$000

5,997,662

3,855,417

Discounted at 4%

US$000

3,395,140

2,040,471

Discounted at 6%

US$000

2,588,605

1,481,321

Discounted at 8%

US$000

1,983,089

1,063,416

Discounted at 10%

US$000

1,520,971

746,126

Discounted at 15%

US$000

763,306

231,322

US$000

26.8%

18.8%

Cumulative net cash flow

Undiscounted
Net present value

Internal rate of return

Payback period
Years
2.9
4.1
Note: Base case copper prices are based on long-term reverting price curves whereby metal prices in the early years
of operation are higher and gradually decrease to fixed long term prices after Year 10. This approach recognizes the
industry-consensus view that future copper and precious metal prices will remain higher than historical price trends
over the short- to medium-term, with reversion to lower long-term prices.

Sensitivity analysis was performed on the base case taking into account variations in
the metal price, operating cost, foreign exchange, and mining cost. Analysis shows
that the Caariaco Project is most sensitive to changes in metal prices, as this directly
affects the revenue stream.
The Project is less sensitive to capital expenditure and operating cost. The
sensitivities of the two costs are very similar. Considering that the Project is priced in
US dollars, the effects of exchange rate variation do not apply in the current model,
although in reality some equipment, supplies, and services will be priced in Euros or
the local Peruvian currency.

1.24

Alternative Financial Cases

Three alternative cases were evaluated. These used the parameters of the base case
with the exception of the capital costs. The other three scenarios included:

Full Owner-operated mine and process facilities

Contractor mining

Full lease of process and electrical equipment in addition to mining equipment.

The capital cost for the full Owner-operated and financed option is $1.599 billion for
start-up and $206 million to sustain the operation. If the contract mining option were
considered, then the cost could be reduced to $1.405 billion and $63 million for startup and sustaining capital, respectively. The option involving full lease of mine and

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

major process and electrical equipment reduces the capital cost to $1.191 billion and
$207 million for sustaining capital.
The financial evaluation results of the alternative cases are included as Table 1-5.
Table 1-5:

Results of Financial Analysis for Alternative Cases

Item

Unit

Value at $2.25/lb Cu

Value at $3/lb Cu

Full Owner Operated pre-tax

%

25.8

35.8

CNCF*

C$000,000

6,017

9,842

NPV 8%

C$000,000

1,968

3,504

NPV 10%

C$000,000

1,501

2,776

Years

3.0

2.3

IRR

Payback
Contract Mining pre-tax

27.0

37.8

CNCF*

C$000,000

5,754

9,579

NPV 8%

C$000,000

1,919

3,456

NPV 10%

C$000,000

1,476

2,751

Years

2.8

2.1

IRR

Payback
Equipment Leasing pre-tax

29.9

42.0

CNCF*

C$000,000

5,847

9,672

NPV 8%

C$000,000

1,989

3,525

NPV 10%

C$000,000

1,547

2,822

Payback

Years

2.6

1.9

IRR

*Cumulative Net Cash Flow

1.25

Exploration Potential
The Caariaco Norte deposit is open to depth and the potential exists for the mine life
to be extended beyond the 22 years proposed in this report and/or the mining and
processing rate to be increased. Both opportunities offer the potential to enhance the
economics of the Caariaco Norte Project.
The potential exists to discover and delineate additional resources at the Caariaco
Sur and Quebrada Verde targets which are located approximately 1.5 kilometres and
3.5 kilometres south of the Caariaco Norte deposit. These targets are located within
CCC's Caariaco property and, should an economic deposit be delineated at either
site, it is possible that development would utilize the proposed Caariaco Norte
facilities.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

1.26

Conclusions
In the opinion of the QPs, the Project that is outlined in this Report has met its
objectives in that mineralization has been identified that can support estimation of
Mineral Resources. There is sufficient additional scientific and technical information to
support an updated preliminary assessment (PA) study.
Work performed and reported in this Report was based on a pre-feasibility study
commissioned by CCC, and is based on interim information from that study. Additional
geotechnical drilling and rock quality assessment is required to complete the open pit
slope design to a level consistent with generally accepted pre-feasibility requirements.
The above ground structures in the tailings management facility were designed to a
pre-feasibility level; however, geotechnical investigations in the TMF area have not
been completed and as a result there is a risk that the TMF design may require
revision.

1.27

Recommendations
The following work is recommended; no phase is contingent on another, and all can be
conducted concurrently. The total cost of the recommendations ranges from US$2.21
million to US$2.41 million.
CCC should:

Initiate insertion of fine pulp duplicate samples for precision analysis, as this is
currently not part of the CCC sampling program. Such checks should be instituted
in all future exploration programs. AMEC estimates that this would add
approximately 5% to the total costs of the sample analytical programs

Construct a relational database using a commercial database software package,

for more detailed studies. Costs of such a program would depend on whether the
database was constructed in-house or a third-party consultant was contracted to
complete the exercise. Estimated cost: US$10,000

Drill 11 geotechnical core holes (6,690 m) to provide additional information in the

proposed pit area on rock mass properties, joint patterns, hydrogeology and
geological modeling/resource estimation. Estimated cost: US$1.1 M

Drill additional holes to increase the level of confidence of the lithological

interpretation in areas outside the existing drill hole limits but constrained by the
resource pit. The proposed geotechnical holes will cover part of the
recommendation; however an additional 10 holes (6,000 m) is suggested.
Estimated cost: US$900,000 to US$950,000

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Complete a full review of the alteration interpretation on vertical sections reconciled

to bench plans. Construct a mineral zonation model for the next phase of study.
Evaluate arsenic distribution using the interpreted units. Estimated cost:
US$200,000 to US$350,000

Institute a continuous program of specific gravity determinations from core samples

preferably using the same laboratory and determination procedures as those used
in the 2010 testing program. AMEC estimates that this would add approximately
25% to the total analytical program costs.

At the completion of this work, results should be reviewed and incorporated as

appropriate into the ongoing pre-feasibility study or future detailed studies.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

2.0

INTRODUCTION
AMEC Americas Limited (AMEC) was commissioned by Candente Copper Corporation
(CCC) to prepare an independent Qualified Persons Review and NI 43-101 Technical
Report (the Report) on the pre-feasibility study progress report which includes a
preliminary assessment (PA) update for the wholly-owned Caariaco Norte Copper
Project (the Project) located in the Lambayeque Department, Peru. The Project
contains the Caariaco Norte copper deposit, and the Caariaco Sur and Quebrada
Verde prospects. The Project location is shown in Figure 2-1.
CCC will be using the Report in support of disclosures in the CCC press release dated
7 March 2011, entitled Candente Copper Files NI 43-101 Technical Report and
Updates Key Financial Results for the Caariaco Norte Copper Project Pre-Feasibility
Study Progress Report, and the CCC press release dated 18 January 2011, entitled
Candente Copper Announces Positive Pre-Feasibility Progress Report for the
Caariaco Norte Copper Project.
All measurement units used in this Report are metric, and currency is expressed in US
dollars (US$) unless stated otherwise. The Report uses Canadian English.
As at the effective date of the Report of 18 January 2011, the exchange rate was
US$1 equal to approximately 2.78 Peruvian Nuevos Soles.

2.1

Terms of Reference
AMEC was requested to complete a Pre-Feasibility Study for CCC on the Caariaco
Norte Project. The study that is the subject of this Report is considered to be a Prefeasibility Study Progress Report, because:

Additional geotechnical drilling and rock quality assessment is required to complete

the open pit slope design to a level consistent with pre-feasibility requirements; this
drilling has been planned

Geotechnical investigations are required in the area where above-ground

structures are proposed as part of tailings management facility (TMF) design.
Information from the planned geotechnical program may result in modifications to
the design.

The mine plan is based on Measured and Indicated mineral resources only, with
Inferred mineral resources considered as waste. The economic analyses based on
these mineral resources, although modelled to a level consistent with a pre-feasibility
study, are considered to be a PA under NI 43-101.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 2-1:

Project Location Map

Note: Figure courtesy Candente Copper Corp.

Table 2-1:

QPs for the Report

Qualified Person
David Thomas

Date of Site Visit

7 to 11 June 2010

Jay Melnyk

No site visit

Tony Lipiec

No site visit

Alexandra Kozak

No site visit

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Report Sections of Responsibility

(or Shared Responsibility)
Sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, and 17, and those portions of the
Summary, Conclusions and Recommendations that pertain to those sections
Sections 19.1 to 19.4 and those portions of the Summary, Conclusions and
Recommendations that pertain to those sections
Section 16, and those portions of the Summary, Conclusions and
Recommendations that pertain to that section
Sections 1, 2, 3, 18, 19.5 to 19.10, 20, 21, 22, and 23

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

2.2

Qualified Persons
The following are the Qualified Persons (QPs) as defined in National Instrument
43-101, Standards of Disclosure for Mineral Projects, for portions of the Report:

David Thomas, P.Geo., MAusIMM, Senior Geologist, AMEC Vancouver

Jay Melnyk, P.Eng., Principal Engineer, AMEC Vancouver
Tony Lipiec, P.Eng., Principal Process Engineer, AMEC Vancouver
Alexandra Kozak, P.Eng., Manager of Process Engineering, AMEC Vancouver.

Table 2-1 summarizes the site visit dates and the sections of responsibility for Report
preparation. During the site visit, Mr Thomas visited the Project area, where he
conducted an inspection of core and surface outcrops, viewed drill platforms and
sample cutting and logging areas; discussed geology and mineralization
interpretations with CCCs staff and reviewed geological interpretations in sections and
plans.
Gustavo Gonzaga, an AMEC senior geotechnical engineer inspected drill core stored
at the Project core shack adjacent the Project site; Vincent Maddalozzo, a senior civil
engineer with AMEC, visited the Project. Both AMEC staff members provided input to
the QP authors for the Report on information from the site.
Information that supports the Report has been obtained from CCC, or external
consultants, or has been prepared by the QPs. Reference documents are cited in the
text as appropriate and summarized in Section 22 of this Report.
The QPs are not aware of any material scientific and technical changes to the
information on the Project between the dates of the site visit and Report signature
date.

2.3

Effective Dates
The Report has a number of effective dates, including:

Effective date of the Mineral Resources: 8 November 2010

Effective date of the progress report on the pre-feasibility study: 18 January 2011.

The effective date of the Report is taken to be the date of the interim report on the prefeasibility study and is 18 January 2011.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

2.4

Previous Technical Reports

CCC has previously filed the following technical reports on the Project:

Thomas, D., and Lipiec, T., 2010: Candente Copper Corporation, Caariaco
Project, Lambayeque Department, Peru NI 43-101 Technical Report: technical
report prepared by AMEC Americas Ltd for Candente Resource Corp., effective
date 8 November 2010

Bonson, C., Campbell, R., Bender, M., Doerksen, G., Johnston, A., Meyer, T.,
Nowak, M., Pilotto, D., Van Egmond, R., Critikos, P., Ostolaza, R., and Huanani,
A., 2008: Revised Preliminary Economic Assessment Technical Report, Caariaco
Norte Project, Peru: technical report prepared by SRK Consulting Ltd for
Candente Resource Corp., effective date 30 November 2008

Bonson, C., Nowak, M., Doerksen, G., Johnston, A., and van Egmond, R., 2008:
Technical Report Caariaco Norte Project, Department of Lambayeque, Peru:
technical report prepared by SRK Consulting Ltd for Candente Resource Corp.,
effective date 11 July 2008

Stone, D.M.R., Godden, S., Van Egmond, R., and Tosney, J.R., 2007: Updated
Technical Report and Preliminary Economic Assessment on the Caariaco Nort
Porphyry Copper Project Starter Pit Option: technical report prepared by Minefill
Services Inc. for Candente Resource Corp., effective date 18 April 2007

Collins, J., McCrea, J., and Rokosh, J., 2006: Caariaco Copper Project, Peru,
Preliminary Assessment and Economic Evaluation Report: technical report
prepared by Merit Consultants for Candente Resource Corp., effective date
28 June 2006

McCrea, J.A., 2006: Technical Report on the Caariaco Copper Porphyry

Prospect Department of Lambayeque Northwest Peru: technical report prepared
for Candente Resource Corp., effective date 27 April 2006

McCrea, J.A., 2005: Technical Report On The Caariaco Copper Porphyry

Prospect Department of Lambayeque Northwest Peru: technical report prepared
for Candente Resource Corp., effective date 22 April 2005

Currie, J.A., 2004: Technical Report On The Caariaco Copper Porphyry Prospect
Department Of Lambayeque Northern Per Latitude 6 05 S Longitude 70 17 E,
technical report prepared for Candente Resource Corp., August 2004

Huanqui, F., Freeze, J.C., and Coder, J.M., 2002: Geological Report On The
Caariaco Copper-Gold Porphyry Prospect Department Of Lambayeque Northwest
Per NTS 13-E 70 17 E 6 05 S: technical report prepared for Candente
Resource Corp., effective date 9 August 2002.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

2.5

References
Reports and documents listed in the Reference sections of this Report were used to
support preparation of the Report.

2.6

Technical Report Sections and Required Items under Form 43-101F1

Table 2-2 relates the sections as shown in the contents page of this Report to the
prescribed Items Contents Page of Form 43-101F1. The only difference is that
Item 25 Additional Requirements for Technical Reports on Development Properties
and Production Properties is located following Item 19, Mineral Resource and Mineral
Reserve Estimates.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 2-2:

Contents Page Headings in Relation to Form 43-101F1 Prescribed Item Headings

NI 43-101 Item
Number
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7

Report Section
Number

Item 8
Item 9
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15

Form 43-101F1 Heading

Title Page
Table of Contents
Summary
Introduction
Reliance on Other Experts
Property Description and Location
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
History
Geological Setting
Deposit Types
Mineralization
Exploration
Drilling
Sampling Method and Approach
Sample Preparation, Analyses and Security

Section 6
Section 7
Section 8
Section 9
Section 10
Section 11
Section 12
Section 13

Item 16
Item 17
Item 18

Data Verification
Adjacent Properties
Mineral Processing and Metallurgical Testing

Section 14
Section 15
Section 16

Item 19

Mineral Resource and Mineral Reserve

Estimates
Other Relevant Data and Information
Interpretation and Conclusions
Recommendations
References
Date and Signature Page
Additional Requirements for Technical
Reports on Development Properties and
Production Properties
Illustrations

Section 17

Item 20
Item 21
Item 22
Item 23
Item 24
Item 25
Item 26

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Section 1
Section 2
Section 3
Section 4
Section 5

Section 19
Section 20
Section 21
Section 22
Section 23
Section 18

Report Section Heading

Cover page of Report
Table of contents
Summary
Introduction
Reliance on Other Experts
Property Description and Location
Accessibility, Climate, Local Resources,
Infrastructure and Physiography
History
Geological Setting
Deposit Types
Mineralization
Exploration
Drilling
Sampling Method and Approach
Sample Preparation, Analyses and
Security
Data Verification
Adjacent Properties
Mineral Processing and Metallurgical
Testing
Mineral Resource and Mineral Reserve
Estimates
Other Relevant Data and Information
Interpretation and Conclusions
Recommendations
References
Date and Signature Page
Additional Requirements for Technical
Reports on Development Properties and
Production Properties
Incorporated in Report under appropriate
section number

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

3.0

RELIANCE ON OTHER EXPERTS

The QPs, as authors of this Report state that they are qualified persons for those
areas as identified in the relevant Certificate of Qualified Person attached to this
Report. The QPs have relied on, and believe there is a reasonable basis for this
reliance, upon the following reports of other experts, which provided information
regarding mineral rights, surface rights, and environmental status in sections of this
Report as noted below.

3.1

Mineral Tenure
The QPs have not reviewed the mineral tenure, nor independently verified the legal
status, ownership of the Project area, underlying property agreements or permits.
AMEC has fully relied upon, and disclaims responsibility for, information derived from
legal experts for this information through the following documents:

Egusquiza, J., 2010: Legal Aspects Regarding the Status of Mining Concessions,
Surface Rights of Caariaco Copper Per S.A. and a Brief Report of the Tax
Regimen and Royalties: unpublished legal report prepared by Caariaco Copper
Per S.A. legal counsel for AMEC Americas Ltd., 30 November, 2010.

This information is used in Section 4.2 of the Report.

Muraro, T., 2010: Tenure: unpublished email from Caariaco Copper Per S.A. to
AMEC Americas Ltd, 6 December, 2010.

This information is used in Section 4.2.1 of the Report.

3.2

Surface Rights
The QPs have fully relied upon information supplied by CCCs staff and experts
retained by CCC for information relating to the status of the current Surface Rights as
follows:

Egusquiza, J., 2010: Legal Aspects Regarding the Status of Mining Concessions,
Surface Rights of Caariaco Copper Per S.A. and a Brief Report of the Tax
Regimen and Royalties: unpublished legal report prepared by Caariaco Copper
Per S.A. legal counsel for AMEC Americas Ltd., 30 November, 2010.

This information is used in Section 4.3 of the Report.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

3.3

Royalties
The AMEC QPs have fully relied upon information supplied by CCC staff and experts
retained by CCC for information relating to the status of the current royalty provisions
for the Project as follows:

Egusquiza, J., 2010: Legal Aspects Regarding the Status of Mining Concessions,
Surface Rights of Caariaco Copper Per S.A. and a Brief Report of the Tax
Regimen and Royalties: unpublished legal report prepared by Caariaco Copper
Per S.A. legal counsel for AMEC Americas Ltd., 30 November, 2010

This information is used in Section 4.4 of the Report.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

4.0

PROPERTY DESCRIPTION AND LOCATION

The Caariaco Project is situated within the District of the Province of Ferreafe,
Department of Lambayeque, in northwestern Peru, and is approximately 700 km
northwest of Lima, the capital of Peru, and approximately 110 km to the northeast of
the city of Chiclayo. Project centroids are latitude 06 05 south and longitude 79 17
west.

4.1

Property and Title in Peru

Information in this sub-section has been compiled from the Mining Guide to Peru
(Ministry of Energy and Mines General Mining Bureau, 2006). The General Mining
Law of Peru defines and regulates different categories of mining activities,
prospecting, exploration, exploitation, and processing (D.S. No. 014-92-EM, 19921).

4.1.1

Mineral Tenure
The holder of a mining concession is entitled to all the protection available to holders
of private property rights under the Peruvian Constitution, the Civil Code, and other
applicable laws. A Peruvian mining concession is a property-related right; distinct
and independent from the ownership of land on which it is located, even when both
belong to the same person. The rights granted by a mining concession are
defensible against third parties, are transferable and chargeable, and, in general, may
be the subject of any transaction or contract.
To be enforceable, any and all transactions and contracts pertaining to a mining
concession must be entered into a public deed and registered with the Public Mining
Registry (Registro Pblico de Minera). Conversely, the holder of a mining
concession must develop and operate his/her concession in a progressive manner, in
compliance with applicable safety and environmental regulations, and with all
necessary steps to avoid third-party damages. The concession holder must permit
access to those mining authorities responsible for assessing that the concession
holder is meeting all obligations.
Ownership of mineral claims is controlled by mining concessions that are established
using Universal Transverse Mercator (UTM) coordinates to define areas of interest
that are measured in hectares. Individual concessions must have a minimum size of
100 ha and a maximum size of 1,000 ha. New concessions must be orientated northsouth; pre-existing concessions are based on the punto de partido system and can
be of any orientation. Mining titles are irrevocable and perpetual, as long as the

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

required annual maintenance fees (derecho vigencia) are up to date and fully paid to
the Ministry of Energy and Mines (MEM) by 30 June each year following granting of a
concession. The fees are paid in advance. The annual fee for metallic mineral
concessions is $3/ha for each concession that is either actually acquired or pending
(petitorio). The concession holder must reach a minimum level of commercial
production of $100/ha in mineral sales within eight years of the concession being
granted. If there is no production income after eight years, then the annual fee
increases to $4/ha until the 14th year and to $10/ha thereafter.
Exploitation

The concession holder must sustain a minimum level of annual commercial

production greater than $100/ha in gross sales before the end of the sixth year
following the granting of the concession. If the concession has been put into
production within the six-year period, then the annual rental fee remains the same up
to the beginning of Year 9, after which it increases to $4/ha for Years 9 to 14. The
annual rental rises to $10/ha for each year thereafter. If the concession has not been
put into production within a six-year period, then the annual rental increases from the
first semester of the seventh year to $9 ($3 for derecho vigencia, plus a $6 penalty)
until the minimum production level is met.
If, by the start of the twelfth year from granting a concession, the minimum production
level has not been achieved, then the annual rental increases to $23/ha ($3 for
derecho vigencia, plus a $20 penalty). A concession holder can, however, be
exonerated from paying penalties if he/she can demonstrate that at least ten times
the penalty for the total concession was invested during the previous year. The
investment must be documented and it must be accompanied by a copy of the
relevant annual tax statement (declaracin jurada de impuesto a la renta) and
payment of the annual fees. A concession will terminate if the annual rental is not
paid either for three years in total over the period that the concession is held, or for
two consecutive years over the period the concession is held.
4.1.2

Surface Rights
It is a requirement of the Peruvian Government that any property developer either
purchases the surface rights, or makes an appropriate agreement with the surface
rights owner, for access to a property. In the case of the holders of mining
concessions, they are protected under the Peruvian Constitution and Civil Code.
Their concession rights do not, however, confer ownership of the land. Thus, the
owner of a mining concession must deal with the registered land owner to obtain the

1 See http://www.minera.gob.pe/mineria/legislacion/data/D.S.N_014-92-LSM.doc

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right of access to fulfill the production obligations inherent in the concession grant. All
transactions and contracts pertaining to a mining concession must be registered with
the Public Mining Registry in the event of subsequent disputes in law. The issue of
land tenure continues to be of significance in Peru, not least because the national
cadastral system for agricultural land ownership is not always accurate.
4.1.3

Royalties
Per established a sliding scale for mining royalties in 2005. Under this regulation, all
mining companies will be levied a royalty from 2018 once a mine is in production.
Calculation of the royalty payable will be on a monthly basis, and will be based on the
value of the concentrate sold (or its equivalent) using international metal prices as the
base for establishing the value of contained metal. The sliding scale is applied to the
value of ore concentrate or equivalent, as follows:

First stage: 1.0% up to US$60 million in annual concentrate sales

Second stage: 2.0% in excess of US$60 million and up to US$120 million in

annual concentrate sales

Third stage: 3.0% in excess of US$120 million in annual concentrate sales.

Legislation is currently being considered by the Peruvian Government, which may

result in the following increases in the royalty rates:

4.1.4

First stage: 2.0% up to US$60 million in annual concentrate sales

Second stage: 4.0% in excess of US$60 million and up to US$120 million in

annual concentrate sales

Third stage: 6.0% in excess of US$120 million in annual concentrate sales

Gold and silver: royalties of 10% and 5% respectively.

Environmental Regulations
The General Mining Law of Peru is the primary body of law with regard to
environmental regulation of exploration and mining activities. The General Mining
Law is administered by the Ministry of Energy and Mines (MEM). A detailed
description of Perus environmental regulations is found on the MEM website2.
Generally, the MEM requires exploration and mining companies to prepare an
Environmental Impact Statement (DIA) Category I, Environmental Impact Study

2 See http://www.minem.gob.pe

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Semi Detailed (EIAsd)Category II (Table 4-1), an Environmental Impact Assessment

(EIA), a Program for Environmental Management and Adjustment (PAMA), and a
mine closure plan. Mining companies are also subject to annual environmental audits
of operations by the Organismo Supervisor de la Inversion en Energa y Minera
(Osinergmin).
Under Peruvian regulations (D.S. 020-2008-EM y la R.M. 167-2008-MEM-DM) a
DIA-Category I covers drilling of less than 20 drill holes within a 10 ha area. An
EIAsdCategory II is applicable to mining and exploration programs with either more
than 20 drill holes, exploration areas greater than 10 ha, or construction of more than
50 m of tunnels. Both classifications require development of public community
involvement processes, which are administered under regulations D.S. 028-2008-EM
and R.M. 304-2008-MEM-DM.
The MEM typically gives automatic approval of DIACategory I studies, and
turnaround is of the order of 10 days. An EIAsdCategory II study typically can take
several months for approval, due to notification periods and public community
participation processes. Drill approvals for both categories are predicated on the drill
hole collar locations being within a 50 m radius of the sites proposed to MEM; failure
to comply with this can lead to Osinergmin imposing a range of penalties, from fines
to closure of operations.
A mining company that has completed its exploration stage work program must
submit an EIA or a modified EIA either when applying for a new mining or processing
concession, increasing the size of existing processing operations by more than 50%;
or executing any other changes to an existing mining project that results in a >50%
change in the mining rate or expected profit (DS 016-93-EM. Cap III, Art 20), as
follows:

A new EIA must be developed when additional, previously un-mined areas are
proposed to be added to an operation (DS 016-93-EM, D.S. 028-2008-EM and
R.M. 304 -2008-MEM-DM, review articles 15 and 16), and must include
preparation of an executive summary and scheduling of workshops and public
community participation

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Table 4-1:

Classification

Summary of Environmental Requirements for Mining Exploration

Programs
Application
Fees

Approval
Time

Required information as shown in

Art. 5 of Environmental
Regulations for Mining
Exploration

5% of Unit
Tax
Unit is
~US$1,000
Tax = US
$50

10 days

Prepare an Environmental
Evaluation (EA) report as per
Appendix 2 of Environmental
Regulations for Mining
Exploration

40% of Unit
Tax
Unit is
~US$1,000
Tax = US
$400

30 days

Description

Application Requirements

Category I
Environmental Impact
Statement - DIA

Mineral exploration with less than

20 drill holes within a 10 ha area

Category II
Environmental Impact
Study Semi Detailed EIAsd

Mineral exploration with more than

20 drill holes, exploration areas
greater than 10 ha, and/or
construction of more than 50 m of
tunnels

The EIA must incorporate planned expenditure on environmental programs at a

rate that is no less than 1% of the value of annual production of the planned
operation. The MEM must review and make a decision on the project within 120
days, including initial notification, and the initial stage of the public consultation
process. The process of actual project approval may take 812 months. Within
this period the applicant company must organize hearings and workshops to
present project data and coordinate the dates and locations of such hearings with
the MEM.

If the proposed project results in a <50% change in the mining rate or expected profit,
the changes to the existing EIA may be accepted, subject to informational workshops
and public hearings being held. The MEM must review and make a decision on the
existing project EIA within 30 days, including initial notification, and the initial stage of
the public consultation process. The approvals process may take 68 months.
A mining company must also prepare and submit a closure plan (Plan de Cierre) for
each component of its operation. The closure plan must outline what measures will
be taken to protect the environment over the short-, medium- and long-term, from
solids, liquids and gases generated by the mining operation.
The General Mining Law of Peru has in place a system of sanctions or financial
penalties that can be levied against a mining company that is not in compliance with
the environmental regulations.

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4.2

Mineral Tenure

4.2.1

Tenure History
The government of Peru auctioned the right to explore the Project under Public
Auction (Bid) PRI-51-2000, Private Investment Promotion Mining Prospects. The
auction was held in Lima on 14 February 2001 and Candente through its
wholly-owned Peruvian subsidiary Exploraciones Milenio S.A. (EMSA), was the sole
bidder. Consideration was a one-time payment of $75,880.
On grant, the Project consisted of 21 Caariaco claims totaling 16,560 ha. In
addition, four claims, the Jehumarca claims, which are contiguous with the
Caariaco claims, were acquired in 2008, and have an area of 3,600 ha.
In 2009, CCC elected to discontinue the vigencia payments for the Caariaco K, L, M,
P, R and S concessions, totalling 4,170 ha. As payments have to be suspended for
two consecutive years before they are forfeit, the Caariaco K, L, M, P, R and S
concessions did not expire until June 2010.
During 2009, CCC acquired the 400 ha Caariaco W concession.

4.2.2

Current Tenure
The Project currently consists of 16 Caariaco concessions, covering a total area of
13,400 ha and four Jehumarca claims, of 3,600 ha. Concessions are listed in Table
4-2 and shown in Figure 4-1. Tenure is held in the name of the wholly-owned CCC
subsidiary, Caariaco Copper Per S.A.
Mining legislation in Peru does not require location of concession boundaries on the
ground. The boundary limits are defined by UTM coordinates in the mineral
concession title filed on record in the registrar of the Ministerio de Energa y Minas
(Ingemmet) y Sistema nico Nacional de Registros Publicos (Sunarp).
To maintain the property in good standing, annual property payments of $17,500
commenced in June 2002. AMEC was advised by CCC that all required property
payments have been made, and the concessions are in good standing. Providing the
annual property payments are made in a timely manner, the concessions will not
expire.

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Table 4-2:

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
N
17
18
19
20

Caariaco Concessions held by Candente Copper Corp. (as at 26 November 2010)

Name
Caariaco A
Caariaco B
Caariaco C
Caariaco D
Caariaco E
Caariaco F1
Caariaco G
Caariaco H
Caariaco I
Caariaco J
Caariaco N
Caariaco Q
Caariaco T
Caariaco U
Caariaco V
Caariaco W ##
Name
Jehuamarca 1
Jehuamarca 2
Jehuamarca 3
Jehuamarca 4

Public
Registry
Entry
20002633
20002634
20002635
20002636
11054442
11054445
11054460
11071154
11071158
11071162
11071194
11071198
11071208
11071210
11071218

Non-Production
Penalty Payment
(Debt) 2010
(US$)
6,000.00
6,000.00
6,000.00
3,000.00

Validity Fee Paid

Until **
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010

Code
150000004Y02
15000005Y02
15000006Y01
15000007Y01
01-00226-04
01-00312-04
01-01790-05
01-03174-06
01-03175-06
01-03212-06
01-03300-06
01-03309-06
01-03312-06
01-03313-06
01-03314-06
01-01827-09

Hectare
1,000
1,000
1,000
500
1,000 (662.5) #
1,000 (789.5) #
1,000 (940) #
1,000
1,000
1,000
1,000
400
800
400
900
400

Code

Hectare

Registration
Date

Concession Granted

01-01551-05
01-01552-05
01-01553-05
01-01554-05

900.00
900.00
900.00
900.00

01/06/05
01/06/05
01/06/05
01/06/05

07/11/05
09/11/05
07/11/05
11/16/05

Notes:

th

Validity Fee Paid

Until **
2010
2010
2010
2010

* By Supreme Decree N 054-2008-EM published in the Official Gazette El Peruano on October 10 2008, a minimum
annual production requirement was established, equivalent to US$100.00 per year and hectare for metallic minerals or
equivalent to US$ 50.00 per year and hectare for non-metallic minerals. This production requirement is applicable from
the sixth year of grant of the mining concession. In the event of non-fulfilment of this minimum production obligation,
the owner of a mining concession must pay, from the seventh year onward, a penalty of US$6.00 per year and hectare
(in addition to the statutory validity fee payment) up to the year when the minimum annual production occurs. If the
owner of mining concession continues without paying the penalty until the twelfth year, the penalty payment rises to
US$ 20.00 per year and hectare (in addition to the statutory validity fee payment).
** The validity fee is currently US$3 per year and per hectare. Non-payment of the fee for two consecutive years results
in cancellation of the mining concession
# The hectareage granted for Caariaco F1, G and Caariaco H are 1,000 hectares, but for purposes of establishing the
validity fee, Ingemmet uses the hectarages shown in brackets
## Registration of the Caariaco W title is in process

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NI 43-101 Technical Report on Prefeasibility Study Progress Report

Figure 4-1:

Caariaco Concessions held by Candente Copper Corporation

Note: Grid squares on plan indicate scale and are 2 km x 2 km.

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Caariaco Norte Deposit,
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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

4.3

Surface Rights
The owner of the surface rights is the Comunidad Campesina San Juan Bautista de
Caaris. Under Peruvian Law 24656, CCC is required to have a valid agreement with
the campesina to undertake exploration; typically this has been negotiated on an
as-needs basis. The previous agreement expired in December 2009, and Candente is
in the process of negotiating a new, three-year, access agreement.

4.4

Royalties
There are no royalties payable to any third parties on any of the concessions that
currently comprise the Project.
The Project is likely to incur a royalty of 3%, payable to the Government of Peru, once
production commences. This figure is based on the current royalty scheme, as the
Project is likely to produce in excess of US$120 million in annual concentrate sales.
The royalty burden may increase if the proposed royalties increase before the
Peruvian Government are passed into legislation.

4.5

Permits
Exploration activities to date have been undertaken in accordance with the appropriate
Peruvian regulations. A Class B environmental assessment (EA) was conducted by
GEMA Consultants (GEMA) for CCC, as required by Peruvian law when trenching,
drilling, or other major work is performed. GEMA also conducted a Class C EA and
obtained a Class C permit from the Peruvian government for advanced drilling and
exploration work at Caariaco. Additional permits will be needed to support the
planned geotechnical and infill drilling programs discussed in Section 21.
A number of permits will be required to support project development and operation.
The main permit requirements identified to date for the start of construction and mining
operations are summarized below.

Environmental Impact Assessment (EIA), Studies and Permits

Water Authorization
Archaeological Evaluation
Mining Plan and Closure Plan
Mining Operation Certificate (COM)
Easement by Agreement
Procedure of Real Servitude
Construction Permit
Municipality Permits to Construct

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Labour Permits
Surface Water Use Licence
Ground Water Use Licence
Sanitary Authorization for Waste Water Treatment
Permits to Build Roads
Transportation deed for controlled substances and products
Beneficiation Concession (necessary to process the mineral)
Authorization to Start Operation.

CCC has committed to staying apprised of changes in Peruvian environmental and

mining regulations, which are currently being updated. The legislation will need to be
reviewed continuously to identify all the social and environmental studies, permits, and
authorizations required, as well as the permitting process and the timeline itself so that
it can match the project schedule with the licensing schedule.

4.6

Environmental
The site of the Caariaco Norte Project is in Northern Peru, in an area environmentally
similar to the surrounding region that extends into Ecuador and Columbia.
AMEC Peru, on behalf of CCC, has been carrying out environmental baseline studies
and monitoring since 2007. Findings to date include:

The Project site is subject to distinct wet and dry seasons

Hydrological investigations show that naturally acidic waters are present in

mineralized areas within the project footprint

At present there are no Peruvian background guidelines for sediment levels in

watercourses in this area. Upon comparison to Canadian guidelines, water
samples from the area showed some dissolved metal levels above probable effect
levels (PEL), with copper and zinc nearly 50% above Interim Guidelines (ISQGs).
This is not unusual for naturally occurring mineralized areas where PELs are
routinely exceeded

Acidic to slightly acidic pH levels have been identified only at the confluence of the
Oso and Norte watersheds

Due to steep slopes and the high clay and fines contents, soils within the region
are typically unstable

AMEC assessed the baseline air quality in the project area on five separate
occasions. The results indicate that air quality is typical of rural, non-industrialized
areas, with no contaminants at concentrations of concern to human health.

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The Project ecosystem consists of moors and cloud forests at higher elevations and
cultivated land at lower elevations. No native fish species were found within the rivers
and creeks at the Project site, but introduced trout were identified downstream in the
main channel of the Ro Caariaco. Native fish species were found within the lower
basin of both Ro Caariaco and Quebrada Yerma and in Ro Huancabamba,
approximately 40 km from the Project site.
The project area has been studied more intently than the surrounding region with
respect to biodiversity indicators such as species richness (for orchids in particular,
with more than 150 species recorded), level of endemism (for amphibians, orchids,
insects, and small mammals), and the presence of endangered species. All of the
protected and endangered species recorded or sited within the greater project footprint
are also found in similar habitats within Peru or in neighbouring countries.
AMEC notes that in many areas of Peru biodiversity assessments are not yet complete
and therefore it is not uncommon for detailed environmental impact investigations to
identify new species. CCC has instigated two conservation projects that encompass
the relocation of protected orchids found at the site and the identification of an area for
conservation and environmental management.
Once the baseline studies are completed to levels in accordance with the requirements
of the Peruvian Government and meet the guidelines set out in the Equator Principles,
then a process of obtaining all the required environmental, construction and mining
permits will be undertaken.
At this stage of the Project, environmental liabilities are limited to those expected for
an exploration-stage project, and include drill pads and access roads.

4.7

Socio-Economics
CCC has received a certificate of confirmation from the Peruvian National Institute of
Culture (INC) that no archaeological remains exist within the area of the proposed
Caariaco Norte open pit.
Approximately 2,000 ha of the likely Project footprint are located within lands held by
the small community of San Juan Bautista de Caaris, which was settled during the
Spanish Colonial period. The remaining portion falls within lands held by the Jos
Carlos Maritegui hamlet. In addition to the settlements, there are isolated families,
grazing pastures and a portion of the Caaris forest within the Project area.
Approximately 450 residential units inhabit the region, living on small farms where they
engage in a subsistence way of life.

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A baseline study will be required prior to Project development to provide data on

existing residents, assets, and services within the Project area to assess potential
relocation requirements and implications.

4.8

Comment on Section 4
In the opinion of the QPs, the information discussed in this section supports the
declaration of Mineral Resources, based on the following:

Information from legal experts support that the mining tenure held is valid and is
sufficient to support declaration of Mineral Resources

Surface rights are held by the Comunidad Campesina San Juan Bautista de
Caaris, and access is negotiated with the community as required. CCC is
currently negotiating a three-year exploration access agreement with the
community. AMEC notes that access agreements will be a prerequisite for the
recommended drill programs in Section 21

There are no royalties payable to any third party. On production, royalties are
payable to the Peruvian Government, at a fixed scale. The fixed royalty scale is
under review by the Government of Peru, and may increase

Permits obtained by the company to date to undertake exploration activities are

sufficient to ensure that activities are conducted within the regulatory framework
required by the Peruvian Government

Additional permits will be required for Project development; preliminary discussions

have been held with the relevant statutory authorities. A number of permits will be
required to support Project development and operation

Development of the Caariaco Norte Project would require resettlement of a small

number of residents who inhabit the immediate Project area; such relocation will
require additional studies and negotiations

At the effective date of this report, environmental liabilities are limited to those
expected for an exploration-stage project, and include drill pads and access roads

The current state of knowledge on environmental and permit status for the Project
supports the declaration of Mineral Resources.

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5.0

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

INFRASTRUCTURE AND PHYSIOGRAPHY

5.1

Access
The Caariaco property is accessible by road from Lima via the city of Chiclayo
(Figure 5-1). Either the Pan-American Highway (700 km, 11-hour trip) or a commercial
airline flight can be taken from Lima to Chiclayo.
The route from Chiclayo to the Caariaco property is currently a 149 km, 6-hour trip
along mostly unimproved roads via Incahuasi. The road is not suitable for heavy
trucks, and there is no landing strip at the Project site.

5.2

Climate
Temperatures in the project area vary with altitude and range between approximately
3C and 20C. The region receives between 830 mm and 1,700 mm of rainfall each
year. The rainy season extends from November to March.
The climate does not affect exploration and other ground-based operations, although
helicopter-supported operations and road accesses within the Project area are more
difficult during the rainy season. It is expected that future mining operations will be
able to be conducted year-round.

5.3

Local Resources and Infrastructure

5.3.1

Local Resources
Peru has a long history of mining, with the result that mining professionals and
machine operators are generally available in most population centres. CCC would be
able to source Peruvian personal for virtually all mine administration and operation
requirements.
Supplies and other normal services are available at Chiclayo. Specialist exploration
services, such as drilling and geophysical and geochemical analyses, are usually
contracted out of Lima.

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Figure 5-1:

Caariaco Property Access Routes and Infrastructure

Note: Figure courtesy Candente Copper Corp. Deposits shown on plan other than Caariaco
are held by third-parties and are not part of the Project that is the subject of this Report.

5.3.2

Existing Infrastructure
The Caariaco Project has a fully established camp and catering facility for 100
persons. Two weather stations are also on site. Water supply is currently sourced
from the Ro Caariaco, and electricity is supplied by an on-site generator system.

5.3.3

Planned Infrastructure
Figure 5-2 shows the layout of the main Project facilities; Figure 5-3
Access

Site access to support mining operations will require construction of a new access
road. The Project site will be accessed from Chiclayo via the Pan-American Highway
North, past Motupe to Olmos, and then east along the Corral Quemado paved highway
to a point approximately 60 km east of the town of Olmos.

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Lambayeque Department, Peru
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Figure 5-2:

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Planned Layout, Major Project Facilities

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 5-3:

Proposed Mine Site General Arrangement

At this point, the planned all-weather access road to Caariaco mine will branch off,
and follow the Yerma and Caariaco valleys south to the location of the proposed mine
site.
Access to the plant site will be via a new 42 km single-lane (7 m wide) gravel road
branching off the existing Corral Quemado Road along the Huancabamba Valley. The
alignment follows a new bridge crossing over Ro Huancabamba and then passes
through challenging terrain, rising at a constant grade of 8% until it reaches the ridge
top between the Yerma and Caariaco valleys near the tailings management facility
(TMF). The road then widens to 11 m to accommodate the surface-run tailings and
reclaim pipelines running to and from the plant site. Continuation of the road to the
process plant includes a single high point 1,200 m away from the plant.
On-site roads will be provided for vehicle access to facilities and remote structures.
General access roads will be two-way and 8 m wide, service roads will be one-way
and 5 m wide with pullouts, and mine haul roads will be one-or two-way as required
and wide enough to accommodate haul trucks.

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5.3.4

Port
The port site infrastructure for the project will be at the Marine Terminal Muchik (MTM),
a planned development by Lumina Copper Corporation (Lumina) southeast of the town
of Eten and the existing Consorcio Terminales Eten liquid bulk terminal in Northern
Peru. Copper concentrate from the mine will be transported by truck to MTM at a rate
of approximately 400,000 t/a. The loading berth at the port will be designed to
accommodate up to 50,000 DWT loaded Handymax vessels.
The pre-feasibility study progress report assumes that the berthing facility, the trestle
conveyor leading out to the berth, and the shiploader will be shared with Lumina.
Lumina has stated to CCC that its development and operations strategy for the MTM
facility anticipates shared usage with Caariaco, and potentially other companies as
well. Some service buildings and utilities throughout the port site, such as fire,
process, and potable water supply and sanitary waste disposal, would also be shared,
whereas concentrate receiving, storage, and reclaim facilities for the Caariaco Norte
product would be independently developed and operated by CCC.
Concentrate from the mine will be delivered to the port by truck, unloaded into a dump
hopper, and conveyed to a storage building. The storage building has been sized to
meet projected concentrate storage requirements and the anticipated schedule of
vessel arrivals, including an allowance for vessel delays due poor weather or hurricane
conditions en route to the port.
Concentrate reclaimed from storage will be conveyed initially to a sampling station,
then to a transfer tower which feeds in to the shipping pipe conveyor, then to the berth
conveyor, which in turn travels along the length of the berth to a towed tripper that
feeds the travelling shiploader.
Power supply for the CCC facilities will be delivered to a substation at the concentrate
storage and handling facility at 4.16 kV from the power auxiliary distribution system
planned by Lumina. The substation will include incoming 4.16 kV switchgear and a
step-down transformer.
As at the mine site, waste handling and disposal will be managed in an
environmentally acceptable manner in accordance with legal requirements.
The marine berth will be constructed 3.2 km from shore at a water depth of -15.0 m, as
required for the design 50,000 DWT Handymax vessel. Dredging to permit berth
construction closer to shore was deemed uneconomical. The design and orientation of
the berth are intended to minimize wave and swell action. A system of spread

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moorings is intended to prevent ships from colliding with the berth during loading
operations and to reduce loads on the mooring lines.
Vessel operations for export of CCC product will be scheduled in conjunction with
Lumina to avoid berthing conflicts.
Accommodation

Accommodation facilities at the mine site will be constructed to house a construction

crew of approximately 1,500 persons in a combination of single, double, and fourperson occupancy rooms. The facilities will be converted to single- and doubleoccupancy rooms for the operations staff, projected at approximately 600 persons.
Facilities will include areas for a kitchen, dining room, recreation, medical facility, office
space for camp administration, and security for check-in/check-out.
Buildings

A two-storey main administration building will be constructed adjacent to the camp.

The lower floor will be an open office arrangement and the second floor will have
enclosed offices for senior staff. The building will include areas for reception, training,
conferences, and storage. With adequate planning, it could be built early enough to
accommodate the initial construction management and administration staff.
The mine truckshop will be the main services complex on site. The complex will
contain maintenance shops for the mine mobile equipment fleet, warehouse space,
first aid, a change room, dispatch area, lunchroom facilities, and offices for mine
operations. It will also service all light- and medium-duty vehicles used on the site,
including personnel buses and pickup trucks. A truck washdown pad, fuelling station,
and ready-line for mine vehicles will be constructed nearby. A single-lane haul road
will connect the truckshop to the pit area via the primary crusher station.
A mill maintenance shop adjacent to the process plant will service all stationary mill
equipment such as pumps, instruments and motors.
Power Supply

Electrical power will be supplied to the Caariaco Norte site by a 220 kilovolt overhead
transmission line from the local utility substation at Carhuaquero, a distance of
57 kilometres from the mine site. The incoming transmission line will terminate at a
new main site substation for the transformation of power from the transmission voltage
level of 220 kilovolts to the site distribution/utilization level of 25 kilovolts. The

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anticipated connected load for operation is 148 megawatts with an average load of
95 megawatts and power factor of 95 percent.
Power will be supplied to the various mine facilities through radial feeders originating
at the main substation and routed on site through cable tray in pipe racks, either
installed on overhead powerlines, direct buried, or in duct banks. Step-down
transformers will provide equipment utilization voltages from the site distribution
voltage. All process electrical and control rooms will be modular units constructed off
site with all electrical controls and instrumentation equipment installed, wired, and
completely tested before shipment to site.
Emergency power will be produced by standby diesel generating units sized to provide
power to mine and process equipment and the permanent camp in the event of a utility
power failure. The standby power plant will consist of three generator sets and be
rated for a nominal 4.5 MW. In addition, an uninterruptible power supply (UPS) system
will provide backup power to critical control systems, and emergency battery power
packs will supply backup power to the fire alarm system and emergency egress
lighting fixtures.
Water Supply

Fresh water for site services will be obtained from a fresh water reservoir constructed
as part of the Ro Caariaco diversion around the waste rock management facility
(WRMF). Fresh water will be used for process make-up water, fire water, and to
supply the potable water treatment plant (PWTP). The reservoir will also provide startup water for the process plant until sufficient reclaim water is available in the TMF to
furnish continual supply, estimated to be two months after start-up. Normally, most
process water is derived from thickener overflow, reclaim water pumped from the TMF,
and other reclaim sources. Regular fresh water makeup is required for approximately
5% of total process flows, where the water has to be of higher quality.
The PWTP will be designed to provide sufficient potable water for the construction
workforce. The water will be pumped to the camp and administration buildings and
flow by gravity to the other site facilities. Both fresh and potable water will be trucked
to the bulk emulsion plant as required.
There is expected to be limited impact on down-stream water users.
Should discharge of water to the environment be required, the water management
system will ensure that discharge waters meet Peruvian regulations. CCC has
incorporated design parameters for site water management that will minimize the
amount of contact water generated by Project construction and operation.

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Communications

The site communications system will cover the complete voice, data, fax,
Internet/email and radio communications requirements for the process and camp
facilities. The system will be designed to meet all regulatory requirements needed for
operating approvals. The mine communications system will be independent of the rest
of the system.
Fuel

Diesel fuel will be stored in four 500 m3 tanks, providing more than two weeks of
supply the event of fuel delivery disruption or power failure. The fuel will be used to
run the construction / emergency generators and will be piped to the re-fuelling station
near the truckshop.
Waste

Solid waste from the plant site will be handled and disposed of in an environmentally
acceptable manner in accordance with legal requirements and best industry practices.
As applicable, waste will either be incinerated, disposed of in a landfill, recycled, or
removed off site to special handling facilities.
A sewage treatment plant (STP), sized for the complete construction workforce, will be
built on site. The plant will be self-contained in an enclosure housing all mechanical
and electrical equipment and will be designed to produce effluent that complies with
Peruvian regulations for effluent quality. Sewage will be collected from the different
sources through a network of pipelines, holding tanks, lift stations, and a pumper truck,
where necessary. Treated effluent will be discharged directly to the environment
during construction and to the TMF during operations.

5.4

Physiography
Elevations in the Project area range between 2,200 and 3,600 masl, as the Project is
situated on the eastern side of the continental divide. The topography varies from
steep incised valleys at lower elevations to open grassy highlands, locally known as
jalcas or paramus, at upper elevations. Within the area that mineral resources have
been estimated, the topography is steep with fingers of sub-tropical forests extending
up the small valleys. These forests transition into open grasslands and broad valleys
as the elevation increases above 3,000 masl to the north of the main mineralized zone.
The property crosses several climate zones, and temperature differences between the
lower forested valleys and the upper grassy ridges can be up to 10C.

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Vegetation at higher elevations consists mainly of ichu and other types of natural
grasses used for livestock grazing. Localized agriculture plots for subsistence farming
are maintained within the forested valleys. The community of Caaris, north of the
Project area within temperate highlands, is agriculturally-based. The main crops are
potatoes, maize, and a variety of vegetables and herbs.

5.5

Comment on Section 5
In the opinion of the QPs:

There is sufficient suitable land available within the concessions for any future
tailings management facility, mine waste rock facility, and installations such as a
process plant and related mine infrastructure.

A review of the existing and likely power and water sources, manpower availability,
and transport options indicate that there are reasonable expectations that sufficient
labour and infrastructure is available to support declaration of Mineral Resources.

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6.0

HISTORY
Copper was first discovered at Caariaco Norte in the period 19671970 during a
regional stream sediment sampling program carried out by the Peruvian Servicio
Nacional de Geologa y Minera (Ingemmet), in co-operation with a British Geological
Survey team. This work identified a copper anomaly, A-2. Subsequently from 1971 to
1974, Ingemmet undertook a detailed geochemical study of the Caariaco River
valley, which delineated four centres of alteration and copper mineralization. The
geochemistry was supported by geological mapping, rock chip and soil sampling,
induced polarization (IP) and resistivity ground geophysical surveys, and core drilling
of five drill holes (1,500 m). Thin section and petrographic studies were also
performed. A mineral resource estimate was undertaken at the conclusion of this
work.
Placer Dome Exploration Inc. (Placer Dome) optioned the area from the Peruvian
Government in 1994. Work completed included geological mapping, rock chip
sampling, trenching (2,200 m) and pitting (80 test pits), petrographic studies, reinterpretation of the available Ingemmet IP and resistivity data, a very preliminary
estimate of tonnage and grade, and three core holes (874 m). This work identified a
porphyry copper system related to breccias and a Tertiary intrusive complex emplaced
in a volcanic basement of andesite to dacite tuffs and ignimbrites. However, in 1997,
the option was not exercised and reverted to the Government.
During 1999, Billiton Exploration and Mining Per B.V. (Surcusal Peruana) took up an
option from the Peruvian Government. The work program comprised geological
mapping, soil and rock chip sampling, IP and ground magnetic geophysical surveys,
and eight core holes (957.7 m). Petrographic samples were collected and studied and
leach testing was carried out on some of the drill core. A resource estimate was
completed in 1999. The option was dropped in 2000, with the property returning to the
Peruvian Government.
The property was subsequently put up for auction. Candente Copper Corp., through
its wholly-owned Peruvian subsidiary Caariaco Copper Peru S.A. (CCP), formerly
Exploraciones Milenio S.A, (EMSA), acquired 100% ownership of the Project in
February 2002. Since that date, CCC has completed geological mapping, prospecting,
ground magnetic geophysics, rock chip sampling, petrographic studies, bulk sampling
for metallurgical testing and re-logging of existing drill core. A total of 257 core holes
(74,058 m) were drilled to the end of 2008. Mineral resources were first estimated on
behalf of CCC in 2004, and were updated in 2006 and 2008.
A preliminary assessment (PA) was undertaken in 2006. The study envisaged
conventional open pit mining of the Caariaco Norte deposit, with mineralization

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crushed, then placed on a heap leach pad. Copper recovery was planned through a
solvent extraction/electrowin (SXEW) plant to produce copper cathode. Mining would
commence at 30,000 t/d and expand to 60,000 t/d. The financial analysis, using the
costs and assumptions at the time, indicated a positive financial outcome.
In 2008, a revised PA (the 2008 PA) was undertaken, because additional leach testing
had indicated that heap leaching recoveries were erratic, and a more robust
metallurgical process was required. The production rate from the proposed open pit
was 75,000 t/d, feeding a conventional process plant consisting of semi-autogenous
grind (SAG) and ball mills and a flotation circuit to produce copper concentrate. The
financial analysis, using the costs and assumptions at the time, indicated a positive
financial outcome. The mineral resource update and the PA study discussed in this
Report supersede the resource estimate used as the basis of the 2008 PA and the
2008 PA results should be considered historical.
In 2010, CCC commissioned a mineral resource update. The updated mineral
resources, information on the progress of the pre-feasibility study on the Project, and
the PA-level economic analysis on those Mineral Resources forms the subject of the
remainder of this Report.

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7.0

GEOLOGICAL SETTING
A regional geological plan for the Project area is shown in Figure 7-1.
Basement rocks comprise pelitic schists of the Precambrian to Early Paleozoic Olmos
Complex that are unconformably overlain by Late Triassic-Early Jurassic La Leche
Formation marine sediments that have minor intercalated volcanic units. An early to
Late Jurassic volcano-sedimentary sequence, the Oyotn Formation, overlies the
earlier units. Following regional uplift, erosion, and subsequent subsidence, the lower
portion of the Goyllarisquizga Group, a regionally extensive quartz arenite, was
unconformably deposited on the earlier lithologies. In turn, the arenite was overlain by
Early Cretaceous to mid-Late Cretaceous marls, shales, and limestone.
In the Early Tertiary, volcanic units of the Llama and Porculla Formations of the
Calipuy Group were erupted, and were followed by uplift and erosion. Renewed
volcanic activity commenced with the eruption of volcanic rocks of the Huambos
Formation during the Late Tertiary. Porphyry stocks, breccias and dikes that are also
Late Tertiary in age intrude the Cretaceous and Tertiary units (Figure 7-2). Age dates
using K/Ar and ReOs on intrusive rocks, breccias and alteration minerals in the
Caariaco Norte deposit returned dates that range in age from 15.8 Ma to 17.9 Ma.
A number of circular features/intrusions have been identified district-wide (refer to
Figure 7-1). A single circular feature that measures 8 km x 10 km encompasses all
three mineralized centres in the Project, including Caariaco Norte, Caariaco Sur and
Quebrada Verde. This feature is centred on, or close to major fault intersections
suggesting that the emplacement of the intrusive complex has been localized by fault
intersections.
Faults that have been identified at a regional scale consist of two, parallel, long-range,
northwestsoutheast-trending district-scale faults. One bisects the Project area, and
the second fault is approximately 7 km to the northeast. The northwestsoutheast
faults have a probable conjugate northeastsouthwest fault set, which tend to be of
medium-range. These faults appear to control the location and development of the
intrusivebreccia complexes and related mineralization and alteration in the Project
area.

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Figure 7-1:

Regional Geology Map

Note: Figure courtesy Candente Copper Corp. Tenure outlines shown on the plan are superseded by the tenure outlines in Figure 4-1. Grid squares on the plan are 4 km x 4 km

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Figure 7-2:

Regional Stratigraphic Column

Note: Figure courtesy Candente Copper Corp.

7.1

Caariaco Norte Deposit Geology

The Caariaco Norte intrusivebreccia is hosted within a multiphase intrusivebreccia
complex that is approximately 1.7 km in strike extent and 1.1 km wide. The deposit
has been drill-tested to a depth of approximately 770 m and remains open at depth.
The majority of the copper-gold mineralization is hosted within the intrusive and
breccia units, but locally extends for variable distances into the enclosing volcanic
units. Intrusive units comprise approximately 5560% of the deposit, breccias
approximately 3035%, and pre-mineral volcanic rocks approximately 510%.
The intrusive units are nested and collectively roughly oval in shape with older
intrusive rocks being cut by successively younger intrusive bodies. In general, the
intrusive units are northsouth-trending, steeply-dipping bodies. The breccia units cut
the intrusive units, are oval to circular in shape and are steeply plunging. The dykes
generally strike northwestsoutheast with a steep southwesterly dip. The shape and
positioning of the intrusive, breccia and dyke units was largely controlled by
northwestsoutheast and northeastsouthwest-trending faults.

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7.1.1

Lithologies
Table 7-1 presents the stratigraphy for the Project area.
Table 7-1:
Unit
Breccias
Intrusives

Project Stratigraphic Column

Rock Code
IBxP
TBx
IBxH
FP
CQP
BFP
CQFP
VC

Rock Type
Breccia (youngest)
Breccia (middle)
Breccia (oldest)
Dykes
Intrusive (youngest)
Intrusive (middle)
Intrusive (oldest)
Calipuy Volcanic

Description
Polymictic breccia
Tourmaline breccia
Hydrothermal breccia
Feldspar porphyry dykes
Coarse quartz porphyry
Biotite feldspar porphyry
Crowded quartz feldspar porphyry
Pre-mineral andesitic, dacitic and rhyolitic volcanics

The oldest rocks, ascribed to the Calipuy Group, are a series of dacite tuffs with lesser,
bedded, rhyolite tuffs overlain by andesite porphyry flows and pyroclastic rocks.
Andesite pyroclastic rocks and flows dominate on the western, northern and southern
sides of the intrusive complex where elevations are higher. The eastern side of the
intrusive complex is lower in elevation, and thus the dacite and rhyolite volcanic rocks
that underlie the andesite volcanic rocks are exposed adjacent to the intrusive
complex.
Three major intrusive generations have been identified. The oldest intrusive unit is a
crowded quartzfeldspar porphyry (CQFP), which consists of 13% quartz eyes, 35%
feldspar phenocrysts, and 35% hornblendebiotite. Grain sizes of the constituents
range 12 mm. The unit is interpreted as dioritic in composition.
The middle intrusive unit is a biotitefeldspar porphyry (BFP) that is interpreted to be
granodioritic in composition, with 35% quartz eyes, 1520% feldspar phenocrysts,
2-5% euhederal biotite, and traces of hornblende. Grain sizes typically range from
3-5 mm.
The youngest intrusive unit, a coarse quartz porphyry (CQP), consists of 510% quartz
eyes (grain size range from 35 mm), 1520% euhedral feldspar crystals (<3 mm) and
traces of biotite (12 mm). The CQP is interpreted to be of quartz monzonitic
composition.
The youngest intrusive stage is a set of feldspar porphyry dykes/breccias (FP) that
range in thickness from 2 m to 30 m, and have a northwestsoutheast strike, with a
steep, southwesterly dip. The dykes have a fine-grained ground mass with 1020%
feldspar phenocrysts (310 mm) and 510% hornblende phenocrysts (28 mm). The
dykes commonly display cooling contacts. Where the dykes intersect the breccias,
dyke fragments occur as large (>10 m), rotated, and weakly-fractured blocks within the

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breccias. The dykes have only been weakly altered, and contain minor copper
mineralization where they have been brecciated by the hydrothermal breccia unit.
Three breccia bodies that post-date the intrusive rocks are recognized. The oldest
unit, hydrothermal breccia (IBxH), consists of matrix-supported angular to sub-angular
biotitefeldspar porphyry and crowded quartzfeldspar porphyry fragments that display
little or no evidence of transport. Fragment sizes within the central portion of the
breccia are generally 15 cm in a fine-grained matrix. Near the southern margin of the
breccia, there is a high component of feldspar porphyry dyke fragments up to tens of
meters in size. The unit is not well mineralized, with copper grades related to the
inclusion of mineralized porphyry fragments. The margins of the hydrothermal breccia
can show crackle brecciation.
The middle tourmaline breccia (TBx) has a fine-grained matrix consisting of quartz and
tourmaline. The unit is extensive, and was emplaced along the northeastern margin of
the intrusive bodies. Breccia fragments are angular to sub-angular, 110 cm in size,
and include clasts of the biotitefeldspar porphyry, crowded quartzfeldspar porphyry
and the hydrothermal breccia. The breccia is not mineralized, apart from copper
grades related to the inclusion of mineralized porphyry fragments.
The youngest breccia unit, polymictic breccia (IBxP), is a late-stage breccia with an
erratic shape, cross-cutting all earlier units. Sub-rounded to rounded clast fragments
include vein quartz, all three intrusive units, and the two earlier breccia phases.
Fragments range from 0.510 cm with the breccia margins often grading into a crackle
breccia. The unit shows multiple breccia pulses, the last of which is a fluidized microbreccia with rounded fragments that are typically <3 mm in size, crosscutting all other
pulses. Copper mineralization occurs in both the matrix and the fragments.
Mineralization occurs primarily as disseminations, and in fractures, sulphide and quartz
veins, faults and breccias. Fracture density is the single most important factor
influencing copper grades and alteration intensity, although breccias and faults can
locally be important.
Copper mineralization was introduced as a series of events closely following the
emplacement of each of the intrusive units, and the polymictic breccia unit. Initially,
copper mineralization comprised chalcopyrite, minor bornite, introduced following
emplacement of each of the crowded quartzfeldspar porphyry and biotitefeldspar
porphyry units, with the greatest amount introduced following emplacement of the
biotitefeldspar porphyry unit. This event was followed by introduction of chalcocite,
covellite, minor tennantitedigenite, following emplacement of the coarse quartz
porphyry unit. The mineralizing process terminated with enargite, chalcocite and

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covellite, minor tennantitedigenite, introduced concurrently with emplacement of the

polymictic breccia unit.
Near surface, the deposit has been intensely weathered, resulting in the formation of a
leached cap that contains less than 0.05% Cu, trace pyrite and tenorite and variable
concentrations of limonite, goethite, jarosite, and hematite. The leached cap varies
significantly in thickness, ranging from less than a metre to as much as 120 m,
averaging approximately 4050 m in thickness. The water table is at, or near, surface.
A geological plan for the deposit is presented in Figure 7-3. Figure 7-4 and Figure 7-5
are drill sections through the deposit.
7.1.2

Alteration
The alteration forms distinct concentric zones with a central potassic alteration, central
to intermediate, overlapping, and partly overprinting phyllic, argillic and advanced
argillic alteration and fringing propylitic and minor silicic alteration. Alteration intensity
is directly related to the intensity of fracturing in the hosting lithologies and brecciation
in the polymictic breccia unit. Locally, alteration distribution and intensity is controlled
by northeast- and northwest-trending faults.
Phyllic and argillic alteration dominate in the upper 50 to 300 m in the southern half of
the deposit and the upper 100 m to locally 150 m in the northern half of the deposit
(excluding overburden and the leached cap). Most of the area of the northern and
southern halves of the deposit at depth under the layer of phyllic and argillic alteration
is dominated by potassic alteration.

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Figure 7-3:

Geological Map, Caariaco Norte

Note: Figure courtesy Candente Copper Corp.

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Figure 7-4:

Geological Drill Section 9,326,300N

Note: Figure courtesy Candente Copper Corp.

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Figure 7-5:

Geological Drill Section 690,800E

Note: Figure courtesy Candente Copper Corp.

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Alteration type descriptions are as follows:

7.1.3

Potassic alteration consists of variable proportions of secondary potassic feldspar

and biotite, chlorite and magnetite. Associated with deposition of chalcopyrite
(bornite).

Propylitic alteration comprises illite, chlorite, epidote and smectite. Silicic alteration
comprises very fine grained pervasive silica. Associated with deposition of
chalcopyrite and minor bornite. Found mainly at deposit margin, but can locally
occur within the deposit. Can extend for significant distances outside of the
intrusivebreccia complex into the bordering volcanic rocks.

Phyllic alteration includes sericite and quartz with quartz veinlets and stockworks
(0.5 cm to 1.5 cm thick). Associated with deposition of chalcocite, covellite and
minor tennantite and digenite. Commonly intermixed with argillic alteration.
Affected parts of the crowded quartzfeldspar porphyry and biotitefeldspar
porphyry units and all of the coarse quartz porphyry and polymictic breccia units.
Late-stage phyllic alteration has extended along northeast and northwest-trending
faults outwards from the polymictic breccia unit, and affected units distal from the
polymictic breccia unit

Argillic alteration consists of kaolinite and illite. Associated with deposition of

chalcocite, covellite and minor tennantite and digenite. Affected parts of the
crowded quartzfeldspar porphyry and biotitefeldspar porphyry units and all of the
coarse quartz porphyry and polymictic breccia units.

Advanced argillic alteration comprises alunite, kaolinite, pyrophyllite and dickite.

Associated with deposition of enargite, chalcocite and covellite (tennantite and
digenite). Primarily associated with the polymictic breccia unit, but also has
variably affected the bordering coarse quartz porphyry and biotitefeldspar
porphyry units. Has extended along northeast and northwest-trending faults
outwards from the polymictic breccia unit, and affected units distal from the
polymictic breccia unit.

Silicic alteration is found mainly at the deposit margin, but can locally occur within
the deposit. Can extend for significant distances outside of the intrusivebreccia
complex into the bordering volcanic rocks.

Structures
The northwestsoutheast- and the northeastsouthwest-trending fault sets appear to
control the emplacement of the intrusive phases at Caariaco Norte, as well as the
distribution of copper mineralization and alteration. In addition, the faults form
structural corridors for late-stage polymictic breccias and associated alteration and

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mineralization. The smaller set of northwestsoutheast-oriented faults control dyke

emplacement.

7.2

Prospects
Prospect locations are shown in Figure 7-6.
Figure 7-6:

Prospect Location Plan and Geological Map

Note: Figure courtesy Candente Copper Corp.

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7.2.1

Caariaco Sur
The Caariaco Sur deposit is located 1.3 km southwest of Caariaco Norte, and is
situated on a coincident coppergoldmolybdenum anomaly with approximate
dimensions of 1,200 m x 800 m. CCC has interpreted the prospect as a porphyrycopper centre dominated by potassic alteration with chalcopyritebornitemolybdenite
mineralization and anomalous CuAuMo grades.
The host rocks to the mineralized intrusions are Calipuy Group volcanic rocks. Two
main intrusions were noted from geological mapping, an early 750 m x 500 m quartz
monzonite stock, and a later diorite stock with an area of approximately 100 m x 50 m.
A third intrusive phase may also exist (Sillitoe, 1999).

7.2.2

Quebrada Verde
The Quebrada Verde prospect is 3.2 km south of Caariaco Norte and 1.5 km south of
Caariaco Sur. It consists of a 1 km x 750 m diorite porphyry stock that intruded
Calipuy Group volcanic rocks (Wilson, 1999). A satellite stock of the same diorite
porphyry measuring 400 m x 400 m is located 200 m to the northeast. An eastwest
striking, post-mineralization granodiorite dike, which has dimensions of approximately
1 km x 100 m, intruded the volcanic rocks and the larger diorite porphyry stock.
Soil and drill core assay data suggest a concentric mineralization zonation with a wide,
low-grade copper ring hosting elevated gold values along the inner edge and elevated
molybdenum values on the outer edge.

7.3

Comment on Section 7
In the opinion of the QPs, knowledge of the deposit settings, lithologies, and structural
and alteration controls on mineralization within the Caariaco Norte deposit is
sufficient to support Mineral Resource estimation.
The near-by Caariaco Sur and Quebrada Verde prospects are at an earlier stage of
exploration, and the lithologies, structural, and alteration controls on mineralization are
currently insufficiently understood to support estimation of Mineral Resources.

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8.0

DEPOSIT TYPES
The Caariaco Norte deposit is considered to be an example of a primary porphyrycopper system. The following discussion of the typical nature of porphyry-copper
deposits is sourced from Sillitoe, (2010), Berger et al., (2008), and Sinclair (2006).
Porphyry-copper systems commonly define linear belts, some many hundreds of
kilometres long, as well as occurring less commonly in apparent isolation. The
systems are closely related to underlying composite plutons, at paleo-depths of 5 km
to 15 km, which represent the supply chambers for the magmas and fluids that formed
the vertically elongate (>3 km) stocks or dike swarms and associated mineralization.
Commonly, several discrete stocks are emplaced, resulting in either clusters or
structurally controlled alignments of porphyry-copper systems. The rheology and
composition of the host rocks may strongly influence the size, grade, and type of
mineralization generated in porphyry-copper systems. Individual systems have life
spans of circa 100,000 years to several million years, whereas deposit clusters or
alignments, as well as entire belts, may remain active for 10 million years or longer.
Deposits are typically semicircular to elliptical in plan view. In cross section, ore-grade
material in a deposit typically has the shape of an inverted cone with the altered, but
low-grade, interior of the cone referred to as the barren core. In some systems, the
barren core may be a late-stage intrusion.
The alteration and mineralization in porphyry-copper systems are zoned outward from
the stocks or dike swarms, which typically comprise several generations of
intermediate to felsic porphyry intrusions.
Porphyry-copper mineralization occurs in a distinctive sequence of quartz-bearing
veinlets as well as in disseminated forms in the altered rock between them. Magmatichydrothermal breccias may form during porphyry intrusion, with some breccias
containing high-grade mineralization because of their intrinsic permeability. In
contrast, most phreatomagmatic breccias, constituting maardiatreme systems, are
poorly mineralized at both the porphyry copper and lithocap levels, mainly because
many such phreatomagmatic breccias formed late in the evolution of systems.
Copper mineral assemblages are a function of the chemical composition of the fluid
phase and the pressure and temperature conditions affecting the fluid. In primary,
unoxidized or non-supergene-enriched ores, the most common oresulphide
assemblage is chalcopyrite bornite, with pyrite and minor amounts of molybdenite.
In supergene-enriched ores, a typical assemblage can comprise chalcocite + covellite
bornite, whereas, in oxide ores, a typical assemblage could include malachite +

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azurite + cuprite + chrysocolla, with minor amounts of minerals such as carbonates,

sulphates, phosphates, and silicates. Typically, the principal copper sulphides consist
of millimetre-scale grains, but may be as large as 12 cm in diameter and, rarely,
pegmatitic (larger than 2 cm).
Alteration zones in porphyry-copper deposits are typically classified on the basis of
mineral assemblages and consist of potassic, propylitic, phyllic and argillic zones. In
silicate-rich rocks, the most common alteration minerals are K-feldspar, biotite,
muscovite (sericite), albite, anhydrite, chlorite, calcite, epidote, and kaolinite. In
silicate-rich rocks that have been altered to advanced argillic assemblages, the most
common minerals are quartz, alunite, pyrophyllite, dickite, diaspore, and zunyite. In
carbonate rocks, the most common minerals are garnet, pyroxene, epidote, quartz,
actinolite, chlorite, biotite, calcite, dolomite, K-feldspar, and wollastonite. Other
alteration minerals commonly found in porphyry-copper deposits are tourmaline,
andalusite, and actinolite.

8.1

Comment on Section 8
In the opinion of the QPs, the Caariaco Norte deposit is considered to be an example
of a porphyry system based on the following:

Multiple emplacements of successive intrusive phases and a variety of breccias

Copper-bearing igneous rocks are intrusive into host volcanic and sedimentary
rocks

Mineralization is spatially, temporally, and genetically associated with the

intrusivebreccia activity and hydrothermal alteration of the intrusive and breccia
bodies

Large zones of veining and stockwork mineralization, together with minor

disseminated and replacement mineralization occur throughout large areas of
intrusivebreccia and hydrothermally-altered rock

Hydrothermal alteration is extensive and zoned, which is common to porphyry

copper deposits. The alteration assemblages are consistent with the physicochemical conditions of a porphyry environment

Mineralization is focused in well-developed quartzsulphide stockworks; veins,

crackle and breccia zones are also present

Tenor of copper and gold grades

Large tonnage.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

9.0

MINERALIZATION
A discussion of the mineralization styles and related depth, width (thickness),
orientation and continuity is presented for the Caariaco Norte deposit in Section 7.
The discussion in this section of the Report relates to the mineralization type,
character, and mineralogy of the deposit.
Although all of the units listed in Table 7-1 host mineralization, the average grades
vary. In general, the highest copper grades (>0.5% Cu) occur in the biotitefeldspar
porphyry and polymictic breccia units. Intermediate copper grades (0.35%0.5% Cu)
are most common in the hydrothermal breccia and the coarse quartz porphyry and the
lowest grades (0.2%0.35% Cu) are found in the crowded quartz feldspar porphyry,
tourmaline breccia and volcanic host rocks. The feldspar porphyry dykes typically do
not contain copper grades unless the dykes have been fractured, brecciated, or
crackle-brecciated near the south margin of the hydrothermal breccia, where they have
been weakly mineralized (average copper grade ranges of 0.1%0.2% Cu).
A Qemscan examination of core samples selected for metallurgical testwork in 2008,
and performed by SGS Metallurgical Laboratories in Santiago, Chile, indicated the
predominant minerals and mineral associations present in the Caariaco Norte
samples are:

Copper mineral species: dominantly chalcopyrite, covellite, chalcocite and

enargite, with minor bornite, tennantite and digenite and trace tetrahedrite. Copper
sulphide minerals are mainly associated with pyrite and other sulphide gangue
minerals

Non-metallic gangue minerals: quartz and micas/biotite/chlorite/clay group

Sulphide gangue mineral: pyrite. Pyrite is present as liberated pyrite or in

association with other sulphide minerals.

Copper mineralization paragenesis comprised the following stages:

Initially chalcopyrite (bornite) + pyrite

Intermediate, chalcocite and covellite (tennantite, digenite) pyrite
Lastly enargite, chalcocite and covellite (tennantite, digenite) + pyrite.

Copper minerals and pyrite are disseminated, veined, and fracture-hosted, with copper
grades directly related to the intensity of fracturing and alteration type and intensity.
Higher grades are associated with potassic, phyllic, and argillic alteration and less
commonly with propylitic and silicic alteration.

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CCC staff interpret that chalcopyrite (bornite) was deposited initially with potassic and
propylitic alteration. As the system evolved chalcocite and covellite (tennanite,
digenite) developed in association with phyllicargillic alteration, and overprinted and
replaced chalcopyrite (bornite) and potassic alteration in the central and upper parts of
the deposit. Enargite, chalcocite and covellite (tennantite, digenite), associated with
advanced argillic and phyllic alteration was the last to form. These minerals are
typically restricted in distribution to the polymictic breccia unit and the adjacent coarse
quartz porphyry and biotitefeldspar porphyry unit, where they occur as
disseminations, clots, veins, and fracture coatings cutting earlier-formed chalcopyrite,
chalcocite, covellite, potassic, phyllic, and argillic alteration.
Chalcopyrite (bornite), chalcocite, covellite, enargite (tennantite, digenite) are primarily
hypogene in origin, with only limited development of supergene chalcocitecovellite.
In the opinion of CCC staff, between the water table being at or near the present
topographic surface, and an active erosive environment, any supergene
chalcocite/covellite that formed is being rapidly removed. Locally thin (<30 m)
discontinuous layers of supergene chalcocitecovellite occur immediately under the
leach cap.
Pyrite is common in all alteration types, averaging approximately 5% throughout the
deposit as disseminations, veins, and fracture coatings. Magnetite is less common
and primarily associated with chalcopyrite (bornite) in potassic alteration. Tourmaline
is restricted to the matrix of the tourmaline breccia unit.
Gold and silver values are anomalous throughout the deposit; however, higher gold
grades only occur with higher copper grades. Gold grades range, on average,
between 0.04 g/t Au and 0.11 g/t Au and silver grades average 1.3 g/t Ag2.5 g/t Ag
throughout the different rock types in the deposit (Bonson et al., 2008).
Molybdenum (Mo) grades are low, averaging <40 ppm and are slightly higher on the
margins and at depth in the deposit (Bonson et al., 2008). Molybdenum grades are
unlikely to be economically recoverable based on current information.
Figure 9-1, Figure 9-2 and Figure 9-3 display cross-section through the Caariaco
Norte deposit showing copper, gold, and silver grades, respectively.

9.1

Comment on Section 9
In the opinion of the QPs, the mineralization style and setting of the deposit is
sufficiently well understood to support Mineral Resource estimation.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 9-1:

Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Cu (%)

Ranges Overlapping Lithological Interpretation

Note: grid squares are 200 m x 200 m

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 9-2:

Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Au (ppb)

Ranges

Note: grid squares are 200 m x 200 m

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 9-3:

Example Vertical Section (9,326,300N) with 15 m Composites Coloured by Ag (g/t)

Ranges

Note: grid squares are 200 m x 200 m

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

10.0

EXPLORATION
Exploration activities such as geological mapping and sampling have been performed
by CCC and predecessor companies, Ingemmet, Placer Dome, and Surcusal Peruana.
Contractors were used for activities such as geophysical surveys.
Exploration activities on the Project have included regional and detailed mapping,
stream sediment, grab, rock, and soil sampling, trenching and pitting, core drilling,
ground geophysical surveys, mineralization characterization studies and metallurgical
testing of samples. Petrographic studies and density measurements on the different
lithologies have also been carried out.
A summary of the work programs completed to the Report effective date are
summarized in Table 10-1.

10.1

Grids and Surveys

The Project uses WGS-84 UTM (zone 17). Data collected to June 2006 used PSAD56 (zone 17). All survey work on the Project prior to the re-establishment of survey
control points in 2004 and a datum switch in June 2006 was re-done.
Topographic data used to constrain Mineral Resources were based on aerial
photograph coverage provided by Horizons South America S.A.C. Aerial Mapping
Services.

10.2

Geological Mapping
Regional and detailed geological mapping was completed by Ingemmet, Placer Dome,
and CCC in a number of phases. Map scales varied from regional (1:25,000) to
prospect scale (1:1,000). Map results were used to identify lithologies, areas of quartz
veining, alteration, silicification and sulphide outcrop that warranted additional work.
Interpretation of air photos were used to identify areas that required geological
mapping and sampling. During the mapping program, structural measurements were
collected from faults, veins, and fractures to provide additional structural detail for
geological interpretations.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 10-1:

Exploration Summary Table

Year
19671970

Operator
Ingemmet

19711974

Ingemmet

19941997

Placer
Dome

19992000

Surcusal
Peruana

2002 to
present

CCC

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Work Undertaken
Regional stream sediment sampling. Identified anomalous copper in drainages surrounding the
Caariaco Norte deposit
2
Geological mapping at 1:25,000 scale defined 9 km of alteration and mineralization, with four
distinct centres identified.
Limited soil and rock chip sampling; numbers of samples unknown
Nine trenches; locations unknown. A total of 23 rock chip samples taken from the trenches and
analysed for Cu and Mo.
Infill geological mapping at 1:5,000 scale; this detailed mapping was hampered by dense
vegetation and steep topography
IP and resistivity ground geophysics over Caariaco Norte
Five vertical core drill holes completed at Caariaco Norte to depths of 300 m for 1,500 m total
drilling. A total of 579 core samples were collected along 3 m or 1.5 m lengths and analysed for
Cu and Mo. A total of 66 composite geological samples were analysed for total copper (TCu),
Mo, Ag, and Au.
Thin section and petrographic studies on selected drill core samples
Mineral resource estimate
Geological mapping at 1:1,000 scale at Caariaco Norte; preliminary geological mapping, scale
not known, at Caariaco Sur
Soil and rock chip sampling over an area of 1.3 km by 1.5 km at Caariaco Norte. A total of 715
rock chip samples assayed for Au, Cu, Mo, (and some for Ag and As). Reconnaissance rock chip
and grab sampling at Caariaco Sur
Trenching (2,200 m) and pitting (80 test pits) at Caariaco Norte and Caariaco Sur
Re-interpretation of Ingemmet IP and resistivity data; the re-interpretation noted some correlation
between copper grades and chargeability and/or resistivity. It was also noted that some of the
strongest IP targets had not been drilled by Ingemmet
Three core holes (874 m) at Caariaco Norte
Petrographic studies on selected drill core samples
Mineral resource estimate
Geological mapping; scale unknown
Soil and rock chip sampling. Sampled outcrops in the streams south of the drilled area at
Caariaco Norte. Low-level Cu anomalies (<500 ppm) were collected from phyllically-altered
quartz porphyry at Caariaco Norte. The northern side of the quartz porphyry generated
additional surface copper anomalies (5002000 ppm Cu) were found with outcrops of basaltic
andesite. In the outcrops around the drill holes in the northern part of the quartz porphyry, gold
graded in the 100200 ppm Au range. In the southern half of the system, the grades were
generally in the 40100 ppb Au range. Soil samples were only taken at Caariaco Sur and
Quebrada Verde, and outlined co-incident Cu, Au and Mo anomalies over a 750 m diameter area
with smaller anomalies of copper and gold adjacent to this target. Soil sample line spacing was
typically 200 m with 100 m infill where initial results were favourable. Sample spacing was 50 m
along the lines.
IP and ground magnetic geophysical surveys on four lines at Caariaco Norte. For the IP survey,
a dipoledipole array, with electrode spacing of 100 m, was used. The results were not useful
because only a very weak current was received at the potential electrode. The ground magnetic
data used the same lines and spacings; no domains of magnetite destruction could be defined.
Eight core holes (957.7 m) drilled at Caariaco Norte, Caariaco Sur, and Quebrada Verde
Petrographic studies on selected drill core samples
Leach testing on on 12 samples from two intervals of core; results indicated that the
mineralization was potentially bio-heap leachable.
Mineral resource estimate
Geological mapping, including 1:2,000 scale at Caariaco Norte and Caariaco Sur. Preliminary
mapping of the Caariaco Sur and Quebrada Verde zones was also carried out to assess soil
geochemistry anomalies outside of the main mineralized zones. Zones of silicification and quartz
vein stockworks occur peripheral to the main circular feature at Caariaco Sur.
Structural measurements. A total of 311 structural measurements including faults, veins,
fractures etc. were collected
Prospecting, rock chip and grab sampling. A total of 148 rock samples were collected in 2002
2004 from surface for gold, total copper and 35-element inductively-coupled plasma (ICP)
analyses. In addition, a number of PIMA and petrology samples were collected to define
favourable alteration including alunite and sericite and to define the various igneous phases. A

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Year

10.3

Operator

Work Undertaken
total of 392 soil geochemistry samples and 355 rock samples were collected over the geophysical
grid at Caariaco Sur and Quebrada Verde in 2008. Soils with elevated levels of copper of up to
5,720 ppm (0.57%) and gold up to 330 ppb covering over an area of 0.9 km x 1.4 km and
potassic alteration mapped over a length of 2.3 km at Caariaco Sur. Anomalous levels of
copper of up to 2,200 ppm (0.22%) and up to 497 ppb gold in soils cover an area of
approximately 0.7 km x 0.9 km at Quebrada Verde.
Re-logging of existing drill core
20 line km of IP/resistivity and ground magnetic geophysics; outlined areas of magnetite
destruction and delineated the various alteration zones and helped confirm and/or identify
old/new fault structures at Caariaco Norte. A coincident magnetic high; IP/resistivity low and
chargeability high identified at Caariaco Sur. A large IP chargeability high centered on a
resistivity anomaly and covering an area of 0.8 km by 2.0 km identified at Quebrada Verde.
Petrographic studies on selected drill core samples
Four bulk samples for leach testing collected in 2004.
250 core holes (72,116,1 m) at Caariaco Norte, Caariaco Sur and Quebrada Verde

Geochemistry
Stream sediment, soil and rock chip sampling were used to evaluate the mineralization
potential and generate targets for core drilling at Caariaco Norte, Caariaco Sur, and
Quebrada Verde. Sampling was performed by Ingemmet, Placer Dome, Surcusal
Peruana, and CCC.
Stream sediment sampling identified elevated copper and gold values. Rock chip
sampling outlined coppergoldsilvermolybdenum mineralization associated with
quartz porphyry outcrops at Caariaco Norte, Caariaco Sur, and Quebrada Verde.
Soil sampling provided the initial drill target areas for Caariaco Norte and a follow-up
exploration target at Quebrada Verde (Figure 10-1).
PIMA alteration studies undertaken by CCC were used to define favourable alteration
styles for mineralization, including alunite and sericite, and to define the various
igneous phases.

10.4

Pits and Trenches

Nine trenches were excavated by Ingemmet, and a total of 23 rock chip samples
taken. Placer Dome completed trenching (2,200 m) and pitting (80 test pits) at
Caariaco Norte and Caariaco Sur. Test data are superceded by drill data.

10.5

Geophysical Surveys
Geophysical surveys, comprising IP, resistivity, and ground magnetic methods, were
completed at Caariaco Norte, Caariaco Sur, and Quebrada Verde by Ingemmet,
Surcusal Peruana, and CCC.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Results of the surveys prior to the CCC work were considered inconclusive, due to
wide line spacings. CCC completed 20 line km of combined IP/resistivity and ground
magnetic surveys. The surveys at Caariaco Norte outlined areas of magnetite
destruction and addition, thus delineating the various alteration zones and helping to
confirm and/or identify old/new fault structures.
A coincident magnetic high,
IP/resistivity low and chargeability high was identified at Caariaco Sur. A large IP
chargeability high, centered on a resistivity anomaly and covering an area of 0.8 km by
2.0 km, was identified at Quebrada Verde.

10.6

Drilling
Drilling completed on the Project is discussed in Section 11 of the Report.

10.7

Bulk Density
Bulk density data collected to date on the Project are discussed in Section 12 of this
Report.

10.8

Geotechnical and Hydrogeology

Geotechnical drilling has been undertaken to test the orientations of the feldspar
porphyry dikes and to test the orientation of the polymictic breccia within the crowded
quartz feldspar porphyry. All drill holes after drill hole C06-045 have been logged for
standard geotechnical parameters. Following a visit by SRK personnel in late 2008,
geotechnical logging parameters were revised. All drill holes after C07-189 were
logged using the revised protocols.
CCC has also carried out geotechnical mapping of trench exposures (veins, joints and
faults), and strength testing using a point load tester.
Some of the core drill holes had piezometer pipe installed and 12 of those holes had
packer tests completed in them, as part of a hydrogeological data acquisition program
overseen by Ground Water International. Two holes were drilled specifically for
hydrogeological testing on the ridge to the west of the area that has estimated mineral
resources.
A geotechnical drilling program to provide additional information on rock mass
properties, joint patterns and hydrogeology within the proposed pit area is planned.
AMEC notes that information from this program could result in changes to the slope
angle of the pit wall as a result of more detailed geotechnical information, and such

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Lambayeque Department, Peru
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changes would affect the pit shell used to constrain the mineral resources in Section
17. CCC expects the drilling will be undertaken in 2011.

10.9

Other Studies
Petrography and mineralogical studies in support of mineralogical and geological
interpretations have been completed by Ingemmet, Placer Dome, Surcusal Peruana,
and CCC.

10.10

Exploration Potential
Caariaco Norte is part of an extensive porphyry complex that comprises also
Caariaco Sur and a third target, Quebrada Verde. The three deposits cover a
minimum length of 5 km and an average width of 2 km. The porphyry complex is
covered entirely by the Caariaco property. Geological mapping, geophysics and
geochemical sampling by CCC, and by Surcusal Peruana in 1999 (including limited
drilling), indicate a strong potential for additional porphyry coppergold mineralization
within the complex.
Locally, mineralization at Caariaco Norte is still open at depth and at the centralwest
portion of the deposit.

10.11

Comment on Section 10
The exploration programs completed to date are appropriate to the style of the
deposits and prospects within the Project. The petrographic research work supports
the genetic and affinity interpretations.

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11.0

DRILLING
Drilling on the Project consists of 263 core holes (75,665.1 m), including geotechnical
and hydrogeological drilling. A drill summary table by operator is included in Table
11-1; this table does not include the geotechnical or hydrogeological drilling. Drill hole
locations for the Caariaco Norte deposit are shown in Figure 11-1. Figure 11-2
shows the locations of the three drill holes completed at Caariaco Sur and Quebrada
Verde.

11.1

Drill Contractors
The Ingemmet program drill contractor was Craelius Tarratest Peruana S.A. who
utilized three Long Year machines (two model 34s and one model 38). No information
is available for the contractors for the Placer Dome and Surcusal Peruana drill
programs.
The CCC drill programs initially used Pac Rim Drilling SA, a Peruvian subsidiary of
Kluane Drilling Corp. (Kluane), who provided standard man-portable Hydrocore rigs.
Kluane was acquired by Energold Drilling Corp. in September 2007, and the subsidiary
was renamed Energold Drilling Peru S.A.C. (Energold); from September 2007,
Energold has been the Project drill contractor.

11.2

Drill Methods
The Ingemmet program used NCD core size to 50 m, NXWL (60.7 mm core diameter)
to 170 m and BXWL (48.4 mm core diameter) thereafter. Both 10 ft (3 m) and 5 ft
(1.5 m) core barrels were used.
No information is available on the core size for the Placer Dome drilling; however, the
Surcusal Peruana drill program used BQ diameter (36.5 mm).
The CCC programs initially used NTW (56 mm) diameter core. During the 2005 drill
program, ground conditions and depth required a reduction to a BTW core diameter
(42 mm) in drill holes 05-014 at 302.35 m and 05-019 at 268 m). In 2006 and 2007, all
drill holes less than 325 m in depth were drilled with NTW diameter core; holes deeper
than 325 m needed to be reduced to BTW at around 250 m to 300 m depth, to allow
the machine to drill to the planned depth. The 2008 drill program employed HQ
(63.5 mm diameter) or NQ (47.6 mm diameter) core sizes.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 11-1:

Drill Summary Table

Year

Project Operator

Deposit or Prospect

19711974
19941997
19992000

Ingemmet
Placer Dome
Surcusal Peruana

2004
2005
2006
2007
2008

Candente

Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Sur
Quebrada Verde
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Sur

Total

Figure 11-1: Drill Hole Location Plan, Caariaco Norte

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Core
Number Holes
5
3
3
3
1
12
24
46
123
41
2
263

Metres
1,500.0
853.91
555.7
473.0
100.0
2,647.38
7,388.87
15,983.55
31,357.2
13,772.1
1,040.6
75,672.31

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 11-2: Drill Hole Location Plan, Caariaco Sur and Quebrada Verde

Note: Figure from Huangui et al., 2002. Billiton = Surcusal Peruana

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

For the CCC programs, core was transferred to wooden core boxes. Rock quality
descriptions (RQD) measurements were performed at the drill site, then boxes were
lidded, and transported by porters hired by CCC to the Project core processing facility
where it was photographed, logged for geologic and geotechnical information.
No information is available on the core transportation used in the earlier drill programs
by Ingemmet, Placer Dome, or Surcusal Peruana.

11.3

Geological Logging
During detailed core mark-up at the logging facility, CCC geologists perform first-pass
geological logging of the core. This initial log identifies lithological boundaries, major
structures, leaching depth and broad mineralization intervals. In tandem with the
logging, the geologist notes where major sample breaks should be placed at
lithological boundaries.
A second phase of detailed core logging is carried out immediately after cutting on the
preserved split core at CCCs core storage facility in Chiclayo, where each core is
logged for lithology, structure, veining, alteration and mineralization. All logged
descriptions are indexed to 2 m sample intervals, so that the mineralization, veining,
structure, lithology and alteration affecting any sample are known.
Core from all other legacy drill campaigns has been re-logged by CCC.

11.4

Collar Surveys
CCC drill collar locations were picked up by a surveyor using a total station instrument.
All legacy drill collars were picked up by survey in 2006, and tied into the Project grid.

11.5

Down-hole Surveys
For the 2004 drill program, down-hole surveys were undertaken using a Pajari analog
survey tool with a timed locking compass and inclinometer. Readings were taken at
the drill machine to confirm true vertical holes. Any spurious readings were discarded
and a second survey was done at the same depth. The 2005 program used the same
instrumentation and procedures as the 2004 program. However, a number of the 2005
program drill holes do not have down hole survey data due to a malfunction in the
instrument.
All the drill holes from the 2006 and 2007 drill programs were downhole surveyed with
a Sperry Sun single shot downhole survey tool supplied by the drilling company.

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The 2008 program drill holes were down-hole surveyed for dip and azimuth with a
Reflex EZ-Shot digital down-hole survey tool, at 50 m intervals.
Selected drill cores from the 2006 and 2008 drill programs were oriented for
geotechnical purposes using an A.C.E. tool.

11.6

Recovery
Drill core recovery data from the legacy drill campaigns are not available. CCC staff
have recorded core lengths and calculated core recoveries and RQD at the sites of the
drill holes.
AMEC reviewed the core recovery data from drill holes C07-164 through to C08-244
and found a trend of decreasing copper grade with decreasing core recovery. The
copper grades decrease from 0.3% to 0.2% at a core recovery of 80%, however only
2% of the data are affected. There is a low risk of a very low number of assays having
a negatively-biased copper grade due to low core recoveries.

11.7

Caariaco Norte Drilling

The central portion of the deposit has been delineated at a nominal, but not regular
spacing, due to relief restrictions. In this area, the drill grid spacing is 75 m by 75 m
with most of the core holes drilled vertically. On the deposit margins, drill spacing
widens to as much as 100 m by 100 m.
Drill hole depths range from 14 m to 766 m, averaging 290 m. Drill hole orientations
are typically vertical, but have also been drilled at angles ranging from 45 to 75.
The relationship between true widths, drill intercepts, lithologies and copper grades for
drill hole intervals in selected drill holes are shown on the cross-sections included as
Figure 9-1, Figure 9-2 and Figure 9-3 in Section 9.
Example drill intercepts for the deposits are summarized in Table 11-2, and are
illustrative of nature of the mineralization. The example drill holes contain leached cap
and sulphide intersections and areas of higher-grade in lower-grade intervals.

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Table 11-2:

Deposit
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte
Caariaco Norte

Drill Hole Intercept Summary Table

Hole ID
C07-200
C05-020
C08-213
C08-213
C06-074
C07-144
C06-076

From
(m)
76
12
27.25
52.4
52.4
70.6
34.9

To
(m)
300.25
357.95
46.95
98.0
98.0
271.0
363.0

Drill Intercept
Interval
(m)
224.25
345.95
19.7
45.6
237.0
200.4
328.1

Copper Grade
(Cu%)
0.79
0.49
0.96
1.01
0.605
0.812
0.911

Gold Grade
(g/t Au)
0.140
0.045
0.142
0.145
0.111
0.129
0.169

Silver
Grade
(g/t Ag)
2.58
2.46
2.19
3.01
1.99
2.48
2.20

Note: Depending on the dip of the drill hole, and the dip of the mineralization, drill intercept widths are typically greater
than true widths.

11.8

Comment on Section 11
In the opinion of the QP, the quantity and quality of the lithological, geotechnical, collar
and downhole survey data collected in the exploration and infill drill programs are
sufficient to support Mineral Resource estimation as follows:

Core logging meets industry standards for gold, silver, and copper exploration

Collar surveys have been performed using industry-standard instrumentation

Down-hole surveys were performed using industry-standard instrumentation

Recovery data from core drill programs are acceptable to allow reliable sample
data for mineral resource estimation.

Geotechnical logging of drill core meets industry standards for planned open pit
operations.

Depending on the dip of the drill hole, and the dip of the mineralization, drill
intercept widths are typically greater than true widths.

Drill orientations are generally appropriate for the mineralization style, and have
been drilled at orientations that are optimal for the orientation of mineralization for
the bulk of the deposit area.

Drill orientations are shown in the example cross-sections (Figures 9-1 to 9-3), and
can be seen to appropriately test the mineralization. The sections display typical
drill hole orientations for the deposits, show summary assay values using colour
ranges for assay intervals that include areas of non-mineralized and very low
grade mineralization, and outline areas where higher-grade intercepts can be
identified within lower-grade sections. The sections confirm that sampling is
representative of the gold, silver, and copper grades in the deposits, reflecting
areas of higher and lower grades.

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Drill hole intercepts as summarized in Table 11-2 appropriately reflect the nature of
the gold, silver, and copper mineralization.

No factors were identified with the data collection from the drill programs that could
affect Mineral Resource estimation.

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12.0

SAMPLING METHOD AND APPROACH

12.1

Geochemical Sampling
There is no information available on the sampling methods for the Ingemmet, Placer
Dome or Surcusal Peruana geochemical sampling programs. Geochemical samples
taken by CCC were typically 25 kg.

12.2

Pit and Trench Sampling

There is no information available on the sampling methods for the Ingemmet and
Placer Dome geochemical sampling programs.

12.3

Core Sampling
Drill core generated by Ingemmet and Placer Dome was halved; there is no
information as to the typical sample intervals. The Surcusal Peruana drill core was
halved and sampled on 2 m intervals.
CCC drill core is halved using a circular rock saw. Samples are 2 m in length unless a
geological contact is present within the sample interval. In those instances, the
sample interval is terminated at the contact. The subsequent sample interval
terminates at the next meter depth mark that allows a 1.50 m minimum sample length.

12.4

Quality Assurance and Quality Control

The quality assurance and quality control (QA/QC) programs for the Project are
discussed in Section 13.

12.5

Density/Specific Gravity
A total of 9,424 bulk density readings were taken by CCC personnel during core
logging using a weight in air and weight in water. Samples were taken every 10 m to
20 m to include all rock and alteration types. Data were recorded for drill hole ID,
depth, rock type, alteration, weight in air and weight submerged in water.
As a part of the update to the 2008 mineral resource estimate, 550 bulk density
determinations were collected by CCC personnel from drill core intervals and
submitted to ALS Chemex (Lima) for density determinations. The determinations were
performed using a wax-coated immersion technique (specialty assay procedure

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OA-GRA08a). AMEC assigned constant specific gravity values to each lithological

rock type (Table 12-1).
Table 12-1:

Bulk Density Values used in the 2010 Mineral Resource Estimate

Bulk Density

VC
CQFP
BFP
CQP
FP
IBXH
TBX
IBXP

12.6

Oxide
3
(g/cm )

Sulphide
3
(g/cm )

2.13
2.33
2.19
2.17
2.03
2.17
2.17
2.17

2.51
2.50
2.48
2.50
2.56
2.50
2.45
2.50

Comment on Section 12
A description of the geology and mineralization of the deposit, which includes
lithologies, geological controls and widths of mineralized zones, is included in Section
7 and Section 9.
A description of the sampling methods, location, type, nature, and spacing of samples
collected on the Project is included in Section 10 and Section 12.
A description of the drilling programs, including sampling and recovery factors, are
included in Section 11 and Section 12. All collection, splitting, and bagging of core
samples were carried out by company personnel, with the company and personnel
varying depending on the date of the drill program. No factors were identified with the
drilling programs that could affect the reliability of the sample data used for Mineral
Resource estimation.
Figures 11-1 and 11-2 in Section 11, which show drill hole collar locations, indicate
that the sizes of the sampled areas are representative of the distribution and
orientation of the mineralization.
Figures 9-1 to 9-3 in Section 9 show approximate drill hole collar traces in relation to
the orientation of the mineralization. The figures also show drill hole assay intervals
include areas of non-mineralized and very low grade mineralization, and confirm that
sampling is representative of the copper, gold, and silver grades in the deposit,
reflecting areas of higher and lower grades.

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Data validation of the drilling and sampling program is discussed in Section 14, and
includes review of database audit results.
In the opinion of the QPs, the sampling methods are acceptable, meet industrystandard practice, and are adequate for Mineral Resource estimation purposes, based
on the following:

Data are collected following industry standard sampling protocols;

Sample collection and handling of core was undertaken in accordance with

industry standard practices, with procedures to limit potential sample losses and
sampling biases;

Sample intervals in core, comprising average 2 m intervals, are considered to be

adequately representative of the mineralization. Not all drill material may be
sampled depending on location and alteration.

Bulk density determination procedures are consistent with industry-standard

procedures;

There are sufficient acceptable bulk density determinations to support the bulk
density values utilized in tonnage interpolations.

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13.0

SAMPLE PREPARATION, ANALYSES, AND SECURITY

From Project inception to date, Project staff employed by CCC and predecessor
companies were responsible for the following:

13.1

Sample collection
Core splitting
Preparation of samples for analytical laboratory submission
Sample storage
Sample security.

Analytical Laboratories
Several primary assay laboratories have been used for routine analyses over the
Project history.
Ingemmet used the Plenge Laboratory in Lima and the Ingemmet internal laboratory,
also located in Lima. No information is available as to accreditation of the laboratories
at the time sampling was performed.
Placer Dome utilized the SGS-XRAL (SGS) laboratory in Lima, which was independent
of Placer Dome. No information is available as to accreditation of the laboratory at the
time sampling was performed.
For the Surcusal Peruana sampling, sample preparation was undertaken by ALS
Chemex in Trujillo, and primary analysis by ALS Chemex in Lima. The umpire
laboratory was SGS. Both laboratories were independent of Surcusal Peruana. No
information is available as to accreditation of the laboratories at the time sampling was
performed.
Activation-Skyline Laboratories (Actlabs) in Lima, Peru performed all of the sample
preparation and the majority of the analyses for the CCC programs. Actlabs is
independent of CCC, and holds ISO:9000 accreditation for the Peruvian laboratory.
Inductively-coupled plasma (ICP) analyses were performed by the Ancaster, Canada,
Actlabs laboratory, which has Standards Council of Canada (SCC) accreditation for
International Standards Organization (ISO)17025.
Some analyses for the re-analysis of pre-2008 core samples for gold and ICP were
undertaken by ALS Chemex in Lima. ALS Chemex is independent of CCC, and holds
ISO:9000 accreditation for the Peruvian laboratory.

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ACME Laboratories (ACME), Lima were used as a check laboratory for pulp analyses.
ACME is independent of CCC, and holds ISO:9000 accreditation for the Peruvian
laboratory.

13.2

Sample Preparation and Analysis

Limited information is available on the sample preparation and analysis methods for
Ingemmet or Placer Dome. Ingemmet samples were analyzed for Cu and Mo, and
more rarely Au and Ag, using a colorimetric analytical method.
Surcusal Peruana samples were 200g splits of a 1 kg, 200 mesh homogenized
sample. A split from each sample pulp was assayed for Au (fire assay with atomic
absorption finish, 10 pbb detection limit) and Cu, Pb, Zn, Mo and As (multi-acid, total
digest), with an atomic absorption (AA) finish for each element. SGS completed check
assays on a split of one in 20 pulps using the same analytical procedures as the initial
analysis performed by ALS Chemex.

13.2.1

CCC
Sample Preparation
Sample preparation undertaken on the CCC samples comprised drying, then crushing
using a jaw crusher to >70% less than 10 mesh. The sample is thoroughly blended
using a riffle splitter. A sub-split is taken, which is pulverized to >95% less than
150 mesh, and this pulp is submitted for analysis.
Copper
Each sample was subject to total copper and sequential copper leaching analysis
which returns results for acid-soluble, cyanide-soluble and residual copper grades.
Total copper analysis was performed using a three-acid digest and AA finish
(laboratory method ME-3 or three-acid digestion).
The sequential leach analysis consisted of:

An initial leach step, where samples were dissolved in sulphuric acid, and the
copper grade determined by AA to give the acid-soluble copper value.

A secondary leach step, where samples were dissolved in sodium cyanide and the
copper grade determined by AA to give the cyanide-soluble copper value.

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A third leach step, where the samples were dissolved using a three-acid digest and
the copper grade determined by AA finish to give the residual copper value.

For any given sample, copper grades were obtained by adding the three parts of the
sequential copper analysis. Results are compared to the copper grade reported in the
total copper analysis, and if the sum of the sequential leach grades has a >0.03%
difference to the total copper grade, the analysis is repeated for both parts of the
process.
Gold
The sample for gold analysis is taken from the remaining pulps after copper analysis.
The 250 g pulps are homogenized and a 30 g split is weighed out for fire assay
fusion, cupelled to obtain a bead, and digested with aqua regia, followed by an AA
finish, with a detection limit of 5 ppb Au (Actlabs code EF1).
Only a portion of the pre-2008 drilling originally had gold assays. These were
analysed using a fire assay (FA) methodology with an atomic absorption finish (FA-AA)
on a 30 g sample. The remainder of samples were not systematically analysed for
gold until a large analysis in-fill campaign was conducted in March 2008. Due to the
large volume of samples, analyses were split between Actlabs and ALS Chemex. The
FA-AA method on a 30 g sample was used by both laboratories.
For the 2008 drill campaign, the FA-AA method on a 30 g sample has been used, with
all analyses performed by Actlabs.
Inductively-coupled Plasma Multi-element
The analytical method utilized at Actlabs was a 36-element inductively-coupled plasma
optical emission spectrometry (ICP-OES) method following aqua regia digestion
(laboratory code 1E3). ALS Chemex performed a 33-element ICP atomic emission
spectroscopy (AES) method after four-acid digestion (laboratory code ME-ICP61).

13.3

Quality Assurance/Quality Control Programs

There is no information on any quality assurance/quality control (QA/QC) programs for
Ingemmet and Placer Dome.
Surcusal Peruana used blanks (crushed quartz every 20 samples), standard reference
materials (SRM: one in every 20 samples) and check assays (one in every
20 samples). Surcusal Peruanas protocol was that a blank sample was not to be

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submitted adjacent to an SRM sample, but could not be any more than 10 samples
from an SRM. Chain-of-custody and sample preparation protocols were also part of
Surcusal Peruanas QA/QC program at Caariaco.
13.3.1

CCC
Duplicates
No field duplicates were utilized in the 2004 drilling program, but were included from
drill hole C05-013 of the 2005 drill program. Field duplicates typically comprised
quarter drill core.
Coarse reject duplicates were run on drill holes C04-007 and C05-023.
Pulp duplicates were taken at Actlabs every 10th sample.
CCC has consistently sent 5% of pulps prepared and analyzed by Actlabs to
independent laboratories for check assays on total copper analyses. Drill holes C04001 to C06-082 had 5% of the samples sent to ACME Laboratories, Lima for analysis
by a four-acid digestion of a 0.25 g pulp split. Drill holes C07-083 to C07-202 had 5%
of the samples sent to SGS laboratories, Lima for analysis using the same analytical
procedures as the original assay work (three-acid digestion on a 0.25 g split). All
independent checks included standards, blanks and duplicates. Pulp duplicates were
also made during all independent laboratory checks at ACME and SGS.
During 2010, CCC sent a suite of 530 pulp reject samples to the SGS laboratory in
Lima for check analyses on silver ICP analyses. The samples were analysed by a
four-acid digest on a 0.3 g pulp split (method ICP40B). The samples were randomly
selected from drill holes throughout the holes drilled by CCC. All independent checks
included standards, blanks and duplicates.
Blanks
Field blank material is obtained from a barren outcrop of volcanic host rock situated
outside of the alteration halo at Caariaco. Blanks are submitted at a frequency of one
in 30 samples, so that each laboratory batch of 80 will always have at least two blanks.
Field blank fail limits are set at 0.05% copper or five times the detection limit of 0.01%.

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Standard Reference Materials

CCC has used six commercially available SRMs, purchased from CDN Laboratories in
Vancouver, Canada. SRMs are submitted at a frequency of one in 30 samples, so that
each laboratory batch of 80 will always have at least two SRMs. An additional two
SRMs were purchased from Geostats Pty. in Australia specifically for use in the ICP
check assays conducted during 2010. The selected SRMs have low-grade silver
contents which are close to the average silver grade of the Caariaco Norte deposit.
During 2006, SGS was retained to prepare two SRMs from unweathered outcrops
from the Caariaco property, for sequential leach analysis.
Where the copper value of the SRM was outside the acceptable value specified for the
standard by CDN Laboratories (two standard deviations from the mean), they were
failed. Re-analysis of failed copper standards was not carried out at time of drilling.
This was mainly due to the fact that most batches had two, or sometimes three,
standards in them. If one standard failed but the other did not, the batch was
considered to be acceptable, particularly if the other QA/QC samples (blanks and
duplicates) did not fail.
Re-sampling
An extensive re-sampling program of historical pre-2004 drill hole data has been
conducted by CCC. Nine out of eleven historical holes were re-sampled. Only holes
C73-001 and C73-005 holes were not re-sampled. C73-001 was twinned by C04-001
and C73-005 did not have significant copper grades.
Sections of the old core were quartered and sent to Actlabs, Lima, for processing.
Due to the state of the legacy drill core after several moves, composite samples of up
to 20 m were made within mineralization types and between fixed blocks to ensure
proper metreage measurements.
A comparison between the original and the CCC assays shows an acceptable
correlation between the datasets. Based on this, all of the historical data were added
to the final database, and the CCC assays from the re-sampling program were
excluded due to the composite lengths.
Twin Holes
Three pairs of twinned holes were drilled by CCC to verify grade uniformity at short
distances. Two of the twin sets (holes C04-007 with C07-104 and C04-023 with
C07-106) show similar average grades over the same depth intervals. The third twin

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set (C04-005 with C07-146) shows a significantly higher average grades in the original
drill hole from 2004 than in its twin drilled in 2007. This may indicate a vertically
oriented mineralized vein set intercepted in one drill hole and not the other.

13.4

Databases
All date in the field is recorded in written form in field books, log books, sample sheets,
logging forms or shipping forms. Various phases of record keeping are repeated in the
subsequent step to confirm recorded values or numbers.
All field data is entered into Excel tables either in the Caariaco camp or at the CCC
Lima office. Errors in data entry picked up during the verification stage can be
confirmed and corrected from filed data.
Data from third parties such as laboratories or survey contractors are generally
supplied in digital and printed form. These records are printed out and kept in binders
for reference during data verification.

13.5

Sample Security
Sample security at the Caariaco Project during the CCC drilling programs relied upon
the remote nature of the site, the fact that the samples were always attended or locked
at the sample dispatch facility. Sample collection and transportation have always been
undertaken by company or laboratory personnel using company vehicles.
Drill samples were picked up at site by a freight firm using a dedicated vehicle, and
transported to the sample preparation facility. Pulps were transported by laboratory
personnel to the appropriate analytical facility.
Chain of custody procedures consisted of filling out sample submittal forms that were
sent to the laboratory with sample shipments to make certain that all samples were
received by the laboratory.

13.6

Sample Storage
Prior to the construction of an access road into camp, all core was stored on racks
within secure storage facilities. In October 2007, all existing core was moved to a
secure core storage facility located in Chiclayo, close to CCCs regional offices and
thereafter core boxes were transported directly to the new core storage facility for
detailed logging and permanent storage.

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13.7

Comment on Section 13
The QPs are of the opinion that the quality of the gold, copper, and silver analytical
data are sufficiently reliable (also see discussion in Section 14) to support Mineral
Resource estimation and that sample preparation, analysis, and security are generally
performed in accordance with exploration best practices and industry standards as
follows:

Geochemical sampling covered sufficient area and was adequately spaced to

generate first-order geochemical anomalies, and thus was representative of firstpass exploration sampling

Drill sampling has been adequately spaced to first define, then infill, gold and
copper anomalies to produce prospect-scale and deposit-scale drill data. Drill hole
spacing varies with depth. Drill hole spacing in the core of the deposit is
approximately 50 m. Drill hole spacing increases with depth as the number of
holes decrease and holes deviate apart, and is more widely-spaced on the edges
of the deposit

Sample preparation for samples that support Mineral Resource estimation has
followed a similar procedure since 2004. The preparation procedure is in line with
industry-standard methods for coppergoldsilver deposits

Core drill programs were analysed by independent laboratories using

industry-standard methods for copper, gold, and silver analysis

There is limited information available on the QA/QC employed for the earlier drill
programs; however, there are twin drill holes that confirm the grades and
lithologies, and the core from the drill programs has been re-assayed, so that the
data can be accepted for use in Mineral Resource estimation.

Typically, CCC drill programs included insertion of blank, duplicate and SRM
samples. The QA/QC program results do not indicate any problems with the
analytical programs, therefore the copper, gold, and silver analyses from the core
drilling are suitable for inclusion in Mineral Resource estimation

Data that were collected were subject to validation, using in-built program triggers
that automatically checked data on upload to the database

Verification is performed on all digitally-collected data on upload to the main

database, and includes checks on surveys, collar co-ordinates, lithology data, and
assay data. The checks are appropriate, and consistent with industry standards

Sample security has relied upon the fact that the samples were always attended or
locked in the on-site sample preparation facility.

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Chain-of-custody procedures consist of filling out sample submittal forms that are
sent to the laboratory with sample shipments to make certain that all samples are
received by the laboratory

Current sample storage procedures and storage areas are consistent with industry
standards.

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14.0

DATA VERIFICATION
A number of data verification programs and audits have been performed over the
Project history, primarily in support of technical reports.

14.1

Currie, 2004
During a site visit in support of completion of a technical report, Currie (2004)
traversed the entire Caariaco Norte zone, examining numerous outcrops. Four
samples were taken from outcrop material and trenches. Analyses indicated that the
assays from the outcrops were consistent with the grades seen in drill holes.

14.2

MineFill, 2007
MineFill performed detailed data verification for all available data from 1973 to 2006;
only verified assay information was used in the estimation of mineral resources. Assay
values were deemed verified when the original signed assay certificate or photocopy
was present and the database reflected the assay certificate values accordingly. The
sample numbers and assay values on the certificates were called out by an individual,
as another individual located the corresponding sample numbers within the database
and verified the assay values. The data were marked as verified, corrected or
unverified, accordingly. Of the five holes drilled by Ingemmet in 1973, only three were
verified. The remaining 88 core holes in the 2007 database were completely verified
and corrected for use in mineral resource estimates.

14.3

SRK, 2008
SRK undertook the following checks:

Detailed verification of assays using signed assay certificates

Assay verification from electronic laboratory files
Verification of down-hole survey data
Verification of drill hole positions in field
Comparison of Cu grades from re-sampling of historical drill holes to original data
Verification of Cu assay data from twinned drill holes
Comparison of Cu assays from different analytical procedures
Comparison of Cu assays from vertical versus inclined holes
Collection and independent analysis of check assay samples.

No errors or omissions were noted by SRK with the reviewed data that could impact
mineral resource estimation.

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SRK also selected a suite of 21 core samples for independent analysis at ALS
Chemex, Vancouver by four-acid digest and ICP-AES. Samples were chosen on the
basis of their Cu grade (determined by CCC), lithology, mineralization type (presence
of leachable Cu) and age of drill hole, in an effort to reflect the variability in the deposit
and the consistency of analytical results over time. Samples comprised bags of pieces
of quartered core samples taken over a 2 m interval in an attempt to ensure that the
sampled interval co-incided with a CCC sample interval. However, the very fractured,
rubbly nature of the recovery of several intervals meant that the samples reflect a
sample of gravel-sized core fragments, rather than split core.
SRKs comparisons of results with the original CCC assays yielded relatively good
agreement on the whole. Graphic evaluation of the data indicated that approximately
65% and 90% of paired data fell below the 10% and 20% absolute relative difference
lines. Significantly, there was no strong bias within the data, with points falling above
and below the parity line. The data did not, in SRKs opinion show an obvious
correlation between the relative difference and lithology, mineralization, grade or time
of assay.
SRK also concluded that the reasonable correlation between the results from SRK
checks using a four-acid digestion technique with ICP finish and those obtained by
CCC using a three-acid leach and AA finish further confirmed that the three-acid leach
technique was suitable for the Caariaco mineralization.
14.4

AMEC, 2010
AMEC reviewed 1,930 copper, gold, silver and molybdenum assays, or 5.6% of the
analytical data in the database as verification on the data quality. No errors were
noted and the analytical data were considered suitable to support mineral resource
estimation.

14.5

Comment on Section 14
The process of data verification for the Project has been performed by external
consultancies, primarily in support of technical reports.
The QPs, who rely upon this work, have reviewed the appropriate reports, and are of
the opinion that the data verification programs undertaken on the data collected from
the Project adequately support the geological interpretations, the analytical and
database quality, and therefore support the use of the data in Mineral Resource
estimation:

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No significant sample biases were identified from the QA/QC programs undertaken

Twin and infill drilling in areas where drill core data from predecessor companies
was available indicated that the legacy data were sufficiently in accordance with
the data generated by the check programs that the original historic assay values
could be used

Sample data collected adequately reflect deposit dimensions, true widths of

mineralization, and the style of the deposit

External reviews of the database have been undertaken in support of technical

reports, producing independent assessments of the database quality. No
significant problems with the database, sampling protocols, flowsheets, check
analysis program, or data storage were noted

Drill data are typically verified prior to Mineral Resource estimation by running a
software program check.

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15.0

ADJACENT PROPERTIES
There are no adjacent properties at a similar stage of development as the Project.

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16.0

MINERAL PROCESSING AND METALLURGICAL TESTING

16.1

Metallurgical Testwork
Over the project history, a number of metallurgical testwork campaigns have been
undertaken. These are summarized in Table 16-1.
Table 16-1:
Year
1999
2004
2006
2008

Metallurgical Testwork Summary Table

Laboratory
Geomet S.A., Santiago, Chile
Kappes, Cassiday &
Associates, Reno, Nevada
SGS Metallurgical Laboratory,
Santiago, Chile
SGS Metallurgical Laboratory,
Santiago, Chile

2010

SGS Metallurgical Laboratory,

Santiago, Chile

2010
2010

Outotec, Antofagasta, Chile

Outotec, Sweden

Testwork Performed
Sequential leach tests
Column leach tests
Leachability tests
QEMSCAN examination
Comminution and variability comminution tests
Effects of grind sizes
Effects of collectors and pH
Effect of sulphidization
Cleaner flotation tests
Locked cycle tests
Effects of grind sizes
Effects of collector, frother type and dosage, and
pulp pH
Effects of cleaning
Flotation tests
Concentrate generation
Mineralogical analysis
Tailings thickening tests
Proof-of-concept roasting testwork

Initial testwork was focused on leaching; however, additional drill data indicated that
the mineralization was primarily sulphidic and flotation/comminution tests were
subsequently performed.
16.1.1

Leach Tests
In 1999, Surcusal Peruana sent 12 samples from two intervals of core to Geomet S.A.
in Santiago, Chile for diagnostic leach tests. Four different test phases, using four
different solvents were trialed. Huanqui et al (2002) concluded that the potential
leachable copper content of the finely-ground (minus 200 mesh) samples averaged
86.03% copper.

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In 2004, Kappes, Cassiday & Associates (KCA) of Reno, Nevada, performed column
leach tests on two bulk core samples. The oxide column test sample returned 92%
recovery after 93 days. The more sulphidic sample returned a recovery of 52% after
93 days.
During 2006, a total of 32 core samples were sent to SGS Metallurgical Laboratory in
Santiago, Chile for testwork to assess the leachability of copper from high cyanidesoluble copper areas in the deposit. Results were similar to those obtained by KCA,
and confirmed that not all the soluble copper minerals in the mineralized material were
completely leachable. Results were variable and indicated potential recoveries of 60%
to 70% of the contained leachable copper.
16.1.2

Mineralogy
A Qemscan examination of metallurgical samples during 2010 testwork indicated the
predominant minerals and mineral associations at Caariaco Norte samples are:

Copper mineral species: chalcopyrite, covellite, chalcocite, bornite, enargite,

tennantite, and tetrahedrite; primarily associated with pyrite and other sulphide
gangue minerals. Pyrite present as liberated pyrite or in association with other
sulphide minerals.

Non-metallic gangue minerals: quartz, micas, biotite, chlorite, and clay group
minerals.

Particle mineralogical analysis of the three 2010 rougher concentrate samples

indicated:

Chalcopyrite is the main ore mineral with values between 6.06 and 9.30 wt%. The
main gangue in the samples is quartz, pyrite, and sericite/muscovite. Other
gangue includes plagioclase/albite, chlorite, clays, Ti oxides and biotite. The fine
fraction (-400 mesh) has low amounts of pyrites and is primarily phyllosilicates.

In the high-chalcopyrite and low-arsenic rougher concentrates, the copper occurs

mainly as chalcopyrite (70.7 and 71.7% respectively). The remaining copper is
from bornite, enargite, covellite, chalcocite/digenite and trace tetrahedrite.

In the high arsenic secondary copper mineral rougher concentrate, the copper
occurs as chalcopyrite (49.1%), bornite (19.4%), enargite (12.3%), covellite
(12.9%), chalcocite/digenite and trace tetrahedrite.

Copper sulphide liberation increases with the decrease in particle size.

Copper sulphides are typically associated with pyrite and silicates/phyllosilicates.

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16.1.3

Comminution Tests
Comminution tests were performed in 2008 at the SGS Metallurgical Laboratory (SGS)
on four specific copper mineralization composite samples to emphasize chalcopyriterich, arsenic-rich, and secondary copper mineral-rich materials. In addition there was
a comminution variability campaign on selected spatial samples (48 in total) and the
testwork on these involved the following test types:

Crushing work index (CWI),

SAG mill comminution (JKSMC)
Drop weight tests (JKDWT) for ten samples
Specific gravity (SG)
Bond Rod mill work index (RWI)
Bond Ball mill work index (BWI)
Abrasion Index (AI).

Results were:

16.1.4

Caariaco variability crushing work indices were in the range of 4 kWh/t to 12

kWh/t, which are typical of porphyry copper deposits but are significantly lower
than those reported in the original PA. The 80th percentile of the CWi was found to
be 13 kWh/t.

The variability testwork indicates an average bond rod mill work index (RWi) of just
over 10 kWh/t. This, in conjunction with the BWi of just under 10 kWh/t, indicates
that the ore is a soft to moderately soft type

Ball mill work indices in the range of 9 to 12 kWh/t confirm the results of the
process development composites by showing a soft to moderately soft ore type

The average abrasion index was less than 0.1, which may indicate that the
selected variability composites correspond to a non-abrasive mineralized material.
At the 80th percentile, the abrasion index is around 0.12, which is the basis of the
steel values used for the operating cost.

Flotation Tests
2006

Initial flotation tests were performed in 2006 by SGS on three lithology composites,
breccia-rich, chalcopyrite-rich, and copper secondary mineral-rich. Results discussed
are summarized from Bonson et al. (2008):

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Several rougher flotation tests were performed at different particle sizes (K80 of 75,
106, 150, 212 and 250 m) and at a pH of 10. A P80 of 150 m was
recommended for the later stages of testwork.

Rougher flotation tests were carried out to determine the best reagents to obtain a
high copper recovery. The best flotation results were obtained with the collector
AP-3894 and methyl isobutyl carbinol (MIBC) frother.

Flotation tests conducted at pH values of 7.2, 11 and 12 indicated that a pH of 10

is optimum for the rougher flotation stage. This pH gave acceptable results for all
of the composites tested.

Flotation performance (recovery and grade) was not improved by the addition of a
sulphidizing reagent.

Concentrate grade is sensitive to cleaning flotation pH and regrind size. Finer

regrind improved concentrate grade for all the composites tested. Results
indicated performance at a P80 of 37 m (80% passing 400 mesh) achieved
satisfactory concentrate grade for each type of mineralized material.

A recovery of 89% Cu with a concentrate grade of 25.5% Cu was achieved for the
chalcopyrite-rich composite. For the breccia composite, the final concentrate
grade was 26.6% Cu with 81% recovery. For the composite containing higher
levels of secondary minerals, a recovery of 84.5% Cu with a final concentrate
grade of 26.5% Cu was achieved.

2008

The same material used to provide samples for the variability grinding work was used
to create four composites which were used as the basis of flotation testwork conducted
at SGS Metallurgical Laboratory in 2008. Results discussed are summarized from
Bonson et al. (2008).
The effect of grind size (P80 at 75 m, 100 m, 150 m, 200 m and 250 m) on the
flotation performance using rougher kinetic tests was evaluated; although finer grinding
improved the copper recovery, a primary grind of P80 125 m was deemed as
optimum.
Tests were completed out at grind size of 125 m and pH of 10 with collector types of
AP-3894, AP-3330, PAX, AP-3477, AP-404, AP-3926 and AP-3302 and with frother
(MIBC) addition. Higher copper selectivity was observed for all composites using
collectors AP-3330, and AP-3477.

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Frother screening tests were carried out at grind size of 125 m and pH of 10 with
frother types of MIBC, D-250, H-76 and TEB and with addition of collectors AP-3477
(25 g/t) and AP-3330 (25 g/t). The results indicate that copper recovery and grade
benefit most from the use of AP-3330/MIBC.
Several rougher kinetic tests were conducted at natural pH, pH of 9, 10, 11 and 12.
Tests were performed at a grind size of 125 m with addition of collector AP-3330 (25
g/t) and frother MIBC (20 g/t). At pH 9 and 10, good performance was obtained
(recovery and grade) with particularly higher concentrate copper grades occurring at
pH 10 for all composites. A noticeable decrease in copper recovery occurred at
natural pH for the arsenic-rich and copper secondary mineral-rich samples.
Sulphidization tests were completed at a grind size of 125 m, pH of 10 with addition
of collector AP-3330 (25 g/t) and frother MIBC (10 g/t). The effect of the reagent
NaHS addition (50 g/t and 100 g/t) on the mineral response to flotation was evaluated.
The mixed, chalcopyrite-rich and copper secondary mineral-rich composites showed
better copper recoveries without the addition of NaHS. The arsenic-rich sample did
show slightly improved recovery with NaHS addition.
Regrinds were evaluated at times of 4 min, 8 min, and 12 min rather than specific P80
sizes to facilitate laboratory work with the small sample mass available. The
chalcopyrite-rich sample required 4 min of regrinding to achieve optimal graderecovery relationship in batch tests. Between 8 min and 12 min was required for the
other three composites.
Locked cycle tests and detailed mineralogy were
recommended in order to further define the regrind requirements for each composite.
This corresponds to a P80 of 50 m for chalcopyrite-rich and arsenic-rich
mineralization, and a P80 of 35 m for secondary copper mineral-rich and mixed
sulphide type materials.
Several cleaner flotation tests were conducted at pH 11, 11.5 and 12. Tests were
carried out at a grind size of 125 m with addition of AP-3330 (25 g/t) and frother
MIBC (20 g/t). A pH of 11.5 achieved satisfactory results for all composites tested.
2010

In 2010, SGS performed additional testwork on three selected composites, a

low-arsenic composite, a copper secondary mineral composite, and a composite
containing high levels of chalcopyrite and arsenic. These composites were derived
from the same inventory of material which supplied material for the 2008 composites.
Primary flotation was conducted with six stages (1, 2, 4, 8, 10, 12 and 18 min.) of
roughing. Collector and frother type and dosage, and pulp pH were varied to evaluate

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their effect on mineral flotation performance. The duration of each flotation test was
18 minutes.
The effect of grind size (P80 at 120, 150, 175, 200, and 250 m) on the flotation
performance of the three composites (at the conditions developed in 2008) was
evaluated. A slight decrease in recovery was noted when going to a coarser grind with
all three composites. However, the relative impact of going from 150 m to 200 m
was fairly minor for all composite types. The results were sufficiently encouraging to
develop a comparison model which utilized preliminary capital and operating costs at
the various sizes versus the revenue developed. For all the mineralization types, the
increase in throughput and decrease in overall cost outweighed any recovery loss and
the required cost increases in regrinding. The results of the comparison model for all
three cases indicated that it was beneficial to move from a 150 m to a 200 m
primary grind as it allowed a greater amount of metal to be recovered per unit cost of
expenditure.
Collector tests were performed to assess increases in recovery of both copper and
gold into the concentrate. Rougher tests indicated that the best overall recovery
performance for copper and gold was achieved by a 75% A-3894 and 25% PAX
combination.
Cleaner tests showed that cleaning requires a high pH level of approximately 12 in
order to produce satisfactory copper concentrate grades. The mixed reagent did not
perform as well as the sole use of A3894. Additional mineralogical and size analysis is
underway to further investigate the cause of the cleaning seen with the mixed reagent
suite. Although there will be a compensating effect in the impurity roasting step, which
will see an uplift in final copper concentrate grade suitable for sale, AMEC
recommends that more material be obtained for a series of locked-cycle tests to
examine this aspect in more detail.
Flotation testwork was performed to develop the tailings flotation flowsheet and
provide sample suitable for acid-base account testing.
16.1.5

Concentrate Generation
Additional testwork was performed on all three 2010 composites to produce
concentrate feed for proof-of-concept roasting testwork by Outotec. Testwork utilized
a primary grind of 150 m and a regrind of approximately 35 m. The collector used
was 25 g/t of A3894.
During the production of the concentrates, thickening tests performed on the samples
showed that:

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Required underflow slurry densities could be achieved for all the flocculant addition
rates at the three loading levels, 0.30 t/m2h, 0.50 t/m2h, and 0.70 t/m2h.

Required overflow slurry clarities be achieved for most of the Magnafloc 1011
flocculant addition rates at the three loading levels, 0.30 t/m2h, 0.50 t/m2h, and
0.70 t/m2h.

All concentrates show reasonable settling performance.

Concentrate roasting tests were performed using a rotating kiln at a fixed temperature.
The objective was to reduce the As and Sb in the concentrate to levels that would
have low or no penalty elements and thus enhance the marketability of the product.
Each of the three concentrates was tested at four different temperatures, 600C,
650C, 700C and 725C with a residence time of 30 minutes. A stable reducing
environment was achieved by adding a flow of SO2 gas. The produced calcines were
analyzed both for sintering tendencies and elemental composition.
The roasting tests showed that the expected arsenic content in the head grade of the
calcine was similar to the low-arsenic composite, which gave a residual As result
under 0.1%. Composites with higher arsenic levels also produced calcines with
residual As levels of between 0.1% to 0.3%, unless there was calcium present either in
the gangue or from the reagent systems.
The low-arsenic composite calcine showed the best performance at 700C, producing
a concentrate that would not incur a smelter penalty. The secondary copper mineral
composite calcine also showed good performance at 700C, and typically would not
incur a smelter penalty. The results for the high-chalcopyrite and arsenic composite
calcine at 700C, showed a level of arsenic that would incur a penalty; however,
Outotec indicated that this may due to the presence of excess lime used for pH control
in the cleaning circuit.
The levels of antimony were found to reduce by 50% to 60% to a level where this
element would be below penalty levels.
The silver and gold content in the calcine was not analyzed; however, these elements
are expected behave similarly to copper. The average increase in concentrate grade
was 6% for copper, and both silver and gold should follow the same trend.
The roasting tests did not show any problems related to sintering. All concentrates
had a P80 of 50 m or less, with approximately 20% of the material smaller than 10 m.
This suggests that 5% of the calcine will report to the scrubbing circuit for capture at
that point.

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16.1.6

Testwork Results
2008

A standard copper flotation flowsheet was recommended in 2008, incorporating

crushing, grinding, rougher flotation, rougher concentrate regrinding, and two stage
cleaner flotation to produce a copper concentrate. Under the recommended scenario,
the first cleaner tail would be scavenged in a mechanical cell and the cleaner
scavenger concentrate sent back to the regrind mill. The rougher tails and the cleaner
scavenger tails would be discharged to a tailings containment facility. The cleaner
concentrate would be dewatered and shipped offshore to a smelter for refining.
A recovery of 90% Cu was suggested for PA-level work, based on a P80 of 125 m
and a rougher flotation mass pull of 20%. A concentrate grade of 27% Cu was
projected. Recoveries of 55% for gold and 65% for silver were recommended. No
molybdenum recovery was proposed, due to the very low tenor of the Mo
mineralization. It was noted at the time that arsenic and antimony in the concentrates
could incur smelter penalties.
2010

In 2010, it was recognized that there was an opportunity to optimize the metallurgy of
the deposit and to use another approach to deal with the levels of arsenic present in
the concentrate. This second phase of work for Caariaco Norte began in 2010 with
the initial goal being continuation of the definition of mineralization characteristics
sufficient to support a pre-feasibility study.
The early work in this program consisted of testing for the optimum rougher feed size,
regrind feed size, rougher and cleaner reagent additions. Products from this testwork
were further analyzed for mineralogy, chemistry and settling quality. Results from this
testwork indicated that it was possible to utilize a coarser grind and still maintain
recoveries through the employment of a dual collector system. Later work on the test
material concentrated on establishing that the improvements were robust and the
solution proposed for dealing with the penalty elements would work. This latter
testwork, the application of partial roasting, has been to a proof-of-concept level and
development work is recommended to define design parameters for feasibility-level
design.
At the effective date of this Report, the principal elements of the final flowsheet have
been established with indicative recoveries of 89.7% Cu, 55% Au, and 50% Ag, >26%
Cu concentrate delivered to the roaster, >30% Cu concentrate delivered to the

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smelter, and arsenic as a penalty element controlled to a level where no impact on

concentrate marketability is anticipated over the life-of-mine.

16.2

Recoveries
Copper recoveries are expected to vary with feed grade ranging from 93.1% at 0.6%
Cu and 58.8% at 0.1% Cu. The metallurgical response of gold and silver has not been
assessed to the same degree as copper; however, based on the testwork completed
to date, gold and silver recoveries are projected to be 55% and 50% respectively.
Given that the results for the three composites were weighted equally, further definition
of the distribution of these sample types and their representation in the LOM plan is
recommended. This can be achieved through a variability flotation testwork program,
which is currently planned for the next phase of work.

16.3

Proposed Process Route

The process design is for a concentrator with a nominal processing capacity of
95,000 t/d. Where data were not available at the time of flowsheet development,
AMEC developed criteria for the sizing and selection of equipment based on
comparable industry applications, benchmarking, and the use of modern modelling
and simulation techniques.

16.3.1

Process Description
The mineral processing and the roasting/acid plants are based on conventional
technology and industry proven equipment. Run-of-mine (ROM) mineralized material
from the open pit will be crushed and conveyed to the concentrator where the
mineralization will be ground to liberate the mineral values from the host rock and then
separated by flotation. The bulk coppersilvergold sulphide concentrate produced
will be filtered and introduced into the roasting plant. There the concentrate will
undergo a partial oxidative roast, which will remove the arsenic and part of the sulphur
into the gaseous phase. The gas will be scrubbed to capture particulate matter and
the arsenic into solution. This solution will report to a stabilization circuit that will
remove any valuable copper and convert the arsenic into scorodite, which will be
filtered and transferred to the tailings management facility (TMF).
After removal of the arsenic, the gas containing sulphur dioxide will be processed
through a modular plant to produce saleable sulphuric acid.
The copper precipitate and solid calcine produced from the roaster will be
agglomerated and stockpiled. Trucks will transport the combined concentrate to the

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port facilities, where it will be placed on ocean-going vessels for transport to overseas
smelters.
Key elements of the process design are summarized in Table 16-1, and the process
route proposed is included as Figure 16-1. A block diagram of the route is shown in
Figure 16-2.
16.3.2

Crushing/Conveying
The primary crushing station will be a fixed 60 x 89 inch gyratory crusher. Mine haul
trucks with a capacity of up to 290 tonnes each will dump ROM ore directly into the
dump pocket of the crusher.
Crushed mineralized material will fall into a pocket below the crusher, which in turn
discharges to an apron belt feeder. The feeder will draw mineralization from the surge
pocket at a controlled rate using a variable-speed drive and will discharge to sacrificial
coarse ore conveyor No. 1. The conveyor will incorporate a magnet to remove tramp
metal and a metal detector to detect remaining tramp metal in the bulk material and
thus prevent damage to downstream equipment.
Coarse ore conveyor No. 1 will feed coarse ore conveyor No. 2 for delivery from the
crushing station to the coarse ore stockpile (COS). The overland conveyor system
from the crusher discharge belt feeder to the COS is sized for a design capacity of
6,900 t/h.

16.3.3

Coarse Ore Storage and Reclaim

The COS will be conical and have a live capacity of 85,000 tonnes and additional dead
capacity of 280,000 tonnes. The purpose of the stockpile is to create a buffer between
the mining and crushing operations and the process plant so that the plant can
continue to receive ore from the stockpile when there are intermittent stoppages of
feed from the crusher or the mine. A track dozer will be used to push ore into the
feeders when ore needs to be reclaimed from the dead section of the stockpile during
upstream maintenance activities.
Ore will be reclaimed from the stockpile with four in-line belt feeders installed in a
concrete tunnel below the stockpile. The belt feeders will discharge mineralization at a
controlled rate onto the semi-autogenous grind (SAG) mill feed conveyor.

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Table 16-2:

Key Process Design Criteria

Project

Unit

Value

Throughput
Project life

years

22

Annual

t/a

34,675,000

Daily

t/d

95,000

Operating Time
Days per year

days

365

Plant availability

94

Run of Mine Ore

Moisture content

%wt

3.0

Run-of-mine top size

mm

1,000

Nominal feed grade

Cu

0.40

Au

g/t

0.05

Ag
Design feed grade

g/t

1.80

Cu
Overall plant recovery (nominal)

0.50

Cu LOM average

89.7

Au LOM average

55.0

Ag LOM average
Copper grade in flotation bulk copper concentrate

50.0

26.0

Copper grade in roaster calcine

30.6

Primary Crushing
Haul truck capacity

290

Dump pocket capacity

No. of haul trucks

1.5

Crusher type

Gyratory

Crusher OSS

mm

168

Discharge P80

mm

125

Coarse Ore Storage and Reclaim

Live storage

85,000

Grinding
Circuit configuration

SAB

Grinding Parameters
Crusher work index (average)

kWh/t

9.4

Bond rod mill work index (average)

kWh/t

10.2

Bond ball mill work index (average)

kWh/t

11.0

52.1

1.0

ta
Primary grinding

0.64

Mill type

SAG

mm

3.4

JKTech ore breakage test results

P80
Secondary grinding

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Project

Unit

Value

Mill type

Ball

Ball Mill circulating load

250

Cyclones P80

200

% of mill feed

91

4.00

Flotation
Rougher
Concentrate
Recovery, Cu
Grade, Cu
Flotation cells

min

18

Regrind
Work index

Residence time

kWh/t

15.00

Circuit product size, P80

30

% of mill feed

90

20

min

10

% of mill feed

89.7

26.00

min

20

Recovery, Mass

% of mill feed

0.59

Grade, Cu

2.00

Copper Concentrate Thickening and Filtration

Thickener underflow density

wt% solids

65

Tailings Thickening
Thickener underflow density

wt% solids

55

Reagents
Collector 1

AP 3894

Collector 2

PAX

Frother

MIBC

Flocculant

Lime

Cleaner Stage 1
Concentrate
Recovery, Cu
Grade, Cu
Flotation cells
Residence time
Cleaner Stage 2
Concentrate
Recovery, Cu
Grade, Cu
Flotation cells
Residence time
Cleaner Scavengers
Concentrate

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Figure 16-1: Process Overview General Diagram

Figure 16-2: Process Overview Block Diagram

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The SAG mill feed conveyor will deliver the reclaimed ore from the stockpile to the
SAG mill and also receive oversize material from the pebble circuit and SAG mill balls,
which will be discharged back into the SAG mill. The SAG mill feed conveyor will have
a design capacity of 6,300 t/h.
16.3.4

Grinding
The grinding circuit configuration will consist of an open-circuit SAG mill followed by
two ball mills in closed circuit with cyclones. Pebblesmaterial greater than 15 mm
leaving the SAG millwill first be screened out by a trommel screen and then passed
over the SAG mill discharge screen to remove the fines and wash the material before
recycle back to the SAG mill feed conveyor. The undersize from the two screens will
be combined and transferred to the cyclone feed pumpbox. The average final product
size from the grinding circuit will be 80% passing 200 m. Total line throughput will
average 95,000 t/d.
The SAG mill will be a 38 ft diameter x 20 ft effective grinding length (EGL) mill,
powered by a 24 MW gearless motor drive. The mill will be operated at a ball load of
between 15% and 18% by volume, a total mill loading of 26%, and a rotation at 78% of
critical speed. The grates will initially be installed with a 75 mm gap, wearing to
approximately 90 mm. The pulp lifters will be radial; grate flux will be achieved by
adequate discharge cavity depth and proper throat design.
The SAG mill discharge, with a top size of 90 mm, will pass through a trommel screen
from where most of the finely ground material will report directly to the SAG discharge
mill pumpbox. The remainder will pass onto a 3.6 m wide x 7.3 m long vibrating
screen equipped with a 15 mm screen deck. Undersize from the vibrating screen will
collect in the SAG discharge pumpbox and be pumped to the ball mill discharge
pumpbox. Given the coarse nature of the feed, two installed pumps are considered
necessary in this position. The washed pebbles in the vibrating screen oversize will be
conveyed back to the SAG mill feed belt. Solid lime will be added to the SAG mill feed
to suppress the flotation of pyrite while recovering the copper, gold, and silver minerals
in the rougher flotation circuit.
The grinding circuit will have two 26 ft x 40 ft overflow ball mills, each driven by two
7,500 kW single-pinion, fixed-speed drives on either side of the mill, operating in
parallel. The SAG mill transfer pump will feed a distribution box that splits the feed
between two cyclone feed pumpboxes, one coupled with each ball mill. Each
pumpbox will have a single variable-speed pump feeding a cluster of ten 30" cyclones.
The average 80% passing particle size will be 200 m. Cyclone overflows will contain
approximately 35% solids. Each cyclone cluster overflow stream will be sampled and
the sample analyzed by a particle size analyzer before the stream feeds into the

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flotation circuit. Cyclone cluster underflow will report to the ball mill. The ball mills will
operate at a ball load of between 30% and 33% by volume, a total mill loading of 35%,
and a rotation at 76% of critical speed. A grizzly will protect each cyclone feed pump
from large rocks or balls that may be discharged from the mills during upset conditions.
Ball mill discharge will join the SAG mill discharge in the mill discharge pumpbox.
Collectors will be added to the mill discharge pumpbox to prepare the material for
subsequent flotation.
16.3.5

Flotation
The flotation circuit is designed to recover the minerals containing copper, gold, and
silver into a bulk concentrate. The concentrate will subsequently be treated by partial
roasting to prepare it for commercial sale. The design of the flotation circuit maximizes
the recovery of these valuable minerals at the lowest overall capital and operating
cost.
Depending on the mine source location, the mill feed material may at times contain
amounts of clay minerals and pyrite. Copper minerals and some pyrite, along with
significant entrained and locked non-sulphide gangue, will be recovered in rougher
flotation and then be reground to further liberate the minerals from each other. The
rougher tailings will still have significant levels of pyrite, which will be removed in a
flotation circuit positioned near the TMF to produce material that can be used as
cyclone sand for construction of the tailings dam.
The rougher concentrate will be upgraded in two stages of cleaning and sent to the
bulk concentrate thickener.
The average 80% passing particle size in the rougher circuit will be 200 m. Cyclone
overflow will be at approximately 35% solids. The cyclone overflow stream will be
sampled and the sample analyzed by a particle size analyzer before the stream
reports to a distributor and is divided between two rows of six 300 m3 tank-type
flotation cells (12 cells total). At 95,000 t/d, the total rougher residence time will be
18 minutes to obtain an average copper recovery of 92% before cleaning. A mixture of
A3894 and potassium amyl xanthate (PAX) will be used as a collector.
The rougher concentrate will collect in a series of launders and be directed to a single
pumpbox. Two rougher concentrate pumps, one operating and one standby, will feed
the regrind circuit.
Frother (MIBC) is added in the flotation circuit, and additional lime is added to the
roughers to achieve a pH of approximately 9.8.

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The copper cleaner circuit will have one regrind and two cleaner upgrading steps.
The rougher concentrate will be sent directly to densifying cyclones before entering the
regrind mill circuit, consisting of two M10,000 IsaMill units. These regrind mills will
reduce the concentrate particle size to 30 m for discharge to the 1st cleaner circuit of
four 100 m3 mechanical tank cells. The 1st cleaner concentrate reports to the 2nd
cleaner feed. The tails from the 1st cleaners enter the 1st cleaner scavengers,
The 1st cleaner scavenger
consisting of four 100 m3 mechanical tank cells.
concentrate is recirculated back to the feed of the regrind mill system, while the 1st
cleaner scavenger tails join the bulk flotation tails.
The 2nd cleaners will consist of four column cells and use recirculating pumps to feed a
sparger assembly. The 2nd cleaner concentrate is the final concentrate and is sent to
the concentrate thickener. The 2nd cleaner tails are recycled back to the feed of the 1st
cleaners.
Lime and frother are the principal reagents in the cleaning circuit. Lime is used as the
primary pH modifier throughout and is added at the regrind mills as required to
depress pyrite.
16.3.6

Concentrate Dewatering
The final concentrate will be fed into the copper concentrate thickener where flocculant
will be added to assist material settling. While the thickener overflow is recycled to the
process water system, the thickened underflow is stored in a concentrate storage tank.
Material from the concentrate storage tank is fed in batches to the pressure filters for
the reduction of overall concentrate moisture content to 8%.
After filtration, the concentrate will be transferred by conveyor to a storage silo with
sufficient capacity for eight hours of concentrate delivery. Concentrate from the silo is
fed to the roaster circuit for partial roasting to remove impurities.

16.3.7

Tailings Thickening and Disposal

The role of the tailings thickener is primarily to recycle solution at the process plant
that would otherwise report to the TMF with the flotation tailings, thereby significantly
reducing the volume of decant solution to be pumped back to the plant from the TMF.
The tailings thickener underflow will be pumped to the final tailings pumpbox at a
density of 55%. Any discharges from the process plant are also added to the tailings
pumpbox at this point.

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From the pumpbox at elevation 2,930 m, the tailings will be pumped by means of a
two-stage pumping system (with installed spare) through a HDPE pipeline to a high
point at elevation 2,990 m approximately 650 m north of the plant site, along the main
access road. From there the tailings will flow by gravity to the pyrite flotation circuit at
elevation 2,985 m.
The tailings line will enter the pyrite flotation plant at the TMF and discharge to a
mixing, dampening tank where potassium amyl xanthate (PAX) and frother will be
added before the material passes to two 300 m3 self-aerated flotation cells. The
pyrite-rich froth is removed and diverted directly to the TMF for subaqueous
encapsulation. The pyrite flotation underflow material is pumped to a cyclone plant on
the northern abutment of the tailings storage embankment. The cyclone plant will be
installed at 2,750 m elevation for use during the initial years of operation and will be
moved to 2,980 m elevation for final deposition as the embankment height increases.
The cyclone plant will separate the tailings flow into a sands component and a slimes
component. The sand, which comprises approximately 24% of the total tailings
stream, will be used for construction of the tailings embankment, while the slimes, the
remaining 76%, will be used to form a beach on the upstream side of the embankment.
The tailings sands will exit the cyclones at a pulp density of approximately 74%,
requiring the use of positive displacement pumps. Due to the high pressures needed
for pumping this material, the slurry will be pumped through a HDPE-lined carbon steel
pipe to smaller diameter spigot pipes. The spigots will be spaced at 50 m intervals to
evenly distribute the sand slurry along the downstream side of the embankment, where
it will be spread and compacted by dozers.
The slimes component will be pumped to the upstream side of the embankment
through a HDPE pipeline to spigots spaced 50 m apart along the embankment crest.
The slimes will form a beach to help raise the embankment by the centreline
construction method.
16.3.8

Roasting and Stabilization

The filtered flotation concentrate from the process plant will contain arsenic at levels
that would impair its marketability. Arsenic will therefore be removed from the
concentrate by the industrially proven Partial Roasting process, which converts the
arsenic to its (air oxidation) trioxide (As2O3) form.
The arsenic trioxide, recovered by scrubbing the roaster off-gas with water, will need to
be stabilized before disposal in a separate lined impoundment within the TMF,

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Caariaco Norte Deposit,
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separated from the flotation tailings. The arsenic is oxidized and reacts with dissolved
iron to produce stable, highly insoluble scorodite (ferric arsenate).
During the partial roast, some of the sulphur in the concentrate is oxidized to sulphur
dioxide (SO2) and must be removed from the scrubbed (arsenic-free) off-gas. The
technology selected for removal is conversion to concentrated sulphuric acid in a
conventional package plant. The sulphuric acid will be an upgraded, marketable byproduct. The partially roasted concentrate will be agglomerated as required for
shipment and smelting.
The concentrate is introduced into a fluid bed roaster operating at a temperature and
controlled air flow rate conducive to partial oxidation to release the arsenic and a
portion of the sulphur into the gas stream, while maintaining a suitable level of sulphur
in the concentrate for smelting requirements.
Figure 16-3 shows the general arrangement and flowsheet for the planned roasting
facilities.
The calcined concentrate from the roaster and the dust cyclone underflow will be
processed through a calcine cooler and then agglomerated together with the
precipitated copper product before being transported by screw conveyor to a storage
bin. This is the final concentrate product that will be trucked to the port facilities.
In the stabilization circuit, the scrubber slurry passes to conditioning leach tanks where
sulphur dioxide (SO2), in a concentrated bleed stream from the acid manufacturing
plant, is added. The role of the SO2 is to create an acidic reducing environment where
arsenic and iron are leached out while copper is precipitated with the SO2 to form a
copper sulphide. After this controlled reaction, the discharge from the tanks is sent to
a fine copper thickener where the precipitated copper sulphide and insolubles (silica,
etc.) are thickened to a level that permits filtration. The filtered material will be stored
in a surge bin that discharges to agglomeration.

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Caariaco Norte Deposit,
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Figure 16-3: Partial Roasting and Arsenic Removal Circuit

The overflow from the fine copper thickener, containing dissolved arsenic and iron, is
sent to the impurity stabilization circuit. Air is introduced together with limee to create
scorodite. This material is precipitated out of solution in these tanks and is transported
to a stabilized product thickener. There the material is thickened and then pumped to
a surge tank feeding a filtration circuit that filters out the stable arsenic-containing
sludge. The filtered cake is stored in a contained stockpile before being trucked to a
dedicated, lined impoundment within the TMF.
Calcine from the roaster and dust cyclones (dry) and copper sulphide precipitate (wet)
from the stabilization circuit are withdrawn from their respective storage bins and fed to
an agglomerator where the moisture content is adjusted to meet specifications for
transport. Intense mixing in this unit results in uniform wetting, blending, and formation
of granular agglomerates. The agglomerated material is non-dusting and has
favourable material handling properties.
The acid plant will be a modular package plant that will utilize current industry
technology and meet environmental guidelines.
In a typical acid plant flowsheet, the roaster off-gas first passes through a scrubber to
be cleaned of all fine dust and particulate matter. The SO2-containing gas is then sent
to a droplet eliminator and on to a cooling tower where the gas is cooled by means of

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circulating weak acid. The gas passes through wet electrostatic precipitators for
removal of the finest particles and acid aerosols and is then diluted with atmospheric
air and conveyed to a drying tower irrigated with sulphuric acid (96%) flowing countercurrent to the gas. Through this contact, the acid absorbs the moisture in the SO2 gas
and heat is released. The sulphuric acid is collected and cooled.
The gas from the tower is transported to a converter section where the cold SO2 gas is
reheated before entering the first in a series of catalyst beds. SO3 is formed as the
gas passes through successive catalyst beds. The gas then enters an adsorption
tower where the SO3 is adsorbed by circulating acid, which is collected and transferred
to an acid handling system. The gas stream passes through a final adsorption tower,
where the remaining SO3 is recovered, and then through a high-efficiency mist
eliminator and into the final discharge stack. The emissions from the acid plant will
meet applicable environmental regulations for air and water quality.

16.4

Reagents and Grinding Media

The principal flotation reagents for the process are:

A3894 liquid flotation collector, promoter

PAX potassium amyl xanthate, a strong collector
MIBC the frother used in flotation
Lime used to control circuit pH
Flocculant reagent used to help settle solids in the thickeners.

Solid and liquid reagents will be stored in a contained, fenced area, the solid reagents
either under cover or in containers and the liquids in either tote containers or bulk
tanks. As required, the reagents will be delivered to the concentrator mixing area and
prepared for distribution into the system. Each reagent mixing tank will be ventilated to
control emissions. The storage and mixing facilities in this area will also have a
separate sump system.
Reagents will generally be delivered in tote bags or tote containers. Storage capacity
will be provided for a six-week supply of unmixed reagents. Lime required for pH
control will be shipped in trucks as pebble quicklime from Chiclayo on the Peruvian
coast.
Steel grinding media will be trucked in bulk from Lima and be loaded into storage bins
at site. The media for the IsaMill regrind mills will be shipped from Europe in 1 tonne
tote bags and will be loaded into the mills by vendor-supplied equipment.

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Sulphur dioxide provided as a bleed stream from the acid production plant will be used
as a reductant in the conditioning leach circuit.
Limestone will be necessary as a neutralizing reactant for any excess SO2 (sulphuric
acid) produced from the acid plant that cannot be upgraded for sale.
Flocculant will be used as a settling aid in the fine copper and stabilized product
thickeners.
16.4.1

Process Water
Water used for processing purposes will be derived from several sources:

Water reclaimed from the TMF

Water from pit dewatering
Internal plant water recycled from the tailings thickener and the copper
concentrate thickener
Water from the waste rock seepage recovery system
Fresh water from Rio Caariaco for specific plant requirements.

Most process water will be used in grinding and flotation, with lesser amounts used for
washing, flushing, and general cleanup. Fresh water will be used where clean water is
required. Booster pumps will be added where higher pressures are required.

16.5

Process Control, Sampling, and Assay

Process control will be from a central control room where the operator can perform
remote start-up and shut-down. In addition, operators will carry portable computing
pads (with wireless links) to provide them with control information updates. A plantwide radio system will be used for communications.
Instrumentation and control equipment will be used and applied for measurement and
control of process variables such as pressure, level, flow, temperature, density, weight,
and speed. The degree of instrumentation will be sufficient for safe and efficient
control of the process by a minimum number of operators.
All instrumentation will be standard catalogue products from suppliers. Where
practical, identical components will be used to promote component interchangeability,
minimize spare parts, and simplify service and repairs.
Grinding and regrinding cyclone overflowsprimary cyclone overflow and cleaner
regrind mill dischargewill be continuously sampled for particle size analysis.

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An on-stream x-ray fluorescent analyzer (OSA) will provide continuous analyses of

solids content, copper, iron, arsenic, antimony, and sulphur content to enable
operators and supervisory control systems to optimize flotation and respond to upset
conditions.
A laboratory facility will be provided at the mine site for metallurgical, environmental
and analytical services. The facility will be housed in its own building, isolated from the
mill and will be able to conduct instrumental analysis for up 200 samples per day.

16.6

Concentrate Receiving and Loadout at Port Site

Copper concentrate from the process plant will be transported by truck to the Marine
Terminal Muchik (MTM) in northern Peru, a planned port development by Lumina
Copper (Lumina). CCC will construct and operate its own concentrate receiving,
storage, and reclaim facilities at the terminal and will share marine handling facilities
with Lumina. Annual throughput from Caariaco Norte is projected to average
approximately 400,000 tonnes.
Trucks arriving at the terminal will unload the concentrate product into a truck
unloading station consisting of a hopper feeding a conveyor system into the storage
building. All trucks will be weighed before and after unloading and will be washed on
arrival and before departure. Wash water will be collected and treated at the port
facility.

16.7

Proposed Tailings Management Facility

The TMF presented in this subsection was designed to manage tailings for mine
operations at a processing rate of 95,000 t/d for 19 years as per the preliminary mine
plan. Subsequent to completion of this facility design an updated mine plan was
developed that extended the mine life to 22 years.

16.7.1

Location
Two locations with suitable topography for the construction of an embankment and
sufficient volume for containment of the projected life-of-mine tailings were identified:
the Quebrada Yerma valley and the Ro Caariaco valley. A trade-off study was
undertaken to assess the availability of construction materials such as waste rock,
local borrow, and cyclone sand; to compare downstream and centreline embankment
construction methods for each option; and to evaluate alternative tailings depositions
technologies such as high-density thickening. Capital and LOM operating costs were
then compared and weighed against the potential socioeconomic impacts and physical

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footprint. The trade-off concluded that the Quebrada Yerma valley was the preferable
location for building either a cyclone sand or waste rock embankment with centreline
construction, or a waste rock embankment with downstream construction for the
deposition of thickened, sloped tailings.
16.7.2

Design Considerations
The design criteria utilized are commensurate with appropriate governance literature
and/or as appropriate, industry standards for this level of study. The design process
has observed all applicable regulations and statutes, and provisions were made to
satisfy the interpreted regulatory requirement where feasible.
The following design criteria were adopted for design of the tailings facilities:

The design incorporates sufficient freeboard to manage the projected tailings

volume and inflow design flood (IDF) at different stages of the mine life. For
Years 1 to 5 of the mine life, the IDF corresponds to the one-in-1,000 year, five-day
storm event. For Years 6 to 19, the IDF corresponds to the probable maximum
flood (PMF) 30-day storm event. The criteria for closure are less demanding than
for operations because an embankment spillway has been designed and will be
constructed to safely manage the PMF 24-hour event. In accordance with the
preceding IDF criteria, a minimum of 3 m freeboard will be provided and
maintained above the tailings and water level. This comprises 2 m for dynamic
settlement, static settlement, and wave run-up due to wind action, and 1 m of dry
freeboard as a contingency.

The tailings starter embankment will be constructed to provide storage for a

minimum of one year of tailings production as well as the design storm water and
freeboard requirements.

The impoundment will be operated to ensure that the tailings remain saturated so
as to inhibit oxidation.

A sulphide flotation circuit will be installed adjacent to the TMF to remove sulphide
minerals (primarily pyrite) from the tailings. The non-sulphide tailings will feed the
cyclone sand plant and will be non-acid generating (NAG). The coarse cyclone
underflow will be used to construct the tailings embankment. The fine sand
overflow stream will be deposited in the TMF.

The main components of the TMF are as follows:

Starter embankment.
TMF embankment
Seepage collection (SC) impoundment

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16.7.3

Construction diversion structures

Scorodite management facility.

Starter Embankment
The TMF starter embankment is an earthfill/rockfill embankment, with appropriate filter
and transition zones to contain the tailings solids, constructed using locally-borrowed
fill materials. The design includes start-up water being supplied from the freshwater
reservoir upstream of the waste rock management facility. The embankment will be
constructed with 2H:1V upstream and downstream slopes, with a 10 m wide crest. It
has been sized to store one year of tailings production from the process plant, as well
as appropriate design freeboard allowances, including inflow design flood storage,
dynamic and static settlements, wave run-up, and contingency freeboard. The
maximum height of the starter embankment will be 105 m (measured vertically at the
embankment centreline), with a total volume of 12.5 Mm3.
The starter embankment has been sized to store one year of tailings production from
the process plant as well as appropriate freeboard allowances for storage of the IDF,
dynamic and static settlements, wave run-up, and contingency. At present there is no
plan to store water in the TSF for use during start-up. The slope design required for
satisfactory stability will depend primarily on the ground conditions encountered under
the proposed embankment structure. This will be analyzed during the next stage of
study using limit-equilibrium models once data are available from the planned
geotechnical site investigations.

16.7.4

TMF Embankment
The TMF embankment will be raised in stages as a compacted cycloned sand shell
above the starter embankment using cycloned sands and centreline construction
methods. The cyclone sand plant (CSP) will initially be installed on the right abutment
of the TMF embankment at approximately elevation 2,820 masl to produce the
cycloned sand required for the downstream shell. As the embankment is raised, the
CSP will be moved to a platform at elevation 2,960 masl. This relocation concept will
be reassessed at the next stage of study, as there may be an opportunity to move the
sands to the embankment for construction by means of gravity flow.
Feed to the cyclone plant will be the tailings from a sulphide flotation circuit that will
remove the sulphide minerals. The sulphide flotation concentrate will have acidgenerating potential and will therefore be stored subaqueously within the tailings
impoundment. Subaqueous deposition limits oxygen contact with the sulphide
minerals, thereby substantially reducing the potential to produce acid.

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The TMF embankment has been designed with a final downstream slope of 2H:1V,
similar to other tailings embankments currently in operation or under construction. The
embankment will ultimately be 270 m high and require a total volume of 78 Mm3 of
cycloned sand. There is precedent for cyclone sand embankments of this height both
within Peru (currently in operation) and other countries. At Los Pelambres, both the
Quillayes and El Mauro tailings embankments are currently being constructed as
cycloned sand operations with proposed final heights of over 200 m.
The current design requires approximately 80% of the CSP coarse underflow tailings
to be available for placement on the embankment at all times during construction to
maintain adequate storage and freeboard. This aspect will be addressed during
subsequent stages of design when additional information becomes available on the
variability of tailings particle size distribution. In the event that the embankment raising
schedule cannot be fully met using cyclone underflow tailings, then a minor amount of
earthfill / rockfill material may be needed to augment the embankment fill.
16.7.5

Seepage Collection Impoundment

A seepage collection (SC) impoundment has been designed downstream of the main
TMF embankment. The SC embankment design is based on similar designs
previously permitted and constructed in Peru and includes a compacted
earthfill / rockfill embankment with filter / transition zones and a low-permeability,
bituminous geomembrane liner on the upstream face.
Trade-off studies should be undertaken to determine the most appropriate design
considering the availability of local borrow materials and costs for supplying and
installing synthetic and/or imported materials. Slope stability design for the SC
embankment will also depend primarily on foundation conditions, for which data will be
available after the planned site investigation program has been completed.

16.7.6

Construction Diversion Structures

The SC impoundment has been specifically designed to retain cyclone sand drainage,
embankment seepage, and runoff from the embankment and contributing catchment.
The SC impoundment is sized to contain the accumulated precipitation from the 1:25year wet year. In addition, the SC embankment design includes an emergency
spillway sized to manage the peak flow during a PMF event. The embankment will
reach a maximum height of 50 m (measured vertically at the embankment centreline),
creating 1.25 Mm3 of storage volume.

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It is anticipated that the SC impoundment will collect water during the operational life of
the TMF. During post-closure, the SC embankment could serve as a reservoir for
ongoing treatment before release to the downstream environment, depending on the
water quality at that time.
16.7.7

Scorodite Management Facility

Mineral processing over the operating life of the mine will result in the production of
approximately 30,000 m3 of scoroditethe stable ferric arsenate byproduct from the
partial roast process incorporated in the process flowsheet to manage arsenic levels in
the concentrate. Scorodite represents approximately 0.011% of the total waste
material to be stored in the TMF. It is currently planned to provide a separate lined
containment facility for this byproduct. The facility will be capped at closure.

16.7.8

Closure
The design objective for the TMF is to keep the PAG tailings saturated at all times
within the impoundment. To achieve this, the PAG tailings will be deposited
subaqueously, encapsulated with NAG sands, and be flooded with a minimum 2 m of
water cover. Based on the current water balance, the median depth of water cover in
the embankment will be 8 m. It is recommended that the water quality and excess
water discharge schedule be re-evaluated in the next phase of work to reduce the
water cover at closure while determining if there is potential to discharge water and
what treatment technology, if any, may be required.

16.8

Comment on Section 16
In the opinion of the QPs, the metallurgical test work conducted to date supports the
declaration of Mineral Resources based on the following:

The metallurgical testwork completed on the Project has been appropriate to

establish a process route that is applicable to the mineralization types.

Tests were performed on samples that were representative of the mineralization

for the purposes of establishing an optimal conceptual process flowsheet.

The process route proposed uses conventional technology

Recovery factors from the tests are appropriate to the mineralization types and
selected process route based on the available testwork data. If put into operation,
the plant will see recovery factors will vary on a day to day basis depending on
grade and mineralization type.

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Recoveries used to support Mineral Resource estimation were variable for copper,
based on the copper grade, ranging from 58.8% at 0.1% Cu to 93.1% at 0.6% Cu,
55% for gold and 50% for silver.

Copper recoveries within the process plant are expected to vary with feed grade
ranging from 93.1% at 0.6% Cu and 58.8% at 0.1% Cu. The metallurgical
response of gold and silver has not been assessed to the same degree as copper;
however, based on the testwork completed to date, gold and silver recoveries are
projected to be 55% and 50% respectively.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

17.0

MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

Mineral Resource estimates were prepared by AMEC employees David G. Thomas,
P.Geo., Senior Resource Geologist, and Rodrigo Alves Marinho, (C.P.G., AIPG),
Principal Geologist.

17.1

Database
The 2010 AMEC mineral resource estimate uses 15 additional core drill holes that
were not considered in the November 2008 estimate because analytical results were
not available to SRK at the previous estimate cut-off date. The estimation database
comprises 225 core holes (67,485.06 m of core, of which 66,584.29 m have assay
intervals) from the Ingemmet, Placer, Surcusal Peruana, and CCC drill programs. The
drill database was provided by CCC as MS Excel spreadsheets. The database cutoff date is 8 November, 2010.
AMEC imported the collar, survey, lithology, alteration, and assay data into GEMS
(version 6.2.4), a commercial mining software program. GEMS validation routines
were used to check for overlapping intervals, missing intervals, and consistent drill
hole lengths between tables, and no errors were reported.

17.2

Topography
Topographic contour limits were based on a photogrammetric interpretation
undertaken on aerial photograph coverage provided by Horizons South America
S.A.C. Aerial Mapping Services, which was accurate to 1 m (x, y, z). Errors noted in
the digital terrain model (DTM) by Bonson et al., (2008) were surveyed using a Sokkia
total station instrument. These points were used in conjunction with the original
topographic data to minimize the differences found. Although AMEC did not find a
constant elevation difference between the surveyed collars and the DTM, AMEC is of
the opinion that further investigation is required for the next level of study since more
precision will be required for earth-movement estimates.

17.3

Models
CCC provided interpretations of lithological units on northsouth and eastwest
vertical sections that were spaced 100 m apart. As the lateral extent of the lithological
interpretations in some areas of the deposit are not fully defined by drill data, AMEC
expanded the interpretation beyond the limits of the available drill hole information to
cover the block model extents. Although AMEC considers such extrapolation to be

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reasonable, AMEC recommends that additional drilling be performed to increase the

level of confidence of the lithological interpretation in these areas.
Drilling completed post-2008 was added to the existing interpretations. AMEC created
bench polygons and extruded the bench plan polygons to the mid-point distance to the
adjacent polygons to create lithological solids.
Eastwest oriented, 100 m spaced vertical sections for alteration types and intensities
were prepared by CCC. These were simplified by AMEC, and the resulting vertical
polygons extended beyond the limits of the available drill hole information to cover the
block model extents. AMEC recommends a full review of the alteration interpretation
be completed on vertical sections reconciled to bench plans. This work should be
completed for the next level of study.
Estimation domains were defined following evaluation of statistical distributions of
lithological and alteration units. AMEC created a total of seven domains for copper
and four domains for gold and silver (Table 17-1; refer to Table 7-1 for a description of
the lithological unit codes). These domains were tagged to blocks and back-tagged to
composites and were used as the basis for matching samples and blocks during the
estimation process. For the definition of arsenic domains, AMEC used a probabilistic
approach considering an arsenic cut-off grade of 250 ppm as the threshold for lowand high-grade populations.
AMEC defined a supergene-enriched domain that was considered only for the
estimate of copper grades. The supergene layer in the Caariaco Norte deposit is thin
and laterally discontinuous.
Copper mineralization at Caariaco Norte is related to porphyry intrusions, breccias
and potassic, phyllic, argillic and advanced argillic alteration; however, the limits of
mineralization are not well known in the deposit. AMEC recommends building a
mineral zonation model for the next phase of study. A combination of lithology,
alteration and mineral zones should provide a more robust support for the mineralized
envelope and the definition of grade estimation domains.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 17-1:
Element
Copper

Estimation Domains
Domain Code
10

Gold and
Silver

17.4

Lithological Units
VC, CQFP

Alteration Units
Weak argillic

20

VC, CQFP

All but weak argillic

30

BFP, IBXP

Weak argillic

40

BFP, IBXP

All but weak argillic

50

CQP, IBXH, TBX

Weak argillic

60

CQP, IBXH, TBX

All but weak argillic

70

FP

Weak argillic, propylitic, intermediate argillic, phyllic

10

VC, CQFP, CQP, FP

All but advanced argillic

20

VC, CQFP, CQP, FP

Advanced argillic

30

BFP, IBXH, TBX, IBXP

All but advanced argillic

40

BFP, IBXH, TBX, IBXP

Advanced argillic

Composites
Although the nominal sample length for assays is 2 m, sample lengths in the
Caariaco Norte assay database range from 0.45 m to 100.3 m; such long intervals
correspond to non-mineralized zones or to intervals of non-sampling. In order to
normalize the weight of influence of each sample, AMEC regularized the assay
intervals by compositing the drill hole data into 6 m lengths using no geological or
domain boundaries. AMEC then back-tagged the 6 m composites using the
lithological and alteration solid shapes and assigned estimation domain codes.

17.5

Exploratory Data Analysis

Exploratory data analysis comprised basic statistical evaluation of the 6 m composites
for copper, gold, silver and arsenic.
Box plots indicated that copper displayed similar grade distributions in those domains
that had no weak argillic alteration. The biotite feldspar porphyry and polylithic
igneous breccia units (BFP and IBXp) are preferentially mineralized, and have higher
average grades for all metals. CVs for copper are low, around and below 1, in all
domains but domain 10, which consists of volcanic rocks and the crowded quartz
porphyry, where the coefficient of variation (CV) is 1.5 for uncapped copper composite
values.
Average gold grades are very low in all domains, but box plots indicate that the
combination of biotite feldspar porphyry (BFP) and the different types of breccia (IBxP,
TBx, and IBxH) host most of the higher-grade gold mineralization where such
mineralization is associated with any alteration type other than advanced argillic. All

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

domains have low CV values for gold, and this confirms the low variability of the gold
grades.
AMEC used the same domains for silver as defined for gold due to their good
correlation. Silver displays similar average grades and grade ranges to gold. A higher
spread of grade ranges was observed in domain 10.
High-grade arsenic values are concentrated in the northwest and south-centre parts of
the deposit and AMEC could not clearly define domains based on lithology, alteration
or a combination of both. From the analysis of cumulative distribution plots, AMEC
defined a threshold of 250 ppm As for low- and high-grade arsenic populations. By
splitting the data, AMEC reduced the global CV from 1.7 to 0.7 and 1.1 for low- and
high-grade samples, respectively. AMEC recommends that, once a mineralogical
model has been constructed, the arsenic distribution be evaluated using the resulting
interpreted units.
Contact analyses were completed for copper and gold composite values and AMEC
defined soft, firm and hard boundaries from this analysis. To represent the firm
contacts, AMEC shared samples only during the first estimation pass.

17.6

Variography
AMEC used Sage2001 software to construct down-hole and directional correlograms
for the estimation domains for copper, gold, silver and arsenic. For arsenic, AMEC
also created correlograms for the 250 ppm As indicator threshold and subsequent
grade correlograms for low- and high-grade domains. Domains that displayed soft
boundaries were grouped.
For copper and gold, AMEC used spherical models to fit the experimental
correlograms. For silver a combination of exponential and spherical models was used,
depending on domain.

17.7

Grade Capping
AMEC evaluated probability plots by estimation domains to define grade outliers for
copper, gold, silver and. Outlier values typically occur in the upper 1% of the
distribution. Copper and gold values were capped at the thresholds defined. For
silver, outlier values were controlled by using a restricted search ellipse, with a radius
of 25 m x 25 m x 15 m, during grade estimation. AMEC did not restrict extremely high
arsenic values. The grade thresholds for the different element outliers are shown in
Table 17-2.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 17-2:

Outlier Thresholds for Copper, Gold and Silver

Element
Copper (%)

Gold (ppb)

Silver (ppm)

17.8

Domain Code
10
20
30
40
50
60
70
10
20
30
40
10
20
30
40

Threshold
1.10
2.00
2.50
2.50
1.10
1.20
1.10
130
530
12
12
17
17

Estimation Methodology
The block model consists of regular blocks (15 m x 15 m x 15 m) and no rotation is
used. The block size was chosen such that geological contacts are reasonably well
reflected and to support an open pit mining scenario.
AMEC estimated copper, gold, silver, and arsenic grades by estimation domains using
ordinary kriging (OK) interpolation for the majority of domains. Inverse distance
weighting to the second power (ID2) was used to interpolate Au and Ag in domains 20
and 40 where variography was not considered sufficiently robust.
The process included:

Grade estimation was completed in three passes

Sample sharing was based upon the matrix determined from contact profiles
Search orientations for all domains were based upon variogram orientations.
A minimum of 311 and a maximum of 915 drill hole composites were required
for estimation; this varied by element and estimation pass.

The estimate of arsenic grades was divided into low- and high-grade populations and
the final grade calculated by weighting grades by the respective probability.

17.9

Density
AMEC assigned density values to blocks based upon the lithological codes. In
AMECs opinion, these density values are reasonable for use in mineral resource
estimation at this preliminary level of study, but recommends executing a continuous

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

program of bulk density determinations from core samples, using preferably the same
laboratory and determination procedures.

17.10

Model Validation
AMEC validated the Caariaco Norte block model to ensure appropriate honouring of
the input data. A nearest neighbour (NN) model was created to validate the OK
model. The validation comprised:

17.11

Detailed visual inspection of block grade versus composited data in section and
plan view. The visual inspection of block grade versus composited data showed a
good reproduction of the data by the model.

A comparison between the OK and NN estimates was completed to check for

global bias in the copper, gold, silver and arsenic grade estimates. Differences
were within acceptable levels and no global biases were noted in the estimates.

Swath plot validation compared average grades from OK and NN models along
different directions. Except in areas where there is currently limited drilling, the
swath plots indicated good agreement for all variables.

The degree of smoothing due to kriging was assessed by considering change of

support correction using Hermetian polynomials. AMEC considered blocks from all
copper domains and the results show a smoothing of 4% in copper grades but 7%
more tonnes above the 0.2% Cu cut-off, resulting in a difference of only 1% in
contained metal. The kriging smoothing is within acceptable ranges.

Mineral Resource Classification

AMEC used the following criteria to pre-classify blocks into categories as:

Measured mineral resources: composites from a minimum of three drill holes

within 75 m radius from a block centroid, or samples from two drill holes with the
closest sample within 25 m of the block centroid.

Indicated mineral resources: composites from a minimum of two drill holes within
110 m distance of the block centroid.

Blocks that were not classified as Measured or Indicated categories, but had a
composite within 135 m from the block centroid were classified as Inferred. Remaining
blocks were not classified. AMEC used a semi-automated process to smooth the
initial classification and avoid islands or isolated blocks of different categories.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

17.12

Assessment of Reasonable Prospects of Economic Extraction

AMEC assessed the classified blocks for reasonable prospects of economic extraction
by applying preliminary economics for potential open pit mining methods. The
assessment does not represent an economic analysis of the deposit, but was used to
determine reasonable assumptions for the purpose of determining the mineral
resource. Mining and process costs, as well as process recoveries were defined from
on-going AMEC studies for the Project.
A large bulk mining open pit operation is envisioned for Caariaco Norte, featuring
large rope shovels working on 15 m benches. A single pit with internal phases is
projected to provide mill feed at a rate of 95,000 t/d.
AMEC defined a pit shell, optimized using Whittle (version 4.3) software, based on
the parameters listed in Table 17-3. The metal prices used by AMEC represent longterm estimates for mineral resources. The metallurgical recovery for copper is variable
depending on the grade range and is shown in Table 17-4.
AMEC defined a marginal cut-off of 0.14% Cu (see details in Table 17-5). AMEC
selected a base case 0.2% Cu cut-off for mineral resource reporting based upon the
operating cut-offs of other comparable copper mines in South America.

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 17-3:

Optimization Parameters for Resource Pit Shell

Mining Costs

Unit

Value

Waste Mining Reference Cost

Mining Sustaining Capex Allowance

US$/t mined
US$/t mined

1.11
0.16

Total Reference Mining Costs

Process +Tailings + G&A Cost
Mill Sustaining Capex Allowance

US$/t mined
US$/t milled
US$/t milled

Closure Costs Allocation

Total Ore Based Costs

US$/t milled
US$/t milled

1.27
3.32
0.28
0.10

Cu Price
Au Price
Ag Price
Selling Cost
Cu Recovery
Au Recovery
Ag Recovery
Overall Pit Slope(s)

US$/lb
US$/oz
US$/oz
US$/lb
%
%
%
Degree

3.70
2.50
1,035.00
17.25
0.40
variable by grade, refer to Table 17-3
55
50
38

Note: There is an incremental mining cost which increases with height and depth ($0.015 per 15 m bench above 2,800
m, $0.03 per 15 m bench below 2,800 m). No dilution or mining loss adjustments were applied. The overall pit
slope assumption is based on limited geotechnical data and will likely change when results from the planned
geotechnical drilling become available.

Table 17-4:

Copper Process Recoveries

% Cu Head Grade

Recovery

0.60
0.50
0.40
0.30
0.20
0.15
0.10

93.1%
91.8%
89.7%
86.3%
79.4%
72.5%
58.8%

Table 17-5:

Marginal Cut-Off Calculation

Parameters

Value

Processing Cost (US$/t)

Recovery (%)
Price (US$/lb)
Selling Cost (US$/lb)

3.70
58.8
2.5
0.40

Cut-Off Cu (%)

0.14

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

17.13

Mineral Resource Statement

Mineral Resources for the Project were classified under the 2005 CIM Definition
Standards for Mineral Resources and Mineral Reserves by application of a cut-off
grade that incorporated process-based operating costs and recovery parameters, and
constraint of the Mineral Resources to a pit shell based on commodity prices, recovery
parameters and operating costs.
Mineral resources are tabulated in Table 17-6. The Qualified Person for the Mineral
Resource estimate is David Thomas, P.Geo. Mineral resources are reported at a cutoff grade based on the assumption of long-term metal prices as follows: copper price
of US$2.50 per pound, a gold price of US$1,035 per ounce and a silver price of
US$17.25 per ounce, and have an effective date of 8 November 2010. Mineral
resources that are not mineral reserves do not have demonstrated economic viability.
The numbers reported in Table 17-6 differ from the CCC press release of 1 November
2010 because of the inclusion of additional Ag and As assay results from ICP tests in
the estimate for some holes drilled during the 2008 campaign that did not have the
final assay results for the full suite of elements at the time of the press release.
Differences exist in the contained metal tonnages between this table and the press
release, although the tonnes and grades are the same; these differences are not
material.
The sensitivity of the mineral resource to a reduction or increase in copper cut-off
grades is included as Table 17-7, with the base case highlighted.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 17-6:

Mineral Resource Statement for Caariaco Norte at a 0.2% Cu Cut-off Grade

(David Thomas P. Geo., Effective Date 8 November 2010)

Category
Measured
Indicated
Measured + Indicated
Inferred

Table 17-7:

Tonnage
Mt
406.6
596.5
1,003.0
293.3

Cu
%
0.44
0.38
0.40
0.33

Grade
Au
g/t
0.07
0.06
0.06
0.05

Ag
g/t
1.9
1.6
1.7
1.5

Copper
(Blb)
3.977
4.964
8.941
2.165

Contained Metal
Gold
Silver
(Moz)
(Moz)
0.958
24.656
1.081
30.403
2.039
55.059
0.448
13.547

Mineral Resource Statement for Caariaco Norte Showing Sensitivity to

Various Cut-offs (David Thomas P. Geo., Effective Date 8 November 2010).

Cut-Off
Cu (%)

Tonnage
Mt

Cu
%

Grade
Au
g/t

Ag
g/t

Copper
(Blb)

Contained Metal
Gold
Silver
(Moz)
(Moz)

Measured
0.14
0.2
0.3

425.6
406.6
338.1

0.43
0.44
0.48

0.07
0.07
0.08

1.9
1.9
2.0

4.049
3.977
3.588

0.986
0.958
0.853

25.467
24.656
21.399

Indicated
0.14
0.2
0.3

680.7
596.5
414.3

0.35
0.38
0.43

0.05
0.06
0.06

1.5
1.6
1.7

5.283
4.964
3.945

1.166
1.081
0.843

33.124
30.403
23.135

1,106.2
1,003.0
752.4

0.38
0.40
0.45

0.06
0.06
0.07

1.6
1.7
1.8

9.332
8.941
7.533

2.152
2.039
1.696

58.592
55.059
44.534

419.4
293.3
157.7

0.28
0.33
0.41

0.04
0.05
0.06

1.3
1.5
1.7

2.634
2.165
1.433

0.561
0.448
0.281

17.002
13.547
8.539

Measured + Indicated
0.14
0.2
0.3
Inferred
0.14
0.2
0.3

Notes to accompany Mineral Resource and Sensitivity Tables:

1. Mineral resources that are not mineral reserves do not have demonstrated economic viability
2. Mineral Resources base case is reported at a 0.2% Cu cut-off grade
3. Mineral Resources are reported as undiluted.
4. A LerchsGrossmann pit shell was used to constrain the Mineral Resources to assess reasonable prospects
of eventual economic extraction
5. Mineral Resources are reported using assumed long-term prices as follows: copper price of US$2.50/lb,
gold price of US$1,035/oz and silver price of US$17.25/oz
6. Rounding as required by reporting guidelines may result in apparent summation differences between
tonnes, grade and contained metal content
7. Tonnage and grade measurements are in metric units. Contained gold ounces are reported as troy ounces,
contained copper pounds as imperial pounds

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Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

17.14

Comment on Section 17
The QPs are of the opinion that the Mineral Resources for the Project, which have
been estimated using core drill data, have been performed to industry best practices,
and conform to the requirements of CIM Definition Standards (2005).
Areas of uncertainty that may materially impact the Mineral Resource estimates
include:

Long-term commodity price assumptions

Long-term exchange rate assumptions
Operating and capital assumptions used
Metal recovery assumptions used
Any changes to the slope angle of the pit wall as a result of more detailed
geotechnical information would affect the pit shell used to constrain the mineral
resources.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

18.0

ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORT ON

DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES
As the Project is not at a development stage, this section is not relevant to the Report.

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19.0

OTHER RELEVANT DATA AND INFORMATION

This section reports the results of an updated Preliminary Assessment on the Project,
which is based on a Project report completed in mid-January 2011. AMEC cautions
that the Preliminary Assessment is preliminary in nature and that there is no certainty
that the Preliminary Assessment will be realized. The Preliminary Assessment is
based upon Measured and Indicated mineral resources; mineral resources that are not
mineral reserves do not have demonstrated economic viability.
Work performed and reported in this subsection was based on a pre-feasibility study
commissioned by CCC, and is based on interim information from that study. Additional
geotechnical drilling and rock quality assessment is required to complete the open pit
slope design to a level consistent with generally accepted pre-feasibility requirements.
The above ground structures in the tailings management facility were designed to a
pre-feasibility level; however, geotechnical investigations in the TMF area have not
been completed and as a result there is a risk that the TMF design may require
revision. As a result, the information from the interim study findings are presented as a
Preliminary Assessment. Results of this Preliminary Assessment supercede earlier
economic evaluations reported for the Project.

19.1

Proposed Mining Operation

A single pit with internal phases is proposed to provide process feed at a rate of
95,000 t/d. The proposed mine plan is based on diluted Measured and Indicated
mineral resources contained in a Lerchs-Grossmann (LG) optimized pit shell
generated at metal prices of $2.25/lb Cu, $930/oz Au, and $15/oz Ag.

19.1.1

Dilution
Revenue is generated from the sale of copper concentrates, which contain payable coproducts of gold and silver. Copper metal recoveries are variable with head grade. To
capture the multi-element and variable recovery complexity, net smelter return (NSR)
values were calculated for cut-off application and block valuation during pit
optimization.
Mineralization loss and dilution adjustments were performed by applying a mixing
zone across economic boundaries. No additional mineralization loss was applied.
The NSR calculations and dilution/mining loss adjustments were performed using
custom scripts in MineSight.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

This procedure used three scripts to:

Calculate the NSR from the pre-diluted grades

Adjust the dilution/mining losses across economic boundaries defined by the

marginal NSR cut-off, with Inferred material being treated as waste. A second set
of block model grade items (CuDil, AuDil, AgDil, AsDil) was populated.

Calculate the diluted NSR (NSRD) from the diluted grades.

The NSRD was then used for pit optimization and cut-off application for mine planning.
19.1.2

Pit Geotechnical Design Recommendations

The open pit mine design relating to the angle of the pit wall slopes has been
developed based on geotechnical logging of drill core plus rock quality evaluation and
compressive strength testing of a limited number of core samples. The amount of
geotechnical data available is not sufficient, however, to support development of a prefeasibility level design for the pit wall slopes. As a result, the mine plan developed for
this report must be considered to be at a preliminary level.
A site investigation program has been proposed to support geotechnical pit design at a
pre-feasibility level. The data from the site investigation are considered to be key in
understanding the joint patterns and geotechnical complexities associated with the
highwall (approximately 925 m high) and the sensitivity of the highwall slope to pit
depressurization and rock mass strength.
A preliminary geotechnical analysis was performed to provide credible slope angles to
be used to develop preliminary LG pit shapes. The geotechnical analysis considered
three design sectors (Table 19-1).
For the purposes of pit optimization, sectors 1 and 2 (Figure 19-1) were combined and
flattened to account for ramp and geotechnical berm locations, resulting in overall
slopes of 35 and 44 for Sectors 1 + 2 and 3, respectively.

19.1.3

Pit Hydrogeology
Packer test data indicate that permeable features such as faults or fracture zones are
present at depth. Pit dewatering will therefore be undertaken by a combination of
vertical dewatering wells, specifically constructed in these permeable features, and
horizontal drains in areas where the hydraulic conductivities are lower than
approximately 1 x 10-7 m/s.

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Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-1:
Design
Sector

Design Sector Slope Recommendations

Inter-ramp
Angle
(degrees)

Geotechnical Berm
Width
(m)

Vertical Interval
(m)

Overall Slope
Max Slope Angle
(degrees)

Max Slope Height

(m)

38

50

250

35

925

38

50

250

35

925

48

50

250

45

500

Figure 19-1: Pit Design Sectors

To determine potential dewatering requirements, the bedrock was divided into three
regimes. The upper regime, generally less than 100 m deep, could be dewatered with
vertical wells if the hydraulic conductivities were high enough; this should be confirmed
moving into the next phase of the study. The intermediate regime, at 100 m to 300 m
depth, is generally of low permeability and will be depressurized with horizontal drains.
In this case there is evidence that higher-permeability structures are present down to
300 m, indicating that vertical wells may be required in these areas at depth within the
pit. The deeper regime, below 300 m, will be depressurized by horizontal drains.
The model and water balance will be refined on receipt of additional hydrogeologic
information from planned drilling, and the inflow predictions will be re-assessed during
the next phase of study.

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NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.1.4

Pit Optimization
The reference mining cost developed for the pit shell generation is US$1.27/t total for
waste and mineralized material mined. Costs were based on a first-principles cost
estimate from a previous preliminary mine plan. Incremental haulage costs were
based on the increased distance from the pit rim (estimated at level 2,800 m) and are
as follows:

For every bench 15 m above the pit rim, an increase in haulage costs of
US$0.015/t
For every bench 15 m below the pit rim, an increase in haulage costs of
US$0.030/t.

Applying this reference mining cost and the elevation-based cost adjustment factors to
the preliminary mine plan results in an average mining cost of $1.42/t mined.
A combined mineralization-based cost of US$3.57/t milled was used for pit
optimization. Because the mineralization-waste delineation was performed using an
NSR block value, the combined mill feed-based cost of US$3.57/t milled represents
the marginal breakeven cut-off grade. Only Measured and Indicated materials were
processed. Inferred material was treated as waste.
Sensitivity optimization runs were performed to determine the impact of changes to pit
slopes and operating costs. The results show that the LG pit shells are more sensitive
to a pit slope reduction of 2 than an increase of 2. The LG pit shells are more
sensitive to a 10% increase in operating cost than a 10% decrease.
19.1.5

Mine Production Schedule

A mine plan was generated using LG pit shells adjusted by minimum mining width.
The next iteration of mine planning will require pit phase designs, considering
pioneering access to upper benches, internal ramp access, minimum mining widths,
and depressurizing and dewatering requirements.
The input parameters utilized for the mine plan development included a target mine life
between 18 and 22 years, a life-of-mine (LOM) head grade of no less than 0.40% Cu,
and a strip ratio of less than 1:1. To meet these criteria, a series of constant LOM
elevated cut-offs were tested on the collection of nested pit shells.
Internal to the selected ultimate LG pit shell, three intermediate phase mining shapes
were established. Shells 3, 9, and 15 were selected for phase development based on
their ability to maximize grade and reduce pre-stripping requirements early in the LOM,

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

while keeping the process plant at full production capacity in high-level Whittle
schedules. These shells were adjusted for a minimum mining width of 60 m (2 x the
30 m re-blocked block dimension). Because the starter pit had a relatively low
east-side wall, which was predominantly in relatively competent rock, it was regenerated using a 40 overall slope in the upper wall of sectors 1 and 2.
During the next iteration of mine planning, AMEC recommends that cut-off optimization
be performed in conjunction with the use of a more-detailed shell selection
methodology.
The selected mine plan resulted in a total of 728.2 Mt of mill feed and 713.5 Mt of
waste (0.98:1 strip ratio) over a 22-year mine operating life. The LOM plan focuses on
achieving the required mill feed production rate, mining higher-grade material early in
the schedule, and balancing strip ratios. The mine was divided into four phases
(Figure 19-2) with the intent of maximizing grade in the early years, reducing prestripping requirements in the early years, and maintaining process plant production at
95,000 t/d (except in Year 1, when the plant is expected to achieve 80% of its capacity.
Figure 19-2: Proposed Pit Phases (figure looks northeast)

The projected LOM production schedule is included as Table 19-2. Figure 19-3 and
Figure 19-4 show the projected material movement by year and the annual projections
for mill feed, respectively.
Preproduction stripping was scheduled within Year -1, with Year 1 representing the
commencement of processing at a throughput projection at 80% of maximum, allowing
for plant ramp-up after commissioning. Approximately 8 km of pit access construction
will be required during Year -2 and another 4 km in Year -1.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-2:

Year

Ore Mined
(Mt)

LOM Production Schedule

Plant Feed
Mt)

Waste
Mined
(Mt)

Total Mat
(Mt)

Strip
Ratio

NSR
($/t)

Copper
(%)

Gold
(g/t)

Silver
(g/t)

Arsenic
(g/t)

-1

1.3

46.2

47.5

35.65

26.4

27.7

45.3

71.7

1.71

17.6

0.46

0.08

2.46

468

34.7

34.7

40.3

75.0

1.16

19.3

0.50

0.09

2.14

305

34.7

34.7

40.3

75.0

1.16

17.2

0.45

0.08

1.83

261

34.7

34.7

38.7

73.4

1.12

14.9

0.39

0.06

1.95

354

34.7

34.7

38.3

73.0

1.11

17.3

0.45

0.08

2.03

278

34.7

34.7

38.3

73.0

1.11

16.4

0.43

0.08

1.96

231

34.7

34.7

38.3

73.0

1.11

16.4

0.43

0.08

1.82

184

1.11

15.9

0.41

0.08

1.67

156

1.11

14.2

0.37

0.07

1.52

163

1.11

11.6

0.32

0.05

1.32

208

1.11

11.2

0.31

0.04

1.38

307

1.11

13.4

0.36

0.05

1.60

302

1.11

14.9

0.39

0.06

1.70

263

1.11

15.8

0.42

0.07

1.72

194

1.08

16.1

0.42

0.07

1.76

200

0.85

15.5

0.41

0.07

1.63

153

0.75

12.0

0.33

0.05

1.27

168

0.39

11.0

0.30

0.04

1.30

264

0.20

13.2

0.36

0.05

1.50

241

0.12

16.5

0.43

0.07

1.76

279

0.05

17.5

0.46

0.07

1.76

174

0.06
0.98

18.7

0.49

0.07

1.99

236

15.1

0.40

0.07

1.71

243

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Total

34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
7.0
728.2

Project No.: 165270

March 2011

34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
34.7
7.0
728.2

38.3
38.3
38.3
38.3
38.3
38.3
38.3
37.5
29.3
25.9
13.5
6.8
4.3
1.7
0.4
713.5

73.0
73.0
73.0
73.0
73.0
73.0
73.0
72.2
64.0
60.6
48.1
41.4
38.9
36.4
7.4
1,441.7

Page 19-6

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 19-3: Material Movement by Period

Figure 19-4: Mill Feed Characteristics by Year

Notes: Although the term ore is used in these figures, no mineral reserves have been declared for the Project. The
term is used to denote the mineralized material expected as mill feed and material moved.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

The mining schedule attempts to reflect the challenges of developing multiple phases
in steep terrain. The average mining rate is approximately 185 kt/d with a peak of
205.4 kt/d in Years 2 and 3. Material re-handle required during access and mining of
the upper benches was not included in the estimate for this level of study.
The mine plan and equipment productivities assume that a small, short-term stockpile
will be provided near the primary ore crusher to act as a buffer between the mine and
mill; however, no blending of stockpiled material has been included in this schedule.
Detailed pit phase and access design will be required during the next phase of mine
planning. Mine scheduling will need to consider the time required to develop access to
the upper parts of the phases and the requirements to bridge drainages.

19.2

Waste Rock Management Facility

A single elongated waste rock management facility (WRMF) will be developed
adjacent to the pit (Figure 19-5). Bottom-up methods will be used for construction.
Preliminary waste rock characterization suggests that potentially acid generating
(PAG) rock will be present, and so encapsulation storage methods may be required.
More rock geochemistry information is required to develop a waste rock
characterization block model and plan for handling these materials. This work is
recommended for the next phase of study.
Figure 19-5: Proposed Layout, WRF

Project No.: 165270

March 2011

Page 19-8

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.3

Proposed Equipment
Large-scale mining equipment was selected for the conventional bulk open pit mining
approach and to meet the required ore and waste mining rates. Mining will be
performed on 15 m benches, with production drilling performed by electric 311 mm
diameter blast hole drills. Rope shovels of 43 m3 bucket size were selected for loading
activities, as they were a good match to the material movement requirements and the
15 m mining bench. A 40 m3 front-end loader (FEL) will assist with production and rehandle from the short-term stockpile and will act as a backup to the rope shovels.
Haul trucks of 290 t capacity were selected in an effort to minimize the fleet size and
match the loading unit and material movement requirements.
A fleet of suitably-sized support and ancillary equipment has been specified. Mine
support activities include access road construction, pit cleanup, in-pit ramp
maintenance, haul road maintenance, dozing, road grading, haul road dust control,
and water diversion and management.
Primary equipment requirements were calculated from engineering estimates of
productivities, activities, and quantities of material moved. Haul profiles from a
previous preliminary plan were used to estimate truck requirements. Support and
ancillary equipment unit requirements were determined by estimates of activities.
Equipment requirements are as summarized in Table 19-3.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-3:

Mine Equipment Requirements

Equipment Type

No. of Units

Primary Equipment
P&H 4100C Shovel
L2350 Front-end Loader
930E Haul Truck
Sandvik 1190E Drill
Sandvik DP1500 Drill

2
1
21
3
2

Subtotal Primary Equipment

29

Support Equipment
Cat D11R Track Dozer
Cat D10T Track Dozer
Cat 24M Motor Grader
Cat 16M Motor Grader
Cat RTD834 Rubber-tired Dozer
Cat 785C Water Truck
Cat 365DL Track Excavator
Cat 330DL Track Excavator
HM400 Articulated Truck

2
3
1
2
2
2
1
1
3

Subtotal Support Equipment

17

Ancillary Equipment
General Service Truck
Hiab 105 Crane Truck (10 t)
Mine Rescue Ambulance
Komatsu WA320 Wheel Loader w/ Tire Handler
Adanac Fuel Lube Truck
Cat P36000 Forklift
Personnel Bus
Pickup Truck
Lighting Plant 20 kW
Lowbed Tractor Trailer
Cat 988 MCS Cable Reeler
Liebherr LTM 55 Mobile Crane
Flygt Pump 104 kW
Flygt Pump 65 kW
McElroy Pipe Fuser
Mobile Jaw Crusher

2
1
1
2
3
1
2
16
8
1
1
1
1
2
2
1

Subtotal Ancillary Equipment

45

Total

91

Project No.: 165270

March 2011

Page 19-10

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.4

Proposed Water Management

The surface water management plan for the Caariaco Norte project will preserve to
the maximum extent possible the non contact status of surface waters. Waters that
come into contact with Project facilities will be contained and treated if necessary so
that any water released to the environment always meets the applicable water quality
regulatory guidelines.
A system of impoundments, embankments, diversions, and spillways will be developed
immediately before construction commences to handle runoff from construction-related
activities (Figure 19-6).
This system will continue to be developed through
construction and operations to ensure that water discharged to the environment meets
the rebulatory guidelines.
The Project will affect two main catchment areas: the upper reaches of both the
Caariaco valley and the Quebrada Yerma valley. Water will be impounded upstream
of the WRMF to supply the freshwater makeup requirements of the process plant. A
diversion channel will be constructed to direct excess water from Ro Caariaco
around the WRMF. Contact water from the facilities in the area of the pit, process
plant, and WRMF will be collected immediately downstream of the WRMF and be used
as mill makeup water; the excess will be discharged to Ro Caariaco via water
treatment facilities. Because most of this water is consumed by the mill, the site water
balance indicates that such discharges are only expected toward the end of the mine
life.
Precipitation on the TMF and runoff draining into the TMF will be impounded to ensure
a minimum water cover is maintained over the tailings. Excess water will be directed
to the process plant as makeup water. At closure, a TMF spillway will be constructed
on the east saddle embankment to route storm water flows to the Quebrada Yerma.
The TMF spillway will be designed for the PMF. The site-wide water balance
estimates that a water release from the TMF would not be required until the end of the
mine life.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Figure 19-6: Layout Plan, Proposed Water Management Structures

Project No.: 165270

March 2011

Page 19-12

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.5

Capital Costs
Capital costs were based on a combination of budget pricing from local suppliers
contacted specifically for this Project and relevant in-house data from AMEC and
Ausenco. Labour rates were calculated using typical Peruvian wages and benefits
based on recent cost surveys. These were blended with expatriate support labour to
achieve appropriate crew mixes.
The estimate was developed in accordance with pre-feasibility study criteria,
philosophy, and preliminary project design. All costs are expressed in 3rd quarter (Q3)
2010 U.S. dollars. No allowance has been included for escalation, interest or financing
fees, taxes or duties, or working capital during construction. The level of accuracy for
the estimate is 20% of estimated final costs, as per AACE Class 4 definition.
Capital cost estimates are as follows:

Mine capital costs include the mine mobile equipment, pre-stripping, mine access
roads, earthworks associated with water diversion around the mine, dewatering,
and drainage, and the explosives facilities. Mine mobile equipment including drills,
haul trucks and shovels would be supplied under a lease agreement with the
equipment supplier. The mobile equipment capital cost represents a LOM total of
$292 million. The explosives emulsion plant will be provided by a contractor based
on bulk supply and is included in the contractors rate build-up. The mine capital
costs total $172 million.

The direct capital cost of the process plant is $381 million, and includes all process
equipment and structures from the primary crusher to the tailings management and
reclaim water systems, as well as concentrate handling and loadout on site.

Site and services capital totals $133 million, and covers infrastructure and facilities
required to support the mine/mill operations, including plant site preparation, civil
costs, and permanent accommodations.

Tailings embankment construction and facilities, including seepage infrastructure

and reclaim costs total $101.5 million.

Direct capital costs for the construction of the Project access road from Corral
Quernado Road to the site total $39 million.

Water diversion capital totals $51 million, and consists of the construction of a
diversion channel around the proposed waste management facility, including the
freshwater diversion embankment and associated seepage infrastructure and
facilities.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Costs for the port site facilities to be constructed by CCC include port site
development and utilities, and concentrate receiving, storage, and handling. The
shiploader and dock will be constructed by Lumina; CCC has included a usage
fee, which is carried in the operating costs. CCC direct construction costs at the
port total $27 million.

Indirect costs for the project total $296 million and include the services required to
support the construction activities.

Contingency accounts for unforeseen costs within the project scope and was
calculated using an average (of both direct and indirect capital costs) factor of
18%, which is believed to be appropriate for the level of engineering work
performed in the preparation of this pre-feasibility progress report. Contingency
has been applied to all the capital cost estimates in this report, excluding working
and sustaining capital. Input variables used in calculating the contingency are a
result of information gathered from all parties involved in the basis of the estimate.
The contingency is $236.5 million.

The total estimated capital cost to design and build the Caariaco Norte Copper
Project is $1.437 billion (Table 19-4). This cost is based on a leased mining fleet and
Owner-operated process plant, and self-performed pre-production development. The
estimate covers the direct field costs of executing the Project, plus the Owners indirect
costs associated with design, construction, and commissioning.

19.6

Operating Costs
Average salary and wage rates used were based on AMEC in-house data from recent
projects in South America. The work schedule is based on an operating time-frame of
24 h/d, 7 d/wk, 365 d/a. Based on a WTI average price of US$80.00 per barrel, a
diesel cost of $0.72/L, including delivery, was used for operating cost calculations.
The power price for the project was based on costs submitted by a Peruvian utility
provider at $50.51/MWh. The cost includes the price of power, connection fee,
transmission costs, and the cost of generation.
Transportation costs are included within the costs for supplies and materials calculated
for mining and processing and are based on conventional highway truck supply. Costs
per tonne were based on quotations from local trucking firms. Transport cost for
supplies and materials priced from the closest port to site is $25/t. Transport from
Lima is $35/t, and an allowance of $260/t, based on quotations from freight-forwarders,
is included to cover both sea and land freight for bulk goods procured internationally.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-4:

Summary of Capital Costs

Area
Prestripping
Mining Infrastructure & Equipment
Processing Plant & Acid Plant
On Site Infrastructures
Tailings Management
Project Access Road
Water Diversion and Reservoir
Port Site Facilities
Total Direct
Owners Cost
Indirects
Total Indirects
Contingency
Total Capital Cost
Escalation (excluded)
Working Capital (included in Financial Analysis)
Total

2010 ($000)
70,008
101,942
381,277
133,444
101,527
38,795
50,753
26,887
904,633
52,899
243,076
295,975
236,522
1,437,160

1,437,160

The mine operating cost estimate incorporates costs for operating and maintenance
labour, staff, and operating and maintenance supplies for each year. Operating and
maintenance supplies are based on a combination of in-house and vendor-supplied
data and are exclusive of taxes. Consumables (fuel, explosives, supplies etc.) were
calculated from expected use, unit consumptions, and allowances for minor items,
based on in-house information combined with first principle costs developed for
project specifics. All mining costs are based on production Years 1 to 22. Preproduction costs have been capitalized and are included in the capital cost estimate.
Mining costs are included in Table 19-5.
Processing costs include the costs of operating and maintaining the processing
facilities, from the primary crusher through to concentrate loadout, as well as treatment
of concentrate in the on-site roasting facility, production of by-product sulphuric acid,
provision of process and reclaim water pumping, and tailings management.
Tailings management includes pumping mill tailings to the tailings management facility
and treatment of some of the tailings to remove pyrite and other sulphide materials for
continuous placement of sands on the tailings embankment. The processing costs
account for the expenses associated with purchasing consumables, equipment
maintenance, personnel, and power consumption.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-5:

LOM Mining Cost by Category ($000)

Operating Costs

Total

$/t mined

$/t milled

Admin/Overhead

114,152

0.08

0.16

Drilling

101,710

0.07

0.14

303,170

0.21

0.42

Loading

205,359

0.14

0.28

Hauling

944,514

0.66

1.30

Support

266,757

0.19

0.37

Ancillary

45,587

0.03

0.06

14,000
1,995,248

0.01

0.02

1.38

2.74

Blasting

Dewatering
Total

Consumables costs include items such as crusher liners, mill liners, grinding media, all
chemical reagents, and an allocated cost for office / laboratory supplies. The reagent
costs are inclusive of freight for shipping the items to site. Workforce organization,
salaries, and hourly costs were based on AMEC in-house data for recent South
American projects. Equipment maintenance supplies and materials are estimated as a
percentage of the capital cost of equipment. Power consumption was derived from the
estimated load of individual pieces of equipment on the equipment list. Processing
operating costs are included in Table 19-6.
The general and administrative (G&A) operating costs are the labour and overhead
expenses for cost centres that are not directly linked to the mining and process
disciplines. G&A for each cost centre was estimated either from first principles or input
from AMEC based on other operations. Maintenance costs have been assigned to
G&A to cover maintenance costs not specific to either the process plant or mine. G&A
costs are included in Table 19-7.

19.7

Markets

19.7.1

Treatment Charges
The anticipated quality of the copper concentrate to be produced is based on
metallurgical testing carried out by SGS Lakefield in Santiago and Outotec (Sweden)
AB. Other than arsenic, which has been managed by the partial roast process now
included in the process flowsheet design, no other significant deleterious constituents
are anticipated, although it should be noted that antimony is near the normal penalty
levels before roasting of the concentrate, and significantly below penalty limits postroast. Overall, the concentrates are considered to be of good quality.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-6:

Average Annual Processing Costs

Item

Average ($/a)

$/t Milled

Labour

24,526,600

0.71

Reagents and Consumables

37,529,300

1.08

Power

39,083,800

1.13

6,729,800
107,869,500

0.19

Maintenance Supplies
Total

Table 19-7:

Summary of G&A Cost Estimate

Detail

Average Total
($/a)

$/t milled

Site Services

6,414,900

0.19

Access Road Maintenance

1,253,500

0.04

Environment

2,250,000

0.06

Freight Charges

1,406,600

0.04

3,500,000
14,825,000

0.10

Miscellaneous
Total

3.11

0.43

The estimation of treatment and refining charges for the study is based on long term
projections (post 2013) contained in a report prepared by Neil S. Seldon & Associates
Ltd. (NSA) and current AMEC in-house data.
The key determinants for future treatment and refining charges (TC/RC) are the
supply/demand balance for copper concentrates, smelter economics, and spot market
activity as assessed by NSA.
NSA indicated that the annual benchmark numbers have essentially troughed and that
a gradual increase can be expected over the next two to three years, resulting in
treatment charges approaching equilibrium levels around 2013. Looking forward to
post 2012, charges will ultimately be required to approach a sustainable economical
level for the smelting industry. Given such economics and the expectation of higher
copper prices; reflecting the falling dollar value, price participation or some form of
price sharing, such as a step up in the level of TC/RC at higher prices, could
eventually reappear.
AMEC used TC and RC levels of $75/t and $7.50/t, respectively. Following
discussions with NSA regarding the probable range on long-term projection, the
benchmarked figures used by AMEC were determined to be reasonable and fell within
the range considered by NSA. AMEC used a penalty limit of 0.2% for arsenic, which
differs from NSAs recommendation of 0.1%. AMEC does not consider the differences

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March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

to be material because the smelter term assumptions are at a high level and
preliminary in nature, given that no contact has been made with smelters regarding
specific Caariaco concentrates.
19.7.2

Concentrates
From a chemical quality standpoint, the Caariaco Norte concentrate production is
anticipated to be readily acceptable to smelters. At 30% copper, and with sulphur
content at approximately 20%, the higher copper and lower sulphur content of the
partially roasted concentrate is seen as important to smelters today as the copper
content of concentrates for mines such as Escondida are falling, and as a result,
smelter input blends have fallen to 28%.

19.7.3

Acid
The partial roasting facility would generate approximately 140 kt/a of by-product
sulphuric acid. Caliper Metals Corp (CMC), on behalf of NSA, was commissioned to
produce a high-level evaluation of the marketability of the acid both domestically in
Peru and in the export market.
Acid markets in Chile and Peru are centred on the consumption of acid for SX/EW
leach processes and metallurgical acid supply. Chile in particular has evolved into an
intensive user of acid to supply its large and growing base of SX/EW production. It is
anticipated that total SX/EW production volumes will remain significant and will fully
utilize domestic Chilean acid-producing capacity and still require additional imports.
The acid market dynamics in Peru are considerably different and on a reduced scale.
Operations and developments in copper mining are still in the early stages relative to
potential. Perus geographic proximity to Chiles SX/EW-consuming northern regions
offers competitive advantages over deliveries of Chilean domestic acid from central
regions. The Chile/Peru supply demand balances remain in net deficit for the period
examined ending in 2017. From a Peruvian acid producer perspective, this is
particularly positive as domestic options increase while Chile remains a viable export
alternative.
AMEC used a long-term acid price of $90/t based on preliminary discussions with
CMC and NSA in October 2010. A more detailed market study for domestic and
export acid markets is recommended for the feasibility study.

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.7.4

Contracts and Agreements

It is expected that normal commercial terms would operate for any smelting agreement
that may be reached. The terms contained within the sales contracts are likely to be
typical of, and consistent with, standard industry practice, and be similar to such
contracts elsewhere in the world.

19.8

Taxation
The information on taxation is derived from the Federation of International Trade
Associations (FITA) Global Trade Portal, the website of the Federation of International
Trade Associations (FITA, 2007), and was current as at 2007. The QPs have not
verified this information, and have relied upon the website for the data presented.
Detailed taxation regime review would be undertaken with feasibility-level studies; the
data presented in this subsection is for information purposes only.
There is a taxation rate of 27 percent on net profits for Peruvian-resident companies.
The distribution of profits to non-residents is generally taxed at 4.1 percent, resulting in
an effective taxation rate of 30 percent. Branch companies are subject to the same tax
as the Peruvian companies at the rate of 30 percent. The corporate income tax is
calculated on the basis of a tax unit (UIT), which is recalculated annually to account for
the effects of inflation.
A special regime applies to small businessmen and to some low income companies
whereby the tax rate 2.5 percent of monthly income. Capital gains are taxed in Peru at
the rate of 30 percent. Dividends paid by subsidiaries to their parent companies are
subject to a four percent withholding.
The fiscal year begins on 1 January and ends on 31 December of the same year. A
levy on the income to any individual is based on a system of annual units fixed by the
Peruvian Government. A unity in January 2007 was equal to 3,100 PEN, such that
from zero to 27 units the tax rate was 15 percent, rising to 21 percent taxation on an
income of 27 to 54 units. Beyond 54 units, the tax rate was 27 percent. Various
deductions and allowances reduce the individual's taxable income. A total of 20
percent of the salary and wages paid by a company to its employees is tax-exempt.
The standard value-added tax (VAT) rate is 19 percent, two percent of which goes to
the local level as a municipal promotion tax. In special circumstances, a reduced rate
of two percent VAT may be payable. Exemptions include some basic foodstuffs, urban
passenger transport, the international transport of cargo, life assurance polices, some
financial products, books and the construction and maintenance of ships.

Project No.: 165270

March 2011

Page 19-19

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.9

Financial Analysis
The results of the economic analysis represent forward-looking information (cashflows,
net present value, internal rate of return, production rate, and total metal produced)
that are subject to a number of known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially from those presented here. As
with most projects at this level of assessment, risks exist that may affect the
development of the Project. Factors that could pose a risk to the Caariaco Norte
Project include changes in world commodity markets, equity markets, costs and supply
of labour and materials relevant to the mining industry, extent of mineral resources
actually contained in the deposit, geotechnical conditions, actual recoveries achieved
in processing the mineralized material, marketing of concentrate, technological
change, water management, local community support, environmental permitting,
change in government, or changes to regulations affecting the mining industry.
The Project has been evaluated using a discounted cash flow (DCF) analysis. Cash
inflows consist of annual revenue projections for the mine and two years of
preproduction. Cash outflows such as capital, operating costs, and taxes are
subtracted from the inflows to arrive at the annual cash flow projections. To reflect the
time value of money, annual net cash flow (NCF) projections are discounted back to
the project valuation date using several discount rates. The discount rate appropriate
to a specific project depends on many factors, including the type of commodity and the
level of project risks, such as market risk, technical risk, and political risk. The
discounted present values of the cash flows are summed to arrive at the projects net
present value (NPV). In addition to NPV, internal rate of return (IRR) and payback
period are also calculated. The IRR is defined as the discount rate that results in an
NPV equal to zero. Cash flows are taken to occur at the end of each period. Capital
cost estimates have been prepared for initial development and construction of the
project and for ongoing operations (sustaining capital). The resulting net annual cash
flows are discounted back to the date of valuation end-of-year 2010 dollars and
totalled to determine NPVs at the selected discount rates. The IRR is calculated as
the discount rate that yields a zero NPV. The payback period is calculated as the time
needed to recover the initial capital spent.
The mine plan is based on Measured and Indicated mineral resources only, with
Inferred mineral resources considered as waste. The results of the economic analyses
based on these mineral resources are considered to be a Preliminary Assessment
(PA) under NI 43-101.

Project No.: 165270

March 2011

Page 19-20

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.9.1

Basis of Base Case Financial Analysis

The base case financial analysis incorporated the following assumptions:

Conventional truck-and-shovel open pit mining method

Average LOM process rate of 34.7 Mt/a

Average LOM copper recovery of 89.7%

Transport and insurance costs of $781 million over the life of the mine

To reflect some of the advantage that CCC is expected to gain from the current
high price scenario, AMEC used the reverting cost curve values in Table 19-8 to
estimate future metal prices for each case.

Life-of-mine operating costs of $1.24/lb recovered Cu, including smelter and

transport costs, for the base case.

Table 19-8:

Base Case Metal Prices

Copper

Gold

Year

$/lb

$/oz

Silver
$/oz

2015

2.92

1,159

20.96

2016

2.77

1,132

20.00

2017

2.65

1,111

19.25

2018

2.56

1,094

18.64

2019

2.50

1,080

18.15

2020

2.44

1,069

17.76

2021

2.40

1,060

17.43

2022

2.37

1,052

17.17

2023

2.34

1,046

16.95

2024

2.32

1,041

16.76

2025

2.25

1,015

15.85

2026

2.25

1,015

15.85

The capital cost estimate was prepared assuming Owner equipment and Owner
operation of the equipment. For the purposes of the financial analysis, mine
mobile equipment was considered to be leased, rather than purchased.

Start-up capital costs for the base case of $1.437 billion for the mine construction
phase (excluding leased equipment) and $70 million in sustaining capital to
replenish mining and other equipment during the life of the mine.

Project No.: 165270

March 2011

Page 19-21

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

19.9.2

Royalty assumptions of 1% on the first $60,000, 2% on the next $60,000, and 3%

on the remainder. Over the life of the mine, the NPI royalty is estimated to total
$330 million.

Working capital of a maximum of $66 million in the first year of operation

Decommissioning and reclamation costs of $58 million

Corporate tax rate of 30% plus an 8% labour profit sharing tax

No inflationary adjustments

No salvage value.

Results of Base Case Financial Analysis

The pre-tax cumulative cash flow for the base case is $5,998 million with an IRR of
26.8%. The cash flow analysis shows that the project will generate a positive cash
flow in all years except Year -2 and Year -1 on a pre-tax basis. The annual positive
cash flow results in a payback period of 2.9 years. At an 8% discount rate, the pre-tax
net present value (NPV) of the project is $1,983 million.
The after-tax cumulative cash flow for the base case is $3,855 million with an IRR of
18.8%. The cash flow analysis shows that the project will generate a positive cash
flow in all years except Year -2 and Year -1 on an after-tax basis. The annual positive
cash flow results in a payback period of 4.1 years. At an 8% discount rate, the aftertax net present value (NPV) of the project is $1,063 million.
The cashflow, on an annualized basis, for the base case is included as Table 19-9.

19.9.3

Base Case Sensitivity Analysis

Sensitivity analysis was performed on the base case taking into account variations in
metal prices, operating costs and capital costs. For the purposes of the analysis,
variations in grade were considered to mirror the variations in metal price.
The results from the analysis showed that the Project sensitivity was (in order from
highest to lowest) metal price, operating expenditure, capital expenditure. These are
shown in Table 19-10 and Figure 19-6.
Considering that the Project is priced in US dollars, the effects of exchange rate
variation do not apply in the current model, although in reality some equipment,
supplies, and services will be priced in Euros or the local Peruvian currency.

Project No.: 165270

March 2011

Page 19-22

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-9:
Life of
Mine

Project year
Production year

Base Case Cashflow Analysis

1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

-3

-2

-1

10

11

12

13

14

15

16

17

18

19

20

21

22

Metal prices
Gold

US$/oz

1,159

1,132

1,111

1,094

1,080

1,069

1,060

1,052

1,046

1,041

1,015

1,015

1,015

1,015

1,015

1,015

1,015

1,015

1,015

1,015

1,015

1,015

Silver

US$/oz

20.96

20.00

19.25

18.64

18.15

17.76

17.43

17.17

16.95

16.76

15.85

15.85

15.85

15.85

15.85

15.85

15.85

15.85

15.85

15.85

15.85

15.85

Copper

US$/lb

2.92

2.77

2.65

2.56

2.50

2.44

2.40

2.37

2.34

2.32

2.25

2.25

2.25

2.25

2.25

2.25

2.25

2.25

2.25

2.25

2.25

2.25

Pay Metal
Gold

Kozs

791

37.70

52.03

47.74

36.18

43.39

44.25

46.33

46.03

41.12

30.39

23.46

29.53

33.77

38.50

40.79

39.06

27.23

21.58

26.41

37.16

40.68

7.68

Silver

Kozs

18,014

976.39

1,069.81

918.38

977.62

1,015.86

983.14

912.68

838.83

759.61

663.46

691.29

799.24

849.12

862.40

882.95

815.92

634.23

648.94

753.14

880.13

880.15

200.25

Copper

Klbs

5,555,529

253,064

336,744

295,653

259,975

304,860

281,809

282,018

273,986

247,269

200,857

196,419

237,031

260,894

275,006

279,781

269,536

208,298

193,218

235,688

287,149

309,493

66,780

Pay Value
Gold

US$000

832,910

43,688

58,910

53,045

39,585

46,867

47,302

49,105

48,432

43,018

31,629

23,815

29,972

34,272

39,082

41,404

39,645

27,638

21,901

26,807

37,717

41,286

7,790

Silver

US$000

308,989

20,461

21,399

17,676

18,224

18,441

17,456

15,909

14,399

12,872

11,122

10,957

12,668

13,459

13,669

13,995

12,932

10,052

10,286

11,937

13,950

13,950

3,174

Copper
Total

US$000

13,289,674

739,664

932,530

784,407

666,692

760,981

688,536

677,430

649,317

579,758

466,952

441,942

533,320

587,011

618,764

629,507

606,456

468,670

434,740

530,298

646,086

696,360

150,255

US$000

14,431,573

803,814

1,012,839

855,127

724,501

826,288

753,294

742,443

712,148

635,648

509,703

476,714

575,960

634,741

671,515

684,906

659,033

506,360

466,927

569,042

697,753

751,597

161,220

Concentrate transport
Land freight

US$000

(192,019)

(8,747)

(11,639)

(10,219)

(8,986)

(10,537)

(9,740)

(9,748)

(9,470)

(8,547)

(6,942)

(6,789)

(8,193)

(9,017)

(9,505)

(9,670)

(9,316)

(7,200)

(6,678)

(8,146)

(9,925)

(10,697)

(2,308)

Port storage & handling

US$000

(110,274)

(5,023)

(6,684)

(5,869)

(5,160)

(6,051)

(5,594)

(5,598)

(5,438)

(4,908)

(3,987)

(3,899)

(4,705)

(5,179)

(5,459)

(5,553)

(5,350)

(4,135)

(3,835)

(4,678)

(5,700)

(6,143)

(1,326)

Ocean freight

US$000

(457,188)

(20,826)

(27,712)

(24,331)

(21,394)

(25,088)

(23,191)

(23,208)

(22,547)

(20,349)

(16,529)

(16,164)

(19,506)

(21,470)

(22,631)

(23,024)

(22,181)

(17,142)

(15,901)

(19,396)

(23,631)

(25,470)

(5,496)

Insurance charges

US$000

(21,647)

(1,206)

(1,519)

(1,283)

(1,087)

(1,239)

(1,130)

(1,114)

(1,068)

(953)

(765)

(715)

(864)

(952)

(1,007)

(1,027)

(989)

(760)

(700)

(854)

(1,047)

(1,127)

(242)

US$000

(781,128)

(35,801)

(47,555)

(41,701)

(36,627)

(42,916)

(39,655)

(39,667)

(38,524)

(34,757)

(28,223)

(27,567)

(33,268)

(36,618)

(38,603)

(39,275)

(37,836)

(29,235)

(27,115)

(33,074)

(40,302)

(43,437)

(9,371)

Total
Smelting
Treatment

US$000

(640,244)

(29,164)

(38,808)

(34,072)

(29,961)

(35,133)

(32,477)

(32,501)

(31,575)

(28,496)

(23,148)

(22,636)

(27,317)

(30,067)

(31,693)

(32,243)

(31,063)

(24,005)

(22,267)

(27,162)

(33,092)

(35,667)

(7,696)

Cu refining

US$000

(416,665)

(18,980)

(25,256)

(22,174)

(19,498)

(22,865)

(21,136)

(21,151)

(20,549)

(18,545)

(15,064)

(14,731)

(17,777)

(19,567)

(20,625)

(20,984)

(20,215)

(15,622)

(14,491)

(17,677)

(21,536)

(23,212)

(5,009)

Au refining

US$000

(3,955)

(188)

(260)

(239)

(181)

(217)

(221)

(232)

(230)

(206)

(152)

(117)

(148)

(169)

(193)

(204)

(195)

(136)

(108)

(132)

(186)

(203)

(38)

Ag refining

US$000

(7,205)

(391)

(428)

(367)

(391)

(406)

(393)

(365)

(336)

(304)

(265)

(277)

(320)

(340)

(345)

(353)

(326)

(254)

(260)

(301)

(352)

(352)

(80)

US$000

(1,068,069)

(48,723)

(64,752)

(56,852)

(50,031)

(58,621)

(54,227)

(54,249)

(52,690)

(47,551)

(38,629)

(37,761)

(45,561)

(50,142)

(52,856)

(53,784)

(51,799)

(40,017)

(37,126)

(45,272)

(55,166)

(59,435)

(12,823)

Net Smelter Return

US$000

12,582,376

719,289

900,533

756,574

637,843

724,751

659,412

648,527

620,934

553,340

442,851

411,386

497,131

547,981

580,057

591,847

569,397

437,108

402,686

490,696

602,284

648,724

139,025

Acid Revenue

US$000

269,306

12,267

16,324

14,332

12,602

14,778

13,661

13,671

13,282

11,986

9,737

9,521

11,490

12,647

13,331

13,562

13,066

10,097

9,366

11,425

13,920

15,003

3,237

NSR Plus Acid Revenue

US$000

12,851,683

731,557

916,856

770,906

650,445

739,529

673,073

662,198

634,215

565,327

452,587

420,907

508,621

560,627

593,388

605,409

582,463

447,205

412,052

502,121

616,204

663,727

142,263

Total

Production costs
Mining

US$000

(1,995,248)

(94,354)

(116,781)

(98,501)

(98,888)

(114,731)

(100,459)

(101,503)

(113,388)

(101,481)

(94,191)

(95,615)

(91,220)

(88,101)

(88,610)

(106,956)

(96,632)

(83,925)

(71,582)

(69,094)

(68,598)

(72,446)

(28,192)

Process

US$000

(2,265,380)

(86,296)

(107,870)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(107,869)

(21,695)

G&A

US$000

(311,342)

(11,860)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(14,825)

(2,982)

Acid

US$000

(62,838)

(2,862)

(3,809)

(3,344)

(2,941)

(3,448)

(3,188)

(3,190)

(3,099)

(2,797)

(2,272)

(2,222)

(2,681)

(2,951)

(3,111)

(3,165)

(3,049)

(2,356)

(2,185)

(2,666)

(3,248)

(3,501)

(755)

Lease Payment - Mining

US$000

(316,092)

(31,842)

(38,104)

(37,069)

(37,051)

(37,051)

(9,054)

(682)

(854)

(1,171)

(2,003)

(2,325)

(1,928)

(2,330)

(21,271)

(21,904)

(21,843)

(21,674)

(21,522)

(4,405)

(1,143)

(433)

(433)

Total

US$000

(4,950,902)

(227,214)

(281,389)

(261,608)

(261,574)

(277,925)

(235,394)

(228,070)

(240,035)

(228,143)

(221,161)

(222,856)

(218,524)

(216,077)

(235,686)

(254,720)

(244,218)

(230,649)

(217,984)

(198,860)

(195,683)

(199,074)

(54,057)

Royalty payment
Net Smelter Return

US$000

12,582,376

719,289

900,533

756,574

637,843

724,751

659,412

648,527

620,934

553,340

442,851

411,386

497,131

547,981

580,057

591,847

569,397

437,108

402,686

490,696

602,284

648,724

139,025

Stage 1 royalty

US$000

(125,824)

(7,193)

(9,005)

(7,566)

(6,378)

(7,248)

(6,594)

(6,485)

(6,209)

(5,533)

(4,429)

(4,114)

(4,971)

(5,480)

(5,801)

(5,918)

(5,694)

(4,371)

(4,027)

(4,907)

(6,023)

(6,487)

(1,390)

Stage 2 royalty

US$000

(112,624)

(6,593)

(8,405)

(6,966)

(5,778)

(6,648)

(5,994)

(5,885)

(5,609)

(4,933)

(3,829)

(3,514)

(4,371)

(4,880)

(5,201)

(5,318)

(5,094)

(3,771)

(3,427)

(4,307)

(5,423)

(5,887)

(790)

Stage 3 royalty

US$000

(99,424)

(5,993)

(7,805)

(6,366)

(5,178)

(6,048)

(5,394)

(5,285)

(5,009)

(4,333)

(3,229)

(2,914)

(3,771)

(4,280)

(4,601)

(4,718)

(4,494)

(3,171)

(2,827)

(3,707)

(4,823)

(5,287)

(190)

Net profits royalty

US$000

(337,871)

(19,779)

(25,216)

(20,897)

(17,335)

(19,943)

(17,982)

(17,656)

(16,828)

(14,800)

(11,486)

(10,542)

(13,114)

(14,639)

(15,602)

(15,955)

(15,282)

(11,313)

(10,281)

(12,921)

(16,269)

(17,662)

(2,371)

Closure & salvage

Closure costs

US$000

(57,650)

(57,650)

Total

US$000

(57,650)

(57,650)

US$000

7,505,260

Earnings
Earnings before taxes,
depreciation &
amortization

Project No.: 165270

March 2011

484,564

Page 19-23

610,251

488,402

371,536

441,662

419,696

416,472

377,352

322,383

219,941

187,509

276,983

329,912

342,100

334,734

322,963

205,243

183,787

290,340

404,252

446,991

28,185

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Life of
Mine

Project year
Production year
Deductible interest
Earnings before taxes,
depreciation &
amortization

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

-3

-2

-1

10

11

12

13

14

15

16

17

18

19

20

21

22

US$000
US$000

7,505,260

484,564

610,251

488,402

371,536

441,662

419,696

416,472

377,352

322,383

219,941

187,509

276,983

329,912

342,100

334,734

322,963

205,243

183,787

290,340

404,252

446,991

28,185

US$000

7,505,260

484,564

610,251

488,402

371,536

441,662

419,696

416,472

377,352

322,383

219,941

187,509

276,983

329,912

342,100

334,734

322,963

205,243

183,787

290,340

404,252

446,991

28,185

US$000

(1,487,717)

Taxation
Earnings before taxes
Deductions
Depreciations
Total Deductions
Net taxable income
Labour Profit Sharing
Tax
Taxable Income subject to
Corporate Tax
Corporate income tax
Total tax paid
Net earnings

(200,436)

(139,740)

(140,126)

(140,216)

(102,619)

(46,785)

(45,656)

(45,871)

(46,107)

(45,743)

(45,430)

(45,329)

(45,309)

(46,217)

(46,385)

(46,911)

(46,959)

(46,805)

(46,496)

(46,469)

(45,742)

(26,365)

(200,436)

(139,740)

(140,126)

(140,216)

(102,619)

(46,785)

(45,656)

(45,871)

(46,107)

(45,743)

(45,430)

(45,329)

(45,309)

(46,217)

(46,385)

(46,911)

(46,959)

(46,805)

(46,496)

(46,469)

(45,742)

(26,365)

US$000

6,017,543

284,128

470,511

348,275

231,320

339,042

372,911

370,816

331,481

276,276

174,198

142,079

231,655

284,602

295,883

288,349

276,052

158,284

136,983

243,845

357,783

401,250

1,820

US$000

(481,403)

(22,730)

(37,641)

(27,862)

(18,506)

(27,123)

(29,833)

(29,665)

(26,518)

(22,102)

(13,936)

(11,366)

(18,532)

(22,768)

(23,671)

(23,068)

(22,084)

(12,663)

(10,959)

(19,508)

(28,623)

(32,100)

(146)
1,675

US$000

5,536,139

261,398

432,870

320,413

212,814

311,919

343,078

341,150

304,963

254,174

160,263

130,713

213,122

261,834

272,212

265,281

253,968

145,621

126,024

224,337

329,160

369,150

US$000

(1,660,842)

(78,419)

(129,861)

(96,124)

(63,844)

(93,576)

(102,923)

(102,345)

(91,489)

(76,252)

(48,079)

(39,214)

(63,937)

(78,550)

(81,664)

(79,584)

(76,190)

(43,686)

(37,807)

(67,301)

(98,748)

(110,745)

(502)

US$000

(2,142,245)

(101,150)

(167,502)

(123,986)

(82,350)

(120,699)

(132,756)

(132,010)

(118,007)

(98,354)

(62,015)

(50,580)

(82,469)

(101,318)

(105,334)

(102,652)

(98,274)

(56,349)

(48,766)

(86,809)

(127,371)

(142,845)

(648)

US$000

5,363,014

383,415

442,749

364,416

289,186

320,963

286,940

284,461

259,345

224,029

157,926

136,929

194,514

228,593

236,766

232,082

224,689

148,894

135,022

203,532

276,881

304,147

27,537

Capital expenditure
Construction capital

US$000

(1,437,159)

Sustaining capital

US$000

(70,438)

Working capital

US$000

Debt drawdown

US$000

Debt repayment

US$000

Total

US$000

(1,507,597)

(606,908)

(818,909)

(11,342)
(7,460)

(1,977)

(4,746)

(4,453)

(5,804)

(1,975)

(1,722)

(861)

(2,499)

(4,191)

(1,865)

(19,217)

(3,358)

(5,770)

(4,089)

(451)

(65,754)

(16,482)

6,409

1,277

(5,660)

11,448

1,828

(2,705)

3,915

3,379

(260)

(342)

(226)

(5,399)

(4,927)

2,985

5,542

3,696

3,291

(1,013)

(1,631)

60,628

4,431

(3,469)

(10,113)

5,643

(147)

(4,427)

3,054

880

(4,451)

(2,207)

(19,443)

(8,756)

(10,697)

(1,104)

5,092

3,696

3,291

(1,013)

(1,631)

60,628

(606,908)

(818,909)

(77,096)

(23,942)

Net project cash flow

Pre-Tax

US$000

5,997,662

(606,908)

(818,909)

407,468

586,310

492,833

368,067

431,549

425,340

416,324

372,925

325,437

220,821

183,059

274,776

310,469

333,344

324,037

321,859

210,334

187,484

293,632

403,239

445,360

88,813

After tax

US$000

3,855,417

(606,908)

(818,909)

306,319

418,808

368,847

285,717

310,850

292,583

284,314

254,917

227,083

158,807

132,478

192,307

209,150

228,010

221,385

223,585

153,985

138,718

206,823

275,869

302,515

88,165

Project No.: 165270

March 2011

Page 19-24

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Table 19-10: Results of Sensitivity Analysis for Base Case with NPV @ 8%
Change in Factor
Factor

-30%

Exchange rate

-20%

-10%

0%

10%

20%

30%

932

932

932

932

932

932

932

Capital expenditure

1,323

1,193

1,062

932

802

671

541

Operating expenditure

1,312

1,185

1,059

932

806

679

552

Metal price

(195)

182

557

932

1,307

1,681

2,056

Figure 19-7: Graph of Sensitivity Analysis Results for Base Case

Candente - Sensitivity of NPV @ 8%

NPV @ 8% (US$ million)

2,500
2,000
1,500

Capex
Opex

1,000

Price

500

Xrate

0
(500)
-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Change in Factor

19.9.4

Alternative Cases
Three alternative cases were evaluated. These used the parameters of the base case
with the exception of the capital costs. The other three scenarios included:

Full Owner-operated mine and process facilities

Contractor mining

Full lease of process and electrical equipment in addition to mining equipment.

The capital cost for the full Owner-operated and financed option is $1.599 billion for
start-up and $206 million to sustain the operation. If the contract mining option were
considered, then the cost could be reduced to $1.405 billion and $63 million for startup and sustaining capital, respectively. The option involving full lease of mine and

Project No.: 165270

March 2011

Page 19-25

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

major process and electrical equipment reduces to $1.191 billion and $207 million.
Results of the evaluation of the three alternative cases are summarized in Table 1911.
Table 19-11: Results of Financial Analysis for Alternative Cases
Item

Unit

Value at $2.25/lb Cu

Value at $3/lb Cu

Full Owner Operated pre-tax

%

25.8

35.8

CNCF*

C$000,000

6,017

9,842

NPV 8%

C$000,000

1,968

3,504

NPV 10%

C$000,000

1,501

2,776

Years

3.0

2.3

IRR

Payback
Contract Mining pre-tax

27.0

37.8

CNCF*

C$000,000

5,754

9,579

NPV 8%

C$000,000

1,919

3,456

NPV 10%

C$000,000

1,476

2,751

Years

2.8

2.1

IRR

Payback
Equipment Leasing pre-tax

29.9

42.0

CNCF*

C$000,000

5,847

9,672

NPV 8%

C$000,000

1,989

3,525

NPV 10%

C$000,000

1,547

2,822

Payback

Years

2.6

1.9

IRR

*Cumulative Net Cash Flow

19.10

Risks and Opportunities

A risk and opportunity analysis was performed.
Key risks identified included:
Geotechnical design of +900 m pit highwall: The preliminary pit highwall is over
900 m in vertical height, making the proposed Caariaco Norte pit one of the
worlds deepest. The current study design basis for the overall pit and mine
bench slope angles is pending completion of a geotechnical drilling program to
assess rock quality in the pit wall areas. The geotechnical program is planned to
proceed upon receipt of drilling permits. The current design is based on
assessment of scoping level information, visual inspection of available core, and
limited physical testing of available material. If future geotechnical investigations
result in shallower overall pit slope angles, then the stripping ratio will increase
and have a negative impact on the project mining costs.

Project No.: 165270

March 2011

Page 19-26

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Obtaining permits for Project: Prior to development, the project will require many
applications for permits to allow for timely execution of Project work. Receipt of
the necessary permits for Project development will depend on completion of an
Environmental and Social Impact Assessment that is acceptable to the relevant
regulatory agencies in Peru and negotiation of surface access rights for the
project area from the local community. A comprehensive ESIA for the Caariaco
project is currently underway under the guidance of AMEC Earth and
Environmental. AMEC notes that the time period required for negotiation of
drilling permits with the local community has taken longer than anticipated by
CCC. Other applications could potentially encounter similar delays. By
continuing to work closely with the local communities, CCC is confident that this
risk can be managed.

Main access road routing: The design of the main access road is based on lowquality contour data. This may lead to a less-than-optimum design with a risk that
the road may not be constructible in some sections. Aerial or land reconnaissance
followed by more detailed geotechnical investigations along the proposed road
routing is recommended to decrease the risk in the design of this road.
Landslides and diversion channel: Naturally-occurring landslides were observed to
have taken place in the vicinity of the proposed diversion channel. The
functionality of the channel may be at risk. Further assessment of the valley
slopes will be required to assess the severity of this risk and whether it can be
mitigated through regular maintenance of the channel.
Width of tailings line access road: The narrowness of the proposed road may
cause issues during the construction of the pipeline by restricting access to the
site, since the equipment necessary to install the pipeline will block the road for
extended periods of time. Similarly, during operation, repair, and maintenance of
the pipeline there may be restricted access to and from the plant site. Road
movements will need to be scheduled and prioritized for vehicular access.
Coarse Ore Stockpile and Dusting: The open-air design of the coarse ore
stockpile is typical of many operating mines however it may result in noncompliant dust loading during dry periods. Dust suppression or a stockpile cover
may be required.
Stockpile feed conveyor incline angle: The design incline angle of the stockpile
feed conveyor is 14. Testwork is required to confirm that this design angle is
appropriate for this material.
Delivery of long-lead capital equipment: Market conditions may increase delivery
schedules for long-lead capital equipment items. Equipment may need to be
secured and purchased earlier than anticipated.

Project No.: 165270

March 2011

Page 19-27

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Port availability: Current assumptions are that the marine facilities to be developed
by Lumina will be for Phase 2 development, i.e., fully loaded vessel sizes of up to
50,000 DWT (instead of 33,000 DWT) and a berth in 15 m water depth. This
should be confirmed in negotiations with Lumina, since acceptable berth
availabilities are only achieved with Phase 2 implementation.
Opportunities recognized, and which will be evaluated during more detailed studies,
include:
18 month mine plan: The mine plan for the first 18 months of operations should be
optimized to maximize the IRR and reduce project payback period.
Mineral resource estimation: Additional drilling should be undertaken in the vicinity
of Caariaco Norte with the objective of providing sufficient data to support
potential upgrading of mineralization that is currently classified as Inferred to
higher confidence categories. The potential exists to discover and delineate
additional mineralization at the Caariaco Sur and Quebrada Verde targets
Leasing of equipment: The possibility of leasing equipment for the mine, mill, and
electrical infrastructure should be evaluated to determine if it may improve the
project economics.
Low-grade material recoveries: Testwork is required to evaluate process
recoveries for low-grade material. Further testwork and optimization of process
parameters could result in higher recoveries.
Concentrate copper grade: The target grade for the copper concentrate should be
assessed to optimize the overall costs related to handling, transportation and
treatment.
Final tailings thickener: A trade-off study is required to determine if overall tailings
and reclaim water handling costs may be reduced by elimination of the tailings
thickener from the process flowsheet.
Concentrate roasting requirements: The arsenic distribution in the resource should
be evaluated in more detail and optimized in the mine plan to reduce roasting
associated costs.
Concentrate shipping costs: The potential to reduce land shipping costs from the
plant to the port by transporting dry concentrate should be evaluated.
Mineralized material hardness: The mill tonnage throughput should be optimized
through a mineralization hardness model in the block model.

Tailings cyclone system: The tailings cyclone system was selected based on a
preliminary level trade-off assessment comparing rock fill and cyclone sands dam

Project No.: 165270

March 2011

Page 19-28

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

construction. A more in depth trade-off assessment is recommended to confirm

the dam construction methodology that would incur the lowest life of mine costs. .
Stockpile feed conveyor: A trade-off study should be completed to evaluate a
single stockpile feed conveyor versus splitting it into two sections. Having a short
conveyor feeding the stockpile will reduce the amount of structural steel required
for the cantilevered head because the shorter conveyor will transmit lower forces
to the structure.
Coarse ore conveyor motor: A trade-off study should be completed for a wound
rotor motor versus a wrap-around motor on the coarse ore stockpile conveyor.

Project No.: 165270

March 2011

Page 19-29

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

20.0

INTERPRETATION AND CONCLUSIONS

The QPs, as authors of this Report, have reviewed the data for the Project and are of
the opinion that:

Legal opinion provided to AMEC indicates that the mining tenure held by CCC in
the Project area is valid, and sufficient to support declaration of Mineral Resources.

Surface rights are held by the Comunidad Campesina San Juan Bautista de
Caaris, and access for a further three-year term for exploration purposes is
currently being negotiated. Additional surface rights negotiations will be required
to support infrastructure construction and mining operations in the proposed mining
area. Negotiations will be required for surface rights for additional lands including
road rights-of-way, and powerline facilities.

Although no metal production royalty is held by any third-party, royalties are

payable to the Peruvian Government.

The permits held by CCC for the Project are sufficient to ensure that exploration
activities are conducted within the regulatory framework required by the Peruvian
Government. Additional permits will be required for Project development.

Environmental permits for Project development have to be secured. This process

will determine the precise number of environmental management plans that the
regulatory authorities will require to ensure compliance with environmental design
and permit criteria. A comprehensive ESIA for the Caariaco Project is currently
underway.

The time period required for negotiation of drilling permits with the local community
has taken longer than anticipated by CCC. Other applications could potentially
encounter similar delays. By continuing to work closely with the local communities,
CCC is confident that this risk can be managed.

Sufficient work has been undertaken on the permitting and environmental aspects
of the project to gain an understanding of the regulatory requirements that will
need to be met to construct, operate, and close the mine.

The existing and planned infrastructure, availability of staff, the existing power,
water, and communications facilities, the methods whereby goods are transported
to the mine, and any planned modifications or supporting studies are wellestablished, or the requirements to establish such, are well understood by CCC,
and can support the declaration of Mineral Resources.

The geologic understanding of the deposit settings, lithologies, and structural and
alteration controls on mineralization is sufficient to support estimation of Mineral
Resources.

Project No.: 165270

March 2011

Page 20-1

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

The mineralization style and setting is well understood and can support declaration
of Mineral Resources.

The exploration programs completed to date are appropriate to the porphyry

copper style of the deposit.

Work completed in the period 1967 to date has consisted of geological mapping,
prospecting, stream sediment, grab, rock chip and soil geochemical sampling,
trenching and pitting, ground IP/resistivity and magnetic geophysical surveys,
petrographic studies, bulk sampling for metallurgical testing, re-logging and resampling of historic drill core, and core drilling. Completed exploration programs
were appropriate to the mineralization style. To date, a deposit and two
exploration targets have been identified.

Sampling methods are acceptable, meet industry-standard practice, and are

acceptable for Mineral Resource estimation purposes.

The quality of the CCC copper, gold, and silver analytical data is reliable and that
sample preparation, analysis, and security are generally performed in accordance
with exploration best practices and industry standards.

Historic drill data have been validated by CCCs re-logging and re-assay programs,
and data from these programs are reliable, and can be used to support Mineral
Resource estimates.

The results of ongoing metallurgical testwork indicate that the mineralization

responds positively to typical grinding and conventional flotation methodologies.

Metallurgical testwork to date has shown that the mineralization is amenable to

being processed using conventional technologies, and acceptable recoveries were
returned. Metallurgical testwork completed on the Project has been appropriate to
establish process routes that are applicable to the mineralization types and was
performed on samples that were representative of the mineralization.

A concentrator flowsheet was developed that appears to be viable with respect to

the known mineralization of the deposit. The Outotec partial roast process has
been confirmed to reduce the levels of impurities in the concentrate to below
smelter penalty limits and will produce a saleable concentrate throughout the mine
life.

Mineral Resources, which were estimated using core drill data, have been
performed to industry best practices, and conform to the requirements of CIM
Definition Standards (2005).

Reviews of the environmental, permitting, legal, title, taxation, socio-economic,

marketing and political factors and constraints for the Project support the
declaration of Mineral Resources using the set of assumptions outlined. Mineral

Project No.: 165270

March 2011

Page 20-2

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Resources that are not Mineral Reserves do not have demonstrated economic
viability.

The proposed open pit mining method is appropriate to the style of mineralization

Mining will proceed using a conventional truck-and-shovel fleet

Production forecasts are achievable with the proposed equipment and plant

The predicted mine life of 22 years is achievable based on the projected

annual production rate and the Measured and Indicated Mineral Resources
estimated

There is some upside for the Project if the Inferred Mineral Resources that
are identified within the LOM production plan can be upgraded to higher
confidence Mineral Resource categories. Additional potential exists if
significant mineralization can be identified within the adjacent Caariaco
Sur and Quebrada Verde targets.

The open pit mine design relating to the angle of the pit wall slopes has been
developed based on geotechnical logging of drill core plus rock quality evaluation
and compressive strength testing of a limited number of core samples. The
amount of geotechnical data available is not sufficient, however, to support
development of a pre-feasibility level design for the pit wall slopes. As a result, the
mine plan developed for this Report must be considered to be at a preliminary
level.

The preliminary pit highwall is over 900 m in vertical height, making the Caariaco
Norte pit one of the worlds deepest. If future geotechnical investigations result in
shallower overall pit slope angles, then the stripping ratio will increase and have a
negative impact on the project mining costs.

AMEC does not provide detailed taxation analysis, but has attempted to apply the
relevant allowances, deductions, and taxes to the maximum advantage of CCC
based on other projects in Peru. Additional considerations on the likely taxation
regime are required during more detailed studies.

Project No.: 165270

March 2011

Page 20-3

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

21.0

RECOMMENDATIONS
The following work is recommended; no phase is contingent on another, and all can be
conducted concurrently. CCC should:

Initiate insertion of fine pulp duplicate samples for precision analysis, as this is
currently not part of the CCC sampling program. Such checks should be instituted
in all future exploration programs. AMEC estimates that this would add
approximately 5% to the total costs of the sample analytical programs.

Construct a relational database using a commercial database software package,

for more detailed studies. Costs of such a program would depend on whether the
database was constructed in-house or a third-party consultant was contracted to
complete the exercise. Estimated cost: US$10,000.

Drill 11 geotechnical core holes (6,690 m) to provide additional information in the

proposed pit area on rock mass properties, joint patterns, hydrogeology and
geological modeling/resource estimation. Estimated cost: US$1.1 M.

Drill additional holes to increase the level of confidence of the lithological

interpretation in areas outside the existing drill hole limits but constrained by the
resource pit. The proposed geotechnical holes will cover part of the
recommendation; however an additional 10 holes (6,000 m) is suggested in
addition. Estimated cost: US$900,000 to US$950,000.

Complete a full review of the alteration interpretation on vertical sections reconciled

to bench plans. Construct a mineral zonation model for the next phase of study.
Evaluate arsenic distribution using the interpreted units. Estimated cost:
US$20,0000 to US$350,000.

Institute a continuous program of specific gravity determinations from core samples

preferably using the same laboratory and determination procedures as those used
in the 2010 testing program. AMEC estimates that this would add approximately
25% to the total analytical program costs.

The total cost of the recommendations ranges from US$2.21 million to US$2.41
million.
At the completion of this work, results should be reviewed and incorporated as
appropriate into the ongoing preliminary feasibility study or future detailed studies.

Project No.: 165270

March 2011

Page 21-1

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

22.0

REFERENCES
AMEC, 2011: Prefeasibility Progress Report: unpublished internal report prepared by
AMEC E&C Services Inc., for Candente Copper Corporation, 24 February 2011.
Berger, R.B., Ayuso, R.A., Wynn, J.C., and Seal, R.R., 2008: Preliminary Model Of
Porphyry Copper Deposits: U.S. Geological Survey Open-File Report 20081321,
55 p.
Bonson, C., Nowak, M., Doerksen, G., Johnston, A., and van Egmond, R., 2008:
Technical Report Caariaco Norte Project, Department of Lambayeque, Peru:
technical report prepared by SRK Consulting Ltd for Candente Resource Corp.,
effective date 11 July 2008
Bonson, C., Campbell, R., Bender, M., Doerksen, G., Johnston, A., Meyer, T., Nowak,
M., Pilotto, D., Van Egmond, R., Critikos, P., Ostolaza, R., and Huanani, A., 2008:
Revised Preliminary Economic Assessment Technical Report, Caariaco Norte
Project, Peru: technical report prepared by SRK Consulting Ltd for Candente
Resource Corp., effective date 30 November 2008
Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2000: CIM Standards
for Mineral Resources and Mineral Reserves, Definitions and Guidelines:
Canadian Institute of Mining, Metallurgy and Petroleum, August, 2000
http://www.jogmec.go.jp/mric_web/tani/cimstandard.pdf
Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2003: Estimation of
Mineral Resources and Mineral Reserves, Best Practice Guidelines: Canadian
Institute of Mining, Metallurgy and Petroleum, November 23, 2003,
http://www.cim.org/committees/estimation2003.pdf.
Canadian Institute of Mining, Metallurgy and Petroleum (CIM), 2005: CIM Standards
for Mineral Resources and Mineral Reserves, Definitions and Guidelines:
Canadian Institute of Mining, Metallurgy and Petroleum, December 2005,
http://www.cim.org/committees/CIMDefStds_Dec11_05.pdf.
Canadian Securities Administrators (CSA), 2005: National Instrument 43-101,
Standards of Disclosure for Mineral Projects, Canadian Securities
Administrators.
Collins, J., McCrea, J., and Rokosh, J., 2006: Caariaco Copper Project, Peru,
Preliminary Assessment and Economic Evaluation Report: technical report
prepared by Merit Consultants for Candente Resource Corp., effective date 28
June 2006

Project No.: 165270

March 2011

Page 22-1

Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

Currie, J.A., 2004: Technical Report On The Caariaco Copper Porphyry Prospect
Department Of Lambayeque Northern Per Latitude 6 05 S Longitude 70
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Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

by Minefill Services Inc. for Candente Resource Corp., effective date 18 April
2007
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2010 Update: unpublished PowerPoint presentation, Candente Resource
Corp., 3 December 2010.
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internal geologic report prepared for Billiton Exploration and Mining Per B.V

Project No.: 165270

March 2011

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Candente Copper Corporation

Caariaco Norte Deposit,
Lambayeque Department, Peru
NI 43-101 Technical Report on Pre-feasibility Study Progress Report

23.0

DATE AND SIGNATURE PAGE

The effective date of this Technical Report, entitled Candente Copper Corporation,
Caariaco Project, Lambayeque Department, Peru, NI 43-101 Technical Report on
Pre-feasibility Study Progress Report is 18 January 2011.

signed and sealed

David G. Thomas, P.Geo., MAusIMM
dated: 4 March 2011

signed and sealed

Jay Melnyk, P.Eng.
dated: 4 March 2011

signed and sealed

Tony Lipiec, P.Eng.
dated: 4 March 2011

signed and sealed

Alexandra Kozak, P.Eng.
dated: 4 March 2011

Project No.: 165270

March 2011

Page 23-1