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Figure 1.1  Location map, Colpayoc Property

Colpayoc Property

Property Location and Description

The Colpayoc property is located in the Department of Cajamarca of northern Peru. The project is approximately 10 kilometers west of the town of Cajamarca and about 650 kilometers north-northwest of the capital city of Lima (Figure 1.1). Drive time from Lima to Cajamarca is approximately 16 hours along the Pan American Highway from Lima, past the city of Trujillo, then inland to Cajamarca. Daily commercial flights provide direct service to Cajamarca from Lima.

Drive time to the property from Cajamarca is less than an hour in good weather on gravel roads.

The project is in the northern Peruvian Andes at a base elevation of about 3,000 meters where high points of the rolling topography reach above 4,000 meters. The height of the rainy season is in February and March; the driest months are June, July and August. The Cajamarca climate would support year-round operating activity with special measures taken during the rainy season.

History

Modern day exploration work in the Cajamarca mining region dates back to the 1983 joint venture between BRGM and Newmont Mining Corporation that led to the discovery of the Yanacocha deposit. Yanacocha started production in 1993 and quickly became, and has remained, South America’s largest gold producer.

Colpayoc Project Exploration History

The first known exploration programs over the Colpayoc area were completed between 1994 and 1998 by Newcrest Peru S.A. (“Newcrest”), Granges Inc. (“Granges”), and Balaclava Mines Inc. (“Balaclava”). From 2007 to 2013, Estrella Gold Corporation (“Estrella”) conducted an exploration program on the Colpayoc property that provided the basis for two NI 43-101 technical reports stating a mineral resource: 1) the SRK Report (2010) (“SRK Report”); and 2) the Turner Report (2011) (“Turner Report”). Exploration programs conducted by these previous operators were focused on three zones: Daylight (previously known as the Northern Porphyry), Montura (previously known as the Southern Porphyry) and Rayo Grande.

Granges cut trenches with a bulldozer totaling approximately 2,450 meters and took 1,150 chip-channel samples over the Daylight Zone. This trench sampling program outlined a 300m x 400m gold geochemical anomaly area over the Daylight porphyry. Highlights from the trenching included:

Trench T-7: 122m @ 0.53 g/t Au
Trench T-8: 98m @ 0.47 g/t Au
Trench T-9: 206m @ 0.65 g/t Au
Trench T-10: 158m @ 0.51 g/t Au

Estrella’s exploration program consisted of mapping, surface geochemical sampling, geophysical surveying, and drilling. Estrella collected geochemical rock chip samples to add to the existing database from previous operators to produce a geochemical database of 453 rock chip samples in addition to Granges’ trench sampling. Estrella completed a ground magnetic survey of approximately 68 line-kilometers focused over the Daylight Zone with partial coverage of the Montura Zone, then merged its data with re-processed ground magnetic data from a previous survey by Newcrest to produce higher resolution RTP and 3D analytic signal plots.

 

Colpayoc Historic Drill Programs

Newcrest, Balaclava and Estrella conducted drilling campaigns at Colpayoc totaling 3,600 meters of core drilling (Newcrest and Estrella) and 500 meters of reverse circulation (“RC”) drilling (Balaclava). The Au-porphyry occurrence in the Daylight Zone was the primary target of these drill campaigns.

Estrella’s core drilling program in the Daylight Zone consistently confirmed the vertical and lateral continuity of the gold mineralization in the porphyry host rock in clay, sericite-clay, and chlorite alteration zones with varying degrees of quartz stockwork veining. Gold was found to be intimately related to magnetite, both as secondary disseminations and fracture filling. Estrella drilled ten holes for 1,556.3 meters and combined with Newcrest’s single hole of 147.6 meters, core drilling totals 1,703.9 meters in the Daylight Zone (Turner Report).

All of Estrella’s holes were angled to the west; as a result, the porphyry’s contact with limestone units to the east and southwest remains open. The porphyry system also remains open to the north and south as indicated by the geologic mapping. It is important to note that all drilling at the Daylight Zone has ended in alteration and anomalous levels of porphyry gold mineralization. Further drill testing is necessary to delineate the zone at depth.  Table 1.2 lists the drill holes completed by Estrella and the most significant mineralized intercepts.

Geology and Mineralization

Regional Geology

The Colpayoc property lies on the Miocene metallogenic belt of central and northern Peru which extends more than 900 km along the Cordillera Occidental. Most of the mineral occurrences along this belt of deposits are hosted by shelf carbonates and clastic sedimentary rocks of Mesozoic age and by overlying volcanics and coeval intrusive rocks. Base- and precious-metal mineralization was closely associated with the eruption of calc-alkalic volcanic rocks and emplacement of coeval dikes and stocks of Miocene age.

The Cordillera Occidental follows the northwesterly Andean structural trend through the Department of Cajamarca as shown by faults, fold axes and a linear trend of eight porphyry deposits along a 100 km extent from Michiquillay to La Granja. The northeasterly-trending Yanacocha-Chicama Structural Corridor is defined by an alignment of structural elements that includes the Yanacocha Mine complex.

The geology of this segment of the Cordillera Occidental in northern Peru features a sequence of Mesozoic marine sedimentary rocks measured at more than 2,000 meters thick overlain by a thick and extensive sequence of volcanic rocks of the Calipuy Group of Eocene to late Miocene age. The area of volcanic rocks includes several volcanic fields of pyroclastic, flow and domal rocks of rhyolitic to andesitic composition including the nearby Yanacocha Volcanic Field. Most of the volcanic rocks are widely altered in the vicinity of the region’s numerous mineral deposits and mining operations.

The Cajamarca region hosts multiple porphyry and epithermal deposits located along the Chicama-Yanacocha Structural Zone, a major control on magmatic activity in the region. The Yanacocha mine complex is the most prominent of these; the Colpayoc property lies 15 km southwest of the nearest Yanacocha deposit.

Geology of the Colpayoc Property

Geology of the Yanacocha District, Department of Cajamarca (INGEMMET, 1998)

The Colpayoc property is underlain by a Cretaceous marine sedimentary sequence including massive, thick bedded limestone in outcrop which has been folded into a northwest trending syncline verging both northwest and southeast.

Folding was followed by, or contemporaneous with, a mid-Miocene magmatic event that emplaced a granodioritic intrusive complex into the limestone sequence. Ground magnetics outline an area roughly two kilometers in diameter that indicate the intrusive is present at depth underlying much of the southern portion of the property. Historic scout drilling by Newcrest demonstrates that some areas along the perimeter of the magnetic anomaly (granodiorite intrusion) have formed exoskarn alteration in the host limestone.

Geology of the Colpayoc Project, Cajamarca District, Peru. (From Turner, 2011; map does not represent current property limits)

The Daylight porphyry is about 600–800 meters in diameter as interpreted from the magnetic data and surface geologic mapping. The Daylight Zone contains a quartz-biotite-feldspar porphyry with sericite-pyrite-quartz-magnetite alteration, and a younger hornblende porphyry with intense quartz-magnetite stockwork. The Montura porphyry target is located 600 meters southwest of the Daylight Zone and is about 300 meters in diameter based on the magnetic data. The magnetic data, surface geochemistry and alteration strongly suggest that the Montura and Daylight porphyries may coalesce at depth.

The porphyry contains three types of stockwork veining: 1) early quartz – pyrite  + chalcopyrite, 2) pyrite, and 3) quartz – magnetite.  Magnetite also occurs disseminated in the porphyry wall rock.  The entire gold (copper) mineralized zone is hosted within sericite-clay-, iron-oxide-altered intrusive rocks with variable intensity of stockwork veining.  The intrusion and mineralized zone are oxidized to depths starting at 50 meters from surface to deeper than 150 meters.

The Rayo Grande Zone is located 1.5 kilometers west of the Daylight Zone and is defined by a strong magnetic anomaly interpreted as a skarn target developed in Cretaceous clastic and calcareous sedimentary rocks.  Newcrest drilled one core hole which intersected clastic sedimentary rocks containing significant silver mineralization (42.0 m @ 54 g/t Ag) associated with high concentrations of manganese.

Deposit Type

The Colpayoc property hosts gold (copper) porphyry deposits with associated skarn and replacement mineralization that is typical of the metallogenic environment in northern Peru.  The porphyries of the Cajamarca region occur as a series of high-level intrusive apophyses and related zones of tectonism and brecciation that have been exposed to hydrothermal solutions and emplacement of multiple zones of stockwork fractures.

The Colpayoc property porphyry system is similar to gold-enriched porphyry systems found throughout northern Chile, Peru and Colombia. The Cerro Corona Au-porphyry (Goldfields) and Michiquillay Cu-Mo-Au porphyry (Southern Copper) are both within a 40-kilometer radius of Colpayoc. Michiquillay contains >1,100 million tonnes at 0.57% Cu, 0.013% Mo and 0.07 g/t Au (ProInversión, 2015). A zone with the highest average gold grades (0.35 g/t Au) is associated with high copper grades (0.9 – 1.0% Cu).  (Note:  proximity to these known porphyry deposits is not necessarily indicative of the mineralization found on the Colpayoc property.)

Mineral Resource Estimate

The mineral resource estimated is based on the technical report entitled “Technical Report on the Colpayoc Gold Property”, dated December 20, 2021 (the “report”)  and is limited to the Daylight Zone of the Colpayoc property and is an update to the mineral resource reported in the Turner Report. The mineral resource estimate has been prepared by Mr. David Briggs of RockRidge Partnership and Associates (“RockRidge”) under the supervision of Mr. Steven Park, C.P.G, the QP for this report. No new data pertaining to the mineral resource estimation of the Daylight Zone has been acquired since the Turner Report.

The mineral resource estimation workflow was as follows:

  • Informing data compilation and validation
  • Preparation of database in a format accepted by Datamine and Leapfrog software
  • Creation of geological models including lithology, alteration, weathering
  • Establishing mineralization domains
  • Selection of data, statistical analysis, compositing, capping and variography
  • Block modelling
  • Selection of estimation parameters
  • Block model validation
  • Generate pit shell constraining the resource
  • Classification and mineral resource statement

The mineral resource estimate was based on gold assays from 18 diamond drill holes (“DDH”) from the drill campaigns of Estrella, Newcrest and Balaclava (2,904 meters of drilling), and from a total of 2,450 meters of channel samples collected from a series of bulldozer-cut trenches by Granges. RockRidge included data from Balaclava RC drill holes after finding no significant difference in overall grade or metal content compared to DDH drill holes.

RockRidge’s geological modelling found that gold mineralization is restricted to the Porphyry Plagioclase Hornblende (“PPH”) unit in both the drilling and the surface sampling. Material logged as oxide/mixed zone exhibited higher gold grades than the sulfide material. No significant differences in gold grade were observed among the chlorite, clay-sericite, and sericite-clay alteration types predominant in the Daylight Zone. Based on these findings, RockRidge modelled the PPH unit as boundary to the mineralized domain using the surface geology expression as the constraining limit to the unit as there is limited drilling which intersects the PPH-Country Rock boundary at depth. The lateral extent and depth of the PPH unit remain open since they are not well defined by drilling.

A 3D block model was constructed to fill the mineralized domain solid for the Daylight Zone. The parent cells of the block model are orientated orthogonally and measure 10m E x 10m N x 5m RL. RockRidge used a globally assigned density of 2.21 g/cm³ for the Daylight Zone target.

Grade estimation for gold values was conducted using Ordinary Kriging (OK). Additional estimations of Nearest Neighbor (NN) and Inverse Distance Cubed (ID3) were used to check the OK estimate (Table 1.3).

Table 1.3 Comparison of grades by estimation method

Based on the work of RockRidge, the report considers that the Daylight Zone Mineral Resource has “reasonable prospects for eventual economic extraction” because it is suitable for open-pit mining as shown by constraint of the resource within a pit shell based on the parameters detailed in Table 1.4.  

Table 1.4 Resource pit shell parameters

The classified mineral resource estimates for the Daylight Zone are reported at a cut-off grade of 0.25 g/t Au as presented in Table 1.5. Based on the work of RockRidge, the report author considers this cut-off grade to be appropriate for reporting mineral resource amenable for exploitation by open pit mining methods.

 Mineral Resource Statement

Notes:

  1. Canadian Institute of Mining, Metallurgy and Petroleum Standards (2014) were used for reporting the Mineral Resource.
  2. Mineral Resources comprise blocks falling within the resource pit shell at, or above, the cut-off grade of 0.25g/t.
  3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
  4. Rounding may result in apparent discrepancies between tonnes, grade and contained ounces.
  5. The Effective Date of the Mineral Resource is December 20,2021

 

Transaction and Royalties

The titleholder of concession ‘El Ferrol No. 18’ is Sociedad Minera Chetilla S.R.L., a Peruvian corporation (the “El Ferrol Owner”). The Company,  through its Peruvian subsidiary Mineros Invirtiendo en Peru S.A.C., has an exclusive earn-in agreement (the “El Ferrol Agreement”), signed July 24, 2021, to acquire a 100% interest in this concession by making an aggregate payment of $250,000 in the following amounts on or before the following dates:

  • $50,000 (paid) following the date of registering the El Ferrol Agreement (the “Effective Date”);
  • $50,000 one (1) year from the Effective Date;
  • $75,000 two (2) years from the Effective Date; and
  • $75,000 three (3) years from the Effective Date.

(All amounts are USD unless otherwise stated.)

In addition, upon acquisition of the earned interest, The Company shall be deemed to have granted the owner a one percent (1%) net smelter returns (the “El Ferrol Royalty”) from the ‘El Ferrol No. 18’ concession but is is entitled to (but not required to) buy back the full El Ferrol Royalty within nine (9) years after acquisition by making a payment of $500,000 to the El Ferrol Owner.

The Company, through its Peruvian subsidiary Mineros Invirtiendo en Peru S.A.C., has an exclusive earn-in and shareholders agreement, signed July 1, 2021, to acquire up to a 100% interest in the ‘Francisco Jose IV’ and ‘Francisco Jose V’ concessions by acquiring up to 100% of the shares of Colpayoc S.A.C. in two stages over a period of four years by making total cash payments of $3,650,000 and exploration expenditures of $5,000,000.

Upon acquisition of the earned interest,i it shall be deemed to have granted the owners of Colpayoc S.A.C., on a pro-rata basis, an aggregate two percent (2%) net smelter return (the “Jose Royalty”) from the Francisco Jose IV and Francisco Jose V concessions.  The Company is entitled to (but not required to) buy back the full Jose Royalty within one (1) year of the commencement of commercial production by making aggregate payments to the owners of Colpayoc S.A.C. (on a pro-rata basis) as follows: 

  • $1,000,000 for each 0.5% of the Jose Royalty for up to 1.0% of the Jose Royalty;
  • $1,500,000 for the next 0.5% of the Jose Royalty; and
  • $2,000,000 for the remaining 0.5% of the Jose Royalty.
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