Related Documents and Other Information
Pulacayo PUG (underground) detailed interval drill database (xls)
Pulacayo PUD (surface) detailed interval drill database (xls)
Pulacayo Drill Results (pdf)
Pulacayo Drill Maps and Cross Sections
Pulacayo Concentrate Assays 2013 Pilot Mining (1, 2, 3, 4)
Pulacayo Central Shaft Inspection Report (pdf)
Pulacayo resource block model by Mercator (csv)
Pulacayo underground workings and Paca topo maps (dwg)
Tailing Metallurgical Report
Pulacayo Updated Mineral Resource Estimate by Mercator June 16, 2015
Pulacayo Feasibility Study by TWP January 17, 2013
Pulacayo Mineral Resource Estimate by Mercator Geo Services September 28, 2012
Pulacayo Mineral Resource Estimate by Mercator Geo Services October 19, 2011
Pulacayo Mineral Resource Estimate by Micon Int’l December 1, 2008
Pulacayo Preliminary Project Assesment by Micon Int’l June 25, 2010
Paca detailed interval drill database (xls)
Paca Drill Results (pdf)
Paca Open Pit Drill Maps and Cross Sections
Paca Resources Block Model by Mercator (csv)
Paca Updated Mineral Resource Estimate by Mercator September 9, 2015
Paca Mineral Resource Estimate by Micon Int’l March 1, 2007
The Pulacayo Project consists of seven concessions comprising approximately 3,550 hectares of mining concessions. There are two groups of concessions – one centered on the historical Pulacayo mine and town site consisting of four concessions comprising approximately 2,766 ha and the second located approximately 3.9 km directly south consisting of three concessions comprising approximately 784 hectares. Prophecy Developmemt Corp. (“Prophecy”) gained control of 100% of the property in January 2015 by acquiring all of the issued and outstanding shares of ASC Bolivia LDC, an indirectly held subsidiary of Apogee Silver Ltd. (“Apogee”) ASC Bolivia LDC controls the mining rights to the concessions through a separate joint venture agreement with the Pulacayo Mining Cooperative which holds the mining rights through an agreement with the state owned Mining Corporation of Bolivia (“COMIBOL”).
The Project is fully permitted with secured social licenses for mining and processing. During December 2012, the Environmental Impact Assessment (“EIA”) for the Pulacayo project was submitted to Bolivia’s Ministry of Environment and Water and it was approved in October 2013. The submission was the result of over 30 months of technical studies and consultations, including a comprehensive water management plan, the feasibility study, archeological studies, flora and fauna studies, mine closure planning, social baseline studies, and results from two years of public consultations with local communities. The approval of the EIA allows for mine and concentrator construction and operation to a maximum production rate of 560tpd.
Map 1: General location map
Map 2: Pulacayo project location relative to other mining activity
Location and Access
The Pulacayo Project is located 18 km northeast of the town of Uyuni in the Department of Potosi in southwestern Bolivia. It is located 460 km south-southeast of the national capital of La Paz and 145 km straight line distance (207 road km) southwest of the city of Potosi, which is the administrative capital of the department Maps 1 and 2). Pulacayo is accessible by all season paved and gravel roads from La Paz via Oruro to Uyuni, and by a newly paved road from Potosi. The town of Uyuni has a newly developed asphalt airstrip which now accommodates daily scheduled air service from La Paz by two regional carriers. It also has commercial railway connections to the cities of Oruro, Potosi and Villazon, and links to the borders of Argentina and Chile. Railway connections to Chile link to major shipping ports at Antofagasta and Porto Mejillones.
The discovery of silver mineralization at Pulacayo dates back to the Spanish Colonial period (c1545). Although production details during this period are unknown, remnants of colonial town sites suggest a sizeable workforce was employed.
The Pulacayo deposit was rediscovered in 1833 by Mariano Ramirez, and by 1857 the Huanchaca Mining Company of Bolivia was formed with the support of French investors. Revenue from the mine funded the first railway line in Bolivia which connected the town of Pulacayo to the port of Antofagasta, Chile in 1888. By 1891 annual silver production reached 5.7 million ounces and the mining operations at Pulacayo had become the second largest in Bolivia, exceeded only by those at nearby Cerro Rico de Potosi, which is arguably the largest silver deposit in the world.
Production was predominantly from the rich Tajo vein system which extended over a strike length of 3.0 km and to a depth of 1000 meters. By 1923 much of the active mining levels had become flooded. Subsequently the mine was purchased by Mauricio Hochschild in 1927. The workings were dewatered and the Cuarto vein system was developed and exploited. It was during this period that the 2.8 km long San Leone Tunnel was developed to facilitate ore haulage and the first recorded exploration efforts in the area were undertaken. The mines were nationalized by the Bolivian Government in 1952 with operations turned over to COMIBOL (the newly established Bolivian National Mining Enterprise). Operations were suspended in 1959.
The total production from the Pulacayo mine during this period as estimated by the National Geological and Mineral Service of Bolivia (SERGEOTECHMIN) is 678 million ounces of silver, 200,000 tons of zinc and 200,000 tons of lead (SERGEOTECHMIN Bulletin No. 30, 2002, after Mignon 1989). In 1962, the Cooperativa Minera Pulacayo was founded and leased the mine from COMIBOL. The cooperative continues to conduct rudimentary, small scale mining to the present day, exploiting narrow very high grade silver veins in the upper part of the mine, above the San Leone Tunnel level.
Exploration and Drilling
Apogee commenced exploration on the Pulacayo-Paca property in January 2006 subsequent to signing a joint venture option agreement with Apex Silver Limited whereby it could earn up to 60% of Apex Silver Limited’s interest in the concessions. Apogee has been the operator of all exploration initiatives since that time which have included detailed topographic surveys, detailed geological mapping and sampling on surface and in the historical underground workings, geophysical surveys, and extensive diamond drilling. Since 2006, Apogee has completed 244 diamond drill holes totaling 64,728 meters from both surface and underground platforms at Pulacayo, and 80 diamond drill holes totaling 14,814 metres at Paca.
Diamond drilling at Pulacayo has been carried out in 5 phases since Apogee initiated work in January 2006. Phase I was conducted between January and June 2006 and comprised 9 holes totaling 1,826 metres including 4 holes which totaled 770 metres from underground in the historical mine workings. The objective of this phase was in part to corroborate some previous drilling by Apex Silver Limited but the program also successfully demonstrated the presence of significant amounts of disseminated, veinlet and stockwork mineralization over wide intervals between veins which had been exploited during the historical mining activities.
Phase II was conducted during November and December of 2006 and included 10 holes totaling 2,322 metres. This program demonstrated that in addition to residual zones of disseminated, vein let and stockwork mineralization there also remained high grade mineralized shoots which had not been exploited by the previous mine operators.
Phase III was carried on between November 2007 and September 2008 and included 98 holes totaling 24,340 metres. Included in this total were 30 holes totaling 5,911 metres which were drilled from underground in the historical mine workings. The culmination of these efforts was the disclosure of an initial independent estimate of mineral resources prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves (the “CIM Standards”) referenced in NI 43-101 and disclosed in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) for Pulacayo prepared by Micon International Limited (“Micon”). (See the technical report titled “Technical Report for the Pulacayo Project, Potosí District, Quijarro Province, Pulacayo Township, Bolivia” dated December 2008 and filed under the SEDAR profile of Apogee at www.sedar.com).
Phase IV was carried out between January 2010 and September 2011 and included 82 diamond drill holes totaling 29,986 metres. The objective of this program was to extend the known resources to the east and to greater depth with particular focus on a higher grade core area which had been identified in previous campaigns. This phase concluded with the release of an updated independent estimate of mineral resources prepared in accordance with the CIM Standards and disclosed in accordance with NI 43-101 for Pulacayo prepared by Mercator Geological Services Limited. (See the technical report titled “Mineral Resource Estimate Technical Report for the Pulacayo Ag-Pb-Zn Deposit Pulacayo Township, Potosi District, Quijarro Province, Bolivia” dated October 19, 2011 and filed under the SEDAR profile of Apogee at www.sedar.com).
Phase V was carried out between September and December 2011 and included 45 diamond drill holes totaling 6,254 metres. This drilling program was undertaken to delineate the near surface silver oxide mineralization above the sulphide resources at Pulacayo. Mercator Geological Services prepared an initial independent resource estimate of the oxide mineralization at Pulacayo in accordance with the CIM Standards and disclosed in accordance to NI 43-101. (See the technical report titled ”Updated Mineral Resource Estimate Technical Report for the Pulacayo Silver-Lead-Zinc Deposit Pulacayo Township, Potosi District, Quijarro Province, Bolivia” dated September 28, 2012 and filed under the SEDAR Apogee profile at www.sedar.com).
Apogee carried out an extensive drilling program at Paca between March and December of 2006 which included 80 diamond drill holes totaling 14,814 meters. This drilling campaign concluded with the release of an initial independent estimate of mineral resources prepared in accordance with the CIM Standards and disclosed in accordance to NI 43-101 for Paca by Micon. (See the technical report titled “Technical Report on the Mineral Resource Estimate for the Paca Project, Potosí District, Quijarro Province, Thols, Pampa, Huanchaca and Pulacayo Townships, Bolivia” dated March 2007 and filed under the SEDAR Apogee profile at www.sedar.com).
Current Resource Estimate – Pulacayo Deposit
An independent mineral resource estimate for the Company’s Pulacayo silver-zinc-lead deposit, was prepared in accordance with the CIM Standards and disclosed in accordance with NI 43-101. The effective date of the estimate is June 16th, 2015.
The Pulacayo deposit is located in Bolivia, 107km northeast of Sumitomo Corporation’s San Cristobal silver mine, 185km southwest of Coeur Mining, Inc.’s San Bartolome silver mine, and 139km north of Pan American Silver Corp’s San Vicente silver mine. The mineral resource estimate was prepared by Mercator Geological Services Limited (“Mercator”) under supervision of Michael Cullen, P.Geo., who is an independent Qualified Person under NI 43-101. Results of the mineral resource estimate prepared by Mercator for the Pulacayo deposit are presented below in Table 1. A technical report documenting the resource estimate and prepared in accordance with NI 43-101 is filed by the Company on the System for Electronic Document Analysis and Retrieval (SEDAR)
Table 1: Pulacayo Indicated and Inferred Mineral Resource Statement Details
|Pulacayo Mineral Resource Statement – Effective June 16, 2015|
|Ag Eq. Cut-Off (g/t)||Category||Tonnes**||Ag (g/t)||Pb (%)||Zn (%)||Ag Eq. (g/t)|
- Mineral resources are estimated in conformance the CIM Standards referenced in NI 43-101.
- Raw silver assays were capped at 1,700 g/t, raw lead assays were capped at 15% and raw zinc assays were capped at 15%.
- Silver equivalent Ag Eg. (g/t) = Ag (g/t)*89.2% + (Pb% *(US$0.94/ lb. Pb /14.583 Troy oz./lb./US$16.50 per Troy oz. Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag)*10,000*82.9%).
Metal prices used in the silver equivalent calculation are US$16.50/Troy oz. Ag, US$0.94/lb Pb and US$1.00/lb Zn. Metal recoveries 89.2% Ag. 91.9% Pb. 82.9% Zn. used in the silver equivalent equation reflect historic metallurgical results disclosed previously by Apogee Silver Ltd.
- Metal grades were interpolated within wireframed, three dimensional silver domain solids using Geovia-Surpac Ver. 6.6.1 software and inverse distance squared interpolation methods. Block size is 10m(X) by 10m(Z) by 2m(Y). Historic mine void space was removed from the model prior to reporting of resources.
- Block density factors reflect three dimensional modeling of drill core density determinations
- Mineral resources are considered to have reasonable expectation for economic development using underground mining methods based on the deposit history, resource amount and metal grades, current metal pricing and comparison to broadly comparable deposits elsewhere.
- Rounding of figures may result in apparent differences between tonnes, grade and contained ounces
- Mineral resources that are not mineral reserves do not have demonstrated economic viability
- *Mineral resource statement cut-off value; resource statement values are presented in bolded form.
- **Tonnes are rounded to nearest 10,000.
Between 2006 and 2012, a total of 69,739 metres of diamond drilling (226 surface and 42 underground drill holes) was conducted at Pulacayo, results of which support the mineral resource estimate reported herein. Verification and validation checks on the sampling method, sample shipment documentation and analytical data were carried out by Mercator in support of the current resource estimate and Prophecy independently carried out additional database checks with satisfactory results. Review of Quality Control and Quality Assurance program results that include analyses for duplicate, blank, certified reference material and third party check sample materials was also performed by Mercator with acceptable results. The methods and assumptions used to interpolate metal grade including variography, search ellipse orientation and dimensions, drill hole density, and geological interpretation are considered reasonable for this type of epithermal mineral deposit. Block model results were compared to assay composites and ordinary kriging results and all show acceptable correlation to the underlying data. The Pulacayo site is currently permitted for production at a milling rate of 560 tonnes per day and no known legal, political, environmental, or other risks that would materially affect potential future development have been identified by Prophecy at the effective date of the current (June 16th, 2015) mineral resource estimate.
The contained metals within the June 16th, 2015 resource estimate by Mercator are presented in Table2.
Table 2: Contained Metals In June 16th, 2015 Pulacayo* mineral resource estimate
|Metal||Indicated Resource||Inferred Resource|
|Silver||21.7 million oz.||4.7 million oz.|
|Zinc||101.6 million lbs.||35.3 million lbs.|
|Lead||70.3 million lbs.||19.1 million lbs.|
*Based on the resource estimate Ag Eq. cut-off value of 500 g/t; figures are rounded to nearest 100,000
Selected core drilling highlights are presented in Table 3.
|hole Nº||from – to (m)||int (m)||Ag (g/t)||Pb (%)||Zn %||Vertical distance from
|PUD005||96.2 – 108.0||11.9||689||1.9||1.4||-67.5|
|PUD007||70.0 – 96.8||26.8||517||2.3||4.2||-44.5|
|PUD057||374.0 – 378.0||4.0||1,184||0.8||2.3||-137.5|
|PUD069||281.0 – 294.0||13.0||624||2.1||4.2||-46.0|
|PUD109||293.6 – 298.4||4.8||3,607||3.8||4.1||-30.4|
|PUD118||174.0 – 184.0||10.0||1,248||1.7||2.6||-93.9|
|PUD134||128.2 – 151.5||23.3||514||1.3||1.9||-55.7|
|PUD150||290.0 – 302.0||11.2||882||0.4||0.6||-75.2|
|PUD159||343.0 – 354.0||11.0||790||0.6||0.6||-116.6|
|PUD170||237.0 – 239.0||2.0||3,163||0.1||0.9||-32.5|
Total 137 holes: 29 holes (21%) with Ag 1,000 to 10,000 g/t, 67 holes (49%) with Pb or Zn >5%
Current Resource Estimate – Paca Deposit
An independent mineral resource estimate for the Paca deposit, part of the Company’s Pulacayo silver-zinc-lead project, was prepared in accordance with the CIM Standards disclosed according to NI 43-101. The effective date of the mineral resource estimate is September 9, 2015.
The Paca deposit is located in Bolivia approximately 7km north of the Company’s Pulacayo deposit, which is 107km northeast of Sumitomo Corporation’s San Cristobal silver mine, 185km southwest of Coeur Mining, Inc.’s San Bartolome silver mine, and 139km north of Pan American Silver Corp.’s San Vicente silver mine. The mineral resource estimate was prepared by Mercator under the supervision of Michael Cullen, P.Geo., who is an independent Qualified Person as set out in NI 43-101. Results of the mineral resource estimate prepared by Mercator for the Paca deposit are presented below in Table 4. A technical report documenting the resource estimate and disclosed in accordance with NI 43-101 is filed by Prophecy under its company profile on www.SEDAR.com
Table 4: Paca Inferred Mineral Resource Statement Details
|Paca Mineral Resource Statement – Effective September 9, 2015|
|Ag Eq. Cut-Off (g/t)||Category||Tonnes**||Ag (g/t)||Pb (%)||Zn (%)||Ag Eq. (g/t)|
- Raw silver assays were capped at 1,050 g/t, raw lead assays were capped at 5% and raw zinc assays were capped at 5%.
- Silver equivalent Ag Eq. (g/t) = Ag (g/t) + (Pb% * (US$0.94/lb. Pb/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag.)*10,000) + (Zn% * (US$1.00/lb. Zn/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag.)*10,000; 100% metal recoveries are assumed based on lack of comprehensive metallurgical results.
- Metal prices used in the silver equivalent calculation are US$16.50/Troy oz. Ag, US$0.94/lb Pb and US$1.00/lb. Zn and reflect those used in the June 16, 2015 Pulacayo mineral resource estimate by Mercator.
- Metal grades were interpolated within wireframed, three dimensional solids using Geovia-Surpac Ver. 6.7 software and inverse distance squared interpolation methods. Block size is 5m (X) by 5m (Z) by 2.5m (Y). Historic mine void space was removed from the model prior to reporting of resources.
- The block density factor of 2.26 reflects the average value of 799 density measurements.
- The mineral resource is considered to have reasonable expectation for economic development using underground mining methods based on the deposit history, resource amount and metal grades, current metal pricing and comparison to broadly comparable deposits elsewhere
- Mineral resources that are not mineral reserves do not have demonstrated economic viability.
- *The resource estimate cut-off value is 300 g/t Ag Eq. and resource estimate values are presented in bold type.
- **Tonnes are rounded to nearest 10,000.
The resource estimate is based on results of 97 diamond drill holes and 1 reverse circulation drill hole totaling 18,160 metres completed between 2002 and 2007 (see map below). Verification and validation checks on the sampling method, sample shipment documentation and analytical data were carried out by Mercator in support of the current resource estimate and Prophecy independently carried out additional database checks with satisfactory results. Review of available quality control and quality assurance program results that include analyses for duplicate, blank, certified reference material and third party check sample materials was also performed by Mercator with acceptable results. The methods and assumptions used to interpolate metal grade including variography, search ellipse orientation and dimensions, drill hole density, and geological interpretation are considered reasonable for this type of epithermal mineral deposit. Block model results were compared to assay composites and ordinary kriging results and all show acceptable correlation to the underlying data.
The contained metals within the September 9, 2015 resource estimate by Mercator are presented below in Table 5.
Table 5: Contained Metals in September 9, 2015 Paca mineral resource estimate
|Contained Metals in September 9th, 2015 Paca* Mineral Resource Estimate|
*Based on the resource estimate Ag Eq. cut-off value of 300 g/ and 100% recovery; figures are rounded to the nearest 100,000th increment
Only minimal historical mining has occurred at Paca. The geology of the Paca deposit includes a core zone of feeder-style mineralization associated predominantly with brecciated andesite, plus additional zones of shallowly dipping mantos-style mineralization that are hosted by the surrounding volcano-sedimentary sequence. The Paca deposit remains open at depth and along strike at present. The Company believes that there is potential to expand the existing resource and to locate additional mineralization in the vicinity of the Paca deposit as well as in the vicinity of the nearby Pulacayo Mine (refer to Prophecy’s press release dated September 9, 2015 regarding sampling results from the Paca North, El Abra, Pacamayo and Pero priority targets).
Selected core drilling highlights for the Paca deposit that were previously disclosed by Apogee are presented in Table 6 below. See Map 3 for the drill hole locations.
Table 6: Selected core drilling highlights for the Paca deposit
|hole Nº||from – to (m)||int (m)||Ag (g/t)||Pb (%)||Zn %||Vertical distance from
|PUD003||11.0 – 28.0||17.0||260||0.9||0.1||-7.8|
|PUD008||18.0 – 33.5||15.5||314||1.0||0.4||-12.7|
|PUD029||12.0 – 22.3||10.3||436||0.04||0.03||-8.5|
|PUD031||0.0 – 37.0||37.0||217||0.9||0.3||0.0|
|PUD062||10.0 – 52.0||42.0||406||0.8||0.1||-7.1|
|ESM-2||0.0 – 37.0||37.0||433||1.4||1.2||0.0|
The Paca mineralization starts from surface, with approximately 95% of the resource at the cut-off value of 300 g/t Ag Eq. occurring within 100m of the surface (see Figure 1 below). Portions of the deposit may also be amenable to open-pit mining and this will be evaluated further in the future. The Company’s research has shown that relatively few silver open pit deposits have been defined at resource cut-off values of 300 g/t Ag Eq. or more. Prophecy is conducting preliminary internal mine design and planning assessments for Paca that incorporate a pilot mining operation, with mined materials to be processed at a proposed mill constructed on site.
Figure 1: Section of the Paca deposit
Map 3: Paca deposit drill hole locations
Historic Resource Estimate – Pulacayo Deposit
The historic Pulacayo mineral resource estimate by Mercator that was prepared for Apogee has an effective date of September 28, 2012. The same estimate and associated model were subsequently used as the resource base of the Pulacayo project feasibility study prepared by TWP Sudamerica Ltd., with an effective date of January 17, 2013. Results of both projects were disclosed previously by Apogee in accordance with NI 43-101 and are now historic in nature. Table 7 below presents a tabulation of the historical Pulacayo resource estimate.
Table 7 Historic Pulacayo deposit resource estimate detail
|Combined Open Pit and Underground Resources including Oxide and Sulphide Zones|
|Open Pit Resources (Base case 42o Average Pit Wall Slope Angle)|
|Open Pit Indicated||Oxide||1,500,000||95.9||0.96||0.13||4,626,000||NA||NA|
|Open Pit Inferred||Oxide||248,000||71.2||0.55||0.31||569,000||NA||NA|
|Open Pit Indicated||Sulphide||9,283,000||44.1||0.66||1.32||13,168,000||135.90||269.54|
|Open Pit Inferred||Sulphide||2,572,000||33.4||0.92||1.36||2,765,000||51.99||76.88|
|Waste Rock||71,679,000||NA||NA||NA||Strip Ratio 5.3 : 1|
|Under Resources (All blocks blow 4,159 m ASL with NSR>USD$58)|
The historical estimate is not considered reliable by the Company because it is three and a half years old. It is presented here to assist the reader in considering the current Pulacayo deposit resource estimate. Though some of the methods and assumptions used in the historical estimate are still valid others are not. The historical estimate assumed a 42° pit wall slope for the open pit resources. The key parameters included an NSR cut-off of US$13.20for open pit sulfide resources and $US 23.10 for open pit oxide resources, and $58.00 for underground resources below 4159 m ASL, metal prices of US$25.00/Oz silver, US$0.89/lb lead, and US$1.00/lb zinc where lead and zinc do not contribute to revenue in the oxide zone, and contributing 1.0 metre assay composites were capped at 1500 g/t Ag, 15% Pb, and 15% Zn. The key methods included use of inverse distance squared algorithm to estimate grade, variography to assess grade distribution, and use of a proprietary NSR calculator. The historical estimate uses the same resource categories described in Sections 1.2 and 1.3 of NI 43-101. The historical estimate does not include any more recent estimates or data available to the issuer. The work needed to upgrade the historical estimate as current mineral resources is to use current metal prices in the NSR calculation. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources. The Company is not treating the historical estimate as current mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Historic Resource Estimate – Paca Deposit
The historic Paca deposit mineral resource estimate by Micon was prepared for Apogee and has an effective date of January 16, 2007. The estimate was disclosed previously by Apogee in accordance with NI 43-101 and is now historic in nature. Table 8 below presents a tabulation of the full resource estimate developed by Micon.
Table 8: Historic Paca deposit resource estimate detail
|Resource Class||^Tonnes||Ag (g/t)||Pb %||Zn %||Ag (Oz)||Pb (Mlbs)||Zn (Mlbs)|
|Open Pit Inferred||18,416,100||43.04||0.68||1.16||25,484,000||276.08||470.96|
Notes: *Rounded; strip ratio 3.1 to 1 for constraining pit shell; mineral resources that are not mineral reserves do not have demonstrated economic viability.
The historical estimate by Micon is not considered reliable because it is eight years old. It is presented here to assist the reader in considering the current Paca deposit resource estimate. Though some methods and assumptions used are still valid others are not. The historical estimate assumed the up-dip and down-dip limits of the mineralization domains were defined as the lesser of half of the distance to the next barren drill hole or 25 metres, not to cap grade values, and a 45° pit wall slope for the open pit resources. The key parameters included a gross metal value cut-off of $US 20 for mineralized areas and metal prices of US$10.43/Oz silver, US$0.55/lb lead, and US$1.30/lb zinc. The key methods included use of length weighted composite calculation, inverse distance squared algorithm to estimate grade, variography to assess grade distribution, and a proprietary NSR calculator. . The historical estimate uses the same resource categories described in Sections 1.2 and 1.3 of NI 43-101. The historical estimate does not include any more recent estimates or data available to the issuer. The work needed to upgrade the historical estimate as current mineral resources is to use current metal prices and calculation of NSR. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources. The Company is not treating the historical estimate as current mineral resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Management Comment on Historic Tailings
On February 2, 2015, Prophecy published assay results from ALS Minerals Ltda., for samples obtained during the reconnaissance sampling program of tailings piles materials. The tailings piles are the remaining materials from processing ore extracted from the Pulacayo mining district between approximately 1850 and 1950. The ore was processed by a mill located on site which has since been dismantled. A total of 299 samples from 12 tailings piles were obtained. Assay results from the tailings samples are presented in Table 9.
Table 9: Tailings sampling results reported on February 2, 2015 by Prophecy
|Tailings Pile||WxLxH (m)||Average
Refer to Prophecy’s news release dated Feb 2, 2015 for additional information
Management Comment On Milling and Processing
Prophecy’s management has evaluated the options of on-site milling (at Pulacayo) vs. toll milling at Potosi.
Potosi is located approximately 180km from the Pulacayo project and is connected by a recently paved highway which is in excellent condition. Potosi has a population of approximately 180,000 inhabitants and hosts the existing Cerro Rico deposit, with its centuries of silver-lead-zinc mining production that is still active to this day. There are approximately 100 privately owned, small-sized (i.e. 50 to 500 tonnes per day) facilities capable of toll milling and processing ore that produce zinc and lead concentrates sold to a number of active traders such as Trafigura Beheer BV, Glencore plc and Louis Dreyfus Commodities (Suisse) S.A. A number of those facilities have decreased their processing activities due to a lack of quality feed resulting from a combination of low metal prices and the government’s increasing safety restrictions on mining at Cerro Rico.
Prophecy’s representatives visited over 30 milling facilities in Potosi and received a number of toll milling and custom milling offers. The Company has calculated the all-in cost to be USD$35 to USD$40 per tonne, which includes transportation of ore from Pulacayo to Potosi, labor, power, water, equipment rental, and re-agents to produce zinc and lead concentrates.
During over 18 months (2012 to 2013) of trial mining and toll-milling by Apogee, Pulacayo produced high grade silver-lead (6,000 g/t Ag) and silver-zinc flotation concentrates that were sold to Trafigura Beheer BV (see Apogee press release dated January 15, 2013). The Company is currently working towards securing concentrate off-take agreements at commercially competitive terms. The potential for future project financing from this business sector is also being investigated. The historical grade information is not considered reliable by the Company because it is three years old. It is presented here to assist the reader in considering the Pulacayo project. It is not known whether the mining and milling methods used during the trial would be similar to those used by the Company because the Company has not decided on mining and milling methods. The trial mining used the shrinkage stoping method and toll milling used crushing and milling followed by flotation. The historical grade information does not include any more recent information available to the issuer. The historical grade information cannot be upgraded as current grade information; rather new trial toll milling must be completed. The Company is not treating the historical grade as current.
In the past months, the Company has worked with multiple Chinese and local Bolivian suppliers to obtain the best equipment, procurement and construction (“EPC”) proposal terms for construction of a mineral processing facility at the Pulacayo project. The EPC proposals include: concrete foundation, equipment housing, purchase and assembly of crusher, mill, flotation cells, water and power connections, and a tailings storage facility. The processing capacity of the tendered facilities range from 200 tonnes per day to 500 tonnes per day with proposed pricing ranging from USD$4-8 million with a 10-month construction period. The approved designated facility site is located 2km from the Pulacayo mine and is permitted to process up to 560 tonnes of feed per day.
Depending on funding availability and market conditions, the Company may pursue toll milling at Potosi or on-site milling at Pulacayo or both in parallel.
Management Comment On Mining
Prophecy’s engineering team completed detailed mine plans (that are not the part of any economic analysis) , that encapsulate 80% of the Pulacayo deposit resources.
Apogee, the former owner of the property, completed over 1,200m of tunneling (2.5m x 2.5m) at level 0 in its 2012-2013 trial mining run that produced 7,547 tonnes of ore grading 339 g/t Ag, 3.8% Pb and 3.1% Zn (refer to the Company’s news release dated December 5, 2014). Upon close mine inspection, Prophecy’s engineering team determined: (1) there are resources left over from Apogee’s mined areas; and (2) minimal additional tunnel development is required to access the nine planned stopes.
The Company is planning and designing stopes at level 0 and level +40 based on existing drill hole data, sampling data and historic mining records with the goal of sustained mining at the rate of 300 tonnes per day for the first 12 months and will postpone central shaft rehabilitation to access resources below level 0. In addition to the Company’s Pulacayo deposit, its Pacamayo and Paca deposits could potentially be turned into sources for mill feed upon completion of certain geological, engineering, and feasibility work. The Pacamayo deposit is being actively mined on a small scale by local workers and recent samples taken by Prophecy returning silver grades between 2,548 g/t and 7,380 g/t (refer to the Company’s news release dated September 18, 2015). The current inferred resource estimate* prepared according to the CIM Standards and disclosed according to NI 43-101 for the Paca deposit is estimated at 1.26 million tonnes at 363 g/t Ag, 1% Zn and 1% Pb, with 95% of the resource being within 100m from the surface. Recent surface samples taken 1km north of the Paca deposit returned an assay of 833 g/t Ag (refer to the Company’s news release dated August 27, 2015).
*inferred resources do not have demonstrated economic viability, are speculative, and are not to be relied on
The Company performed an equipment audit and analysis at Pulacayo and concluded that there is sufficient equipment to start mining at the rate of 50 tonnes per day, without any additional capital expenditure. Existing equipment includes 25 2-tonne wagons, three battery powered locomotives, 10 stopers, a fan, and a compressor — all of which, are operational and in good condition. Ample power and water are available on site to support continued mining operation at the minimum of 50 tonnes per day. A shrinkage stoping method will be utilized with two to three men per shift, three shifts per day for each stope.
It will require approximately 90 days for the Company to start mining at Pulacayo, which includes notification to, and receipt of approval from, relevant agencies for Prophecy’s mine plan, procurement of fuel, lubricants and explosives, and sourcing experienced labor from the Pulacayo cooperatives who are residents of the town of Pulacayo, located 1km from the mine.
To achieve production rates of 300-500 tonnes per day would require modest power transformer upgrade and extra sets of mining equipment totaling approximately USD$2–3 million (300tpd vs. 500 tpd) in order to commission multiple stope development in parallel.
The Company continues to study optimal mining production and processing scenarios and will announce a production decision at the conclusion of the study.
Bolivian President, Evo Morales in December 2015 visited New York and several European cities accompanied by a large number of Bolivian officials and businessmen to promote Bolivia as an attractive foreign investment destination. Credit rating agencies recently upgraded Bolivia’s debt rating, highlighting its prudent fiscal discipline, stable currency in a growing economy, strengthened legal framework to protect private investment and reduced nationalization risk. The Company believes the Pulacayo project is an attractive silver mining project backed by a local community with a strong mining tradition in an increasingly foreign investment-friendly jurisdiction. Content below is extracted from an article published in The Financial Times on July 15, 2015
“the credit rating agency Fitch upped the Andean country’s rating by one notch – to ‘BB’ from ‘BB-‘, with a stable outlook. The move comes a year after Standard & Poor’s upgraded Bolivia’s rating… Since Mr. Morales took office nine years ago, a combination of gas exports to neighbouring Argentina and Brazil — plus mineral shipments to Asia —, coupled with prudent macroeconomic and fiscal policies, and popular welfare programmes, have tripled the size of Bolivia’s economy to about $30bn.
Despite Mr. Morales’s penchant for nationalizations and his sometimes fierce anti-capitalist rhetoric — and unlike other leftist allies, such as embattled Venezuela — Bolivia has taken prudent advantage of the now-fading commodities boom.
Under Mr. Morales, GDP growth has averaged 5 per cent a year, poverty rates have almost halved, while a gas boom fueled a consumption boom. From Fitch:
…Fitch forecasts that economic activity could keep pace at an average 4.4% in 2015-2017, driven by robust public investment in diversification and industrialization projects and eased domestic liquidity conditions.
But as gas, which is set in relation to a basket of fuel oils that is sensitive to the international price of crude, accounts for about 46 per cent of Bolivia’s exports… Bolivia’s financial position has been bolstered by its foreign reserves standing at almost $15bn, Fitch does not seem to be too worried. As they said in a statement:
Bolivia has improved the sustainability of its hydrocarbons production, the largest source of exports, fiscal revenue and domestic investment. Bolivia’s robust external buffers and ample fiscal policy space render its economy better-placed to absorb adverse shocks and adopt counter-cyclical policies than other commodity exporters in the ‘BB’ category.
Regulatory uncertainty and nationalization risks have eased. Government and businesses agreed on reforms to the investment regime that facilitate private participation in sectors that are not subject to state control and recognize independent conciliation and arbitration for contractual disputes. The authorities ceased nationalizations in 2013 and have paid USD$690 million (2% of GDP) in compensation to multinational companies. (emphasis added)
Pulacayo Background and District Potential
Historic Pulacayo production was predominantly from the Tajo vein system which extends over a strike length of more than 3 km and to a depth of at least 1,000 metres (Figure 2). Total production from the Pulacayo mine during the period 1857 to 1959 is estimated by the National Geological and Mineral Service of Bolivia (SERGEOTECMIN) to be 678 million ounces of silver, 200,000 tons (181,400 tonnes) of zinc and 200,000 tons (181,400 tonnes) of lead (SERGEOTECMIN Bulletin No. 30, 2002). Prior resource drilling only covered approximately 20% of the Tajo vein system strike length. With new drilling, Prophecy feels that there is potential to discover additional resources along the Tajo structure. The Company is examining Pulacayo as a large-scale district silver project that includes a number of other silver occurrences and anomalies additional to the Tajo system. These include the Paca, Pacamayo, El Abra, Pero prospects that all occur within 10km of the Pulacayo site. The Company classifies these as having potential for discovery of future mineral resources through application of modern exploration techniques. The reader is directed to the Company’s press releases dated August 27, September 9, September 18, 2015 and its website for further project information.
Highlights of reconnaissance exploration results from these areas are given in Table 10.
El Abra 250m x 110m: Surface Outcrops
|Ag (g/t)||Sb (%)||Pb (%)||Ag Eq
Pacamayo 2m x 26m: Underground Samples
|Ag (g/t)||Sb (%)||Pb (%)||Zn (%)||Cu (%)||Ag Eq
Paca North 400m x 100m: Surface Outcrops
|Ag (g/t)||Pb (%)||Zn (%)||Ag Eq
Pero 400m x 300m: Surface Outcrops
|Ag (g/t)||Sb (%)||Pb (%)||Ag Eq
Figure 2: Tajo vein system
Qualified Persons and Update Date
The technical content of this web site page and the related documents and other information listed herein were reviewed and approved by Christopher M. Kravits, CPG, LPG, who is a Qualified Person within the meaning of NI 43-101. Mr. Kravits is a consultant to the Company and serves as its Qualified Person and General Mining Manager.
This web site page was last updated, reviewed and approved by Christopher M. Kravits March 10, 2016.