untitledSUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2 Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763
RUSORO MINING LTD.
OF THE EXPANSION OF PRODUCTION AT CHOCO 10
BOLIVAR STATE, VENEZULA
3 June, 2009
Mary Jean Buchanan, Eng., M.Env., Met-Chem Canada Inc. Michael Godard, P.Eng., Micon International Limited Christopher A. Jacobs, CEng, MIMMM, Micon International Limited Jeremy P. Haile, P.Eng., Knight Piésold Ltd. Christopher R. Lattanzi, P.Eng., Micon International Limited Dave Laudrum, P.Geo. James Leader, P.Eng., Micon International Limited John H. Perry, P.Geo. Sam Shoemaker, Jr., MAusIMM Ian Ward, P.Eng. John Zbeetnoff, P.Geo.
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4.0  PROPERTY DESCRIPTION AND LOCATION 28  4.1  LOCATION...............................................................................................................28  4.2  PERMITS AND LICENCES.....................................................................................30  4.3  ROYALTIES, PAYMENTS AND OTHER AGREEMENTS..................................32 
5.1  TOPOGRAPHY, CLIMATE AND VEGETATION.................................................34  5.2  ACCESS AND POPULATION CENTRES..............................................................34  5.3  AVAILABILITY OF POWER, WATER AND PERSONNEL................................34 
12.1.1  Sampling Programs............................................................................................59  12.1.2  Core Recovery ...................................................................................................62 
13.1.1  Pre-March, 2005 ................................................................................................68  13.1.2  Bolivar Gold: 2003 – March, 2006....................................................................68  13.1.3  Gold Fields Procedures ......................................................................................70 
14.1.1  Summary ............................................................................................................77  14.1.2  Data Validation and Database............................................................................77  14.1.3  Gold Fields’ Data Validation and Database.......................................................79  14.1.4  Data Quality Conclusions ..................................................................................85 
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17.1.1  Introduction........................................................................................................95  17.1.2  Micon Technical Data Review...........................................................................95  17.1.3  Choco 10 Mineral Resource...............................................................................96  17.1.4  Choco 10 Mineral Reserves .............................................................................105  17.1.5  Statement on Choco 10 Mineral Resources .....................................................108 
20.0  INTERPRETATION AND CONCLUSIONS 188 
21.0  RECOMMENDATIONS 189 
List of Tables Page
Table 1.1  Choco 10 Unconstrained Mineral Resources as of September 30, 2007 ...........3 
Table 1.2  Increible 6 Mineral Resource Estimate ..............................................................4 
Table 1.3  Mine Production Schedule for 20,000 t/d Mill Feed .........................................8 
Table 1.4  LOM Cash Flow Projections............................................................................16 
Table 1.5  Economic Sensitivity to Gold Price .................................................................18 
Table 1.6  Rusoro Proposed Budget for 12 Months to April, 2010 ..................................21 
Table 2.1  Study Team ......................................................................................................24 
Table 4.1  Choco 4 and Choco 10 Title Description.........................................................31 
Table 4.2  Summary of Land Holdings for the Increible 6 Concession............................31 
Table 4.3  Royalty Payments to CVG and CVG-Tecmin .................................................33 
Table 11.1  Choco 10 Deposit – Drill Spacing and Orientation for Pre-2007 Drilling.............................................................................................................53 
Table 11.2  Choco 10 - Drill Metres and Drill Types Completed.......................................55 
Table 11.3  Diamond Drill Core Recovery for Material Type............................................55 
Table 11.4  Summary and Distribution of Drilling Campaigns, Increible 6 Project...........57 
Table 11.5  Summary of Drilling Undertaken on Choco 10 and Increible 6 Concessions, 2007-2008 ..................................................................................58 
Table 12.1  Summary of 2003-2004 Sample Intervals .......................................................60 
Table 12.2  Diamond Drilling Showing the Different Core Size Proportions ....................63 
Table 12.3  Summarized Logging Codes for Increible 6 ....................................................65 
Table 14.1  MRM Procedures Which Underpin the Mineral Resource Quality Management System........................................................................................80 
Table 14.2  Gold Fields Assay Procedures and QC Protocols ............................................86 
Table 14.3  Gold Fields QC Sample Failure Criteria..........................................................86 
Table 14.4  Micon Check Assay Data, Increible 6, December 2006 ..................................88 
Table 16.1  Bond Work Indices and Abrasion Parameters .................................................92 
Table 16.2  Summary of SMC Evaluations ........................................................................93 
Table 16.3  Cyanidation Test Summary..............................................................................94 
Table 17.1  Choco 10 Unconstrained Mineral Resources as of September 30, 2007 .........98 
Table 17.2  Total Number of Validated Drill Holes and Drill Metres by Hole Type and Deposit ....................................................................................................103 
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Table 17.3  Drill Hole and Composited Sample Numbers by Drill Hole Type and Deposit Used in Resource Model Estimation ................................................103 
Table 17.4  Choco 10 Mineral Reserves as of September 30, 2007 .................................105 
Table 17.5  Choco 10 Pit Design Criteria .........................................................................106 
Table 17.6  Undiscounted Lerchs-Grossmann Shell vs. Pit Design at US$500/oz...........107 
Table 17.7  Increible 6 Mineral Resource Estimate ..........................................................110 
Table 17.8  Summary Statistics for 2-m Composites, Increible 6.....................................112 
Table 17.9  Capping Levels Applied to Assays Prior to Computing Composite Grades ............................................................................................................115 
Table 17.10  Assay Statistics for Modelled Mineralized Domains.....................................117 
Table 17.11  Increible 6 Block Model Parameters..............................................................122 
Table 17.12  Parameters Used in the Five Passes of Grade Interpolation ..........................123 
Table 18.1  Pit Optimization Parameters, RCP.................................................................129 
Table 18.2  Pit Optimization Parameters, VBK................................................................130 
Table 18.3  Pit Optimization Parameters, Increible 6 .......................................................130 
Table 18.4  Pit Optimization Parameters, Capia and Cerro Azul .....................................130 
Table 18.5  Characteristics of Optimized Pits...................................................................132 
Table 18.6  Mine Production Schedule for 20,000 t/d Mill Feed .....................................135 
Table 18.7  Annual Requirements for New Units of Mine Equipment.............................136 
Table 18.8  Historical Statistics for the Choco 10 Plant ...................................................140 
Table 18.9  Electrical Demand (15,000 t/d) for Existing Substation ................................153 
Table 18.10  Electrical Demand (15,000 t/d) for New Substation......................................154 
Table 18.11  Applicable Legislation ...................................................................................164 
Table 18.12  Permit Requests Put Forward to the Ministry of Environment for Water Use for the Choco 4 and Choco 10 Concessions ................................168 
Table 18.13  Permit Requests Put Forward to the Regional Ministry of Environment or Ministry of Basic Industries and Mines for Project Changes, New Affection Licences, and/or Exploitation Certificates ............169 
Table 18.14  Expansion Cases Evaluated............................................................................174 
Table 18.17  Mining Cost Summary ...................................................................................178 
Table 18.18  Process Operating Cost Summary..................................................................179 
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Table 18.21  LOM Capital Cost Summary .........................................................................181 
Table 18.22  LOM Cash Flow Projections..........................................................................183 
Table 18.23  Analysis of Incremental Cash Flows ............................................................183 
Table 18.24  Economic Sensitivity to Gold Price ...............................................................185 
Table 19.1  Choco 10 Production Statistics, 2006-2008...................................................187 
Table 21.1  Rusoro Proposed Budget for 12 Months to April, 2010 ................................190 
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Page Figure 1.1  Location of the Choco 10 Mine, Southeastern Venezuela.................................2 
Figure 1.2  Flowsheet for Case 2 - 20,000 t/d Processing Plant.........................................10 
Figure 1.3  Overall Site Layout for 20,000 t/d Facilities....................................................11 
Figure 1.4  LOM Cash Flow Projection – Case 2 ..............................................................17 
Figure 1.5  NPV8 Sensitivity Diagram ...............................................................................18 
Figure 4.1  Location of the Choco 10 Mine in Southeastern Venezuela............................29 
Figure 4.2  El Callao District Showing Locations of Rusoro Concessions........................29 
Figure 4.3  Location of Surface and Mineral Tenements, Increible 6................................30 
Figure 5.1  Plan Showing the Choco 10 Mining Areas and Mine Infrastructure ...............35 
Figure 5.2  Location of the Increible 6 Concession Area...................................................36 
Figure 7.1  Regional Geological Map ................................................................................41 
Figure 7.2  Geological Map of the Choco 10 Area ............................................................42 
Figure 7.3  Northwest-Southeast Geological Cross-Section ..............................................43 
Figure 7.4  Increible 6 Geology..........................................................................................45 
Figure 11.2  Location of Drilling Programs, Increible 6 ......................................................57 
Figure 12.1  Scatter Plot of Diamond Drill Recovery versus Grade ....................................63 
Figure 13.1  Process Map of the Sample Flow for Choco 10 Resource Definition .............70 
Figure 14.1  Sample Consignment Form..............................................................................81 
Figure 14.4  Data Shed – Data Validation............................................................................83 
Figure 14.5  Assay Swapper .................................................................................................84 
Figure 17.1  Plan of Section Locations for Rosiko, Coacia Pisolita and VBK ....................97 
Figure 17.2  Schematic Cross-Section through Rosika Showing Ore Domain Lodes and Halos .......................................................................................................100 
Figure 17.3  Schematic Cross-Section through Coacia Showing Ore Domain Lodes and Halos .......................................................................................................100 
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Figure 17.5  Schematic Northwest-Southeast Section through VBK Showing Ore Domain Lodes and Halos...............................................................................102 
Figure 17.6  Schematic Relationships Between Optimized Pit Shell and Final Design ............................................................................................................107 
Figure 17.7  Distribution of All Assay Values Reporting to Lens El1...............................114 
Figure 17.8  Distribution of Assay Values Reporting to Lens El1, Frequency Truncated at 60, Capping Level Selected at 40 g/t Au ..................................114 
Figure 17.9  Typical Cross-Section Showing Geological Interpretation Section 2175E .............................................................................................................120 
Figure 17.10  Typical Cross-Section With Geological Interpretation 4160E ......................120 
Figure 17.11  Longitudinal Section Displaying Grade Thickness Contours for Lens Cr1..................................................................................................................121 
Figure 17.12  Longitudinal Section Displaying Grade Thickness Contours for Lens El2 ..................................................................................................................121 
Figure 17.13  Typical Plan View Showing Block Grades....................................................125 
Figure 17.14  Typical Cross-Section Showing Block Grades ..............................................125 
Figure 17.15  Typical Cross-Section Showing Only Indicated Block Grades .....................126 
Figure 18.1  RCP Optimized Pit.........................................................................................132 
Figure 18.3  Increible 6 Optimized Pit ...............................................................................133 
Figure 18.4  Capia Optimized Pit .......................................................................................134 
Figure 18.5  Cerro Azul Optimized Pit...............................................................................134 
Figure 18.6  Overall Layout Showing Locations of the Various Choco Pits and Waste Rock Dumps........................................................................................137 
Figure 18.7  Schematic Flow Diagram of the Existing Choco 10 Plant.............................139 
Figure 18.8  Flowsheet for Case 2 20,000 t/d Processing Plant .........................................143 
Figure 18.9   Layout for Site Facilities - Case 2..................................................................144 
Figure 18.10  General Arrangement Plan of the Mill Building - Case 2.............................145 
Figure 18.11  Leach/Adsorption Circuit - Case 2.................................................................147 
Figure 18.12  Annual Gold Production ................................................................................176 
Figure 18.13  Annual Cash Operating Costs ........................................................................177 
Figure 18.14  Annual Mining Operating Costs ....................................................................178 
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Figure 18.16  Annual G&A Operating Costs .......................................................................181 
Figure 18.17  Annual Capital Expenditure...........................................................................182 
Figure 18.19  Cumulative, Discounted, Incremental Cash Flows versus Base Case ...........184 
Figure 18.20  NPV8 Sensitivity Diagram .............................................................................184 
Figure 18.21  Comparison of NPV8 for Owner-Operated and Contractor Mining ..............186 
APPENDIX 1 Annual Cash Flow Projections APPENDIX 2 Detailed Cross-sections for Rosika, Coacia, Pisolita and VBK Pits
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1.0 SUMMARY Micon International Limited (Micon) was retained in May, 2008, by Rusoro Mining Ltd. (Rusoro) to prepare a preliminary assessment (scoping study) of the potential for increased capacity and throughput at the Choco mill, based principally on mine production from the Choco 10 mine and the Increible 6 property. The Choco 10 and Increible 6 concessions are located near El Callao, Venezuela. (See Figure 1.1). The results of the preliminary assessment are discussed in this Technical Report. The rated capacity of the Choco mill is currently 5,400 t/d. The preliminary assessment considered a base case, in which the existing plant continues to operate, but at an average rate of 5,000 t/d to account for the harder material that will be mined in future, and three expansion options:
Case 1 A new plant operating at 10,000 t/d. Case 2 The existing plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d each, for a total of 20,000 t/d.
The preliminary assessment is based on the construction of facilities to treat material from the existing Choco 10 mine and the nearby Increible 6 property as an expansion of the existing Choco 10 plant. With the exception of the construction of a new tailings storage facility, the expanded facilities will be essentially located within the site of the existing Choco 10 operation and represent a brownfields expansion. Rusoro’s operations are located in the vicinity of El Callao and El Dorado, Bolivar State, in eastern Venezuela. These comprise two operating gold mines, Choco 10 and Isidora, and 10 exploration projects (including development and exploration around the mines). Output from both the Choco 10 and Isidora mines, near El Callao, is processed through the Choco mill. (Ore from Isidora has been processed through the Choco mill since late 2008 and reserves are expected to be exhausted by mid-2009). Through Promotora Minera de Guayana S.A., (PMG), the Venezuelan operating company, Rusoro owns and operates the Choco mill and has an ownership interest of 95% in the Choco 10 mine. Production from the Isidora mine is subject to a joint venture with the Venezuelan government. The Increible 6 gold property is under development and is located 4 km northeast of Choco 10. It is 100% owned by Rusoro, through its subsidiary, General Mining de Guyana, C.A. (General Mining).
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Location of the Choco 10 Mine, Southeastern Venezuela
Micon was previously retained by Rusoro to audit the resource estimate for Choco 10 and to prepare a resource estimate for Increible 6. The Technical Reports discussing these estimates are:
Technical Report on the PMG (Gold Fields) Choco 10 Concession and Mine, Estado Bolivar, Venezuela, dated November 21, 2007. (Leader et al., 2007).
Technical Report on the Increible 6 Property, Bolivar State, Venezuela, dated
November 14, 2007, revised and updated February 14, 2008. (Laudrum et al., 2008). 1.1 GEOLOGICAL SETTING The Choco 10 and Increible 6 mineral concessions are located within the Guyana Shield, which occupies the northern part of the Amazon Craton between the Amazon and Orinoco river basins. The geology of the Guyana Shield as a whole is poorly known, reflecting minimal development and limited access, as well as intense tropical weathering and cover across this large area. It has been subdivided into three major geological entities: i) Archaean rocks of the Imataca Complex; ii) Palaeoproterozoic Trans-Amazonian granite-greenstone belts; and iii) Palaeoproterozoic sedimentary and igneous rocks of the Roraima Group, Uatumã Group and the Avanavero Suite. The majority of gold mineralization is hosted by the greenstone belts.
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The gold mineralization at Choco 10 and Increible 6 is typical of Archaean-Proterozoic orogenic gold deposits. The deposits are hosted in an early Proterozoic sequence of the Pastora Greenstone Belt of the Guyana Shield. The stratigraphy comprises a tholeiitic to calc- alkaline volcanic package, overlain by volcaniclastic and epiclastic rocks intruded by gabbroic sills. The rock package has been subjected to intense tropical weathering and mineralization is dominantly structurally controlled. High-grade gold mineralization occurs with carbonate, pyrite, silicification and quartz-veining in lower-strain zones typically associated with crenulations, folding and chaotic foliations. 1.2 MINERAL RESOURCES The mineral resources reported in Leader et al., 2007 for the Choco 10 concession, and in Laudrum et al., 2008 for the Increible 6 concession, form the basis for the preliminary assessment which is the subject of this report. These resource estimates include inferred resources, which are also included in the open pit designs and production schedules for the preliminary assessment. There is no assurance that further exploration has, or will, result in upgrading any of these inferred resources to the measured or indicated category, as would be required for their inclusion in any subsequent prefeasibility or full feasibility study. The mineral resources for Choco 10, as at September 30, 2007, are summarized in Table 1.1 and are reproduced from Leader et al., 2007. The resources are quoted separately for four deposits on the property: Rosika, Coacia, Pisolita (also referred to as RCP) and Villa Balazo- Karolina (VBK)
Table 1.1 Choco 10 Unconstrained Mineral Resources as of September 30, 2007
Measured Indicated Total M + I Inferred
Tonnes Grade Au oz
Tonnes Grade Au oz
Tonnes Grade Au oz
Tonnes Grade Au oz
Pit Material COG (g/t)
(millions) (g/t) (000) (millions) (g/t) (000) (millions) (g/t) (000) (millions) (g/t) (000) Rosika Oxide 0.5 0.1 2.74 13 0.5 1.49 22 0.6 1.79 35 0.1 1.95 5 Trans 0.5 0.2 3.02 15 0.2 1.50 12 0.4 2.09 26 0.1 2.08 5 Fresh 0.5 1.6 3.21 165 11.1 2.23 796 12.7 2.35 961 5.9 2.12 400 Coacia Oxide 0.5 0.1 1.18 3 2.0 1.86 120 2.1 1.83 123 0.5 1.75 27 Trans 0.5 0.0 0.00 0 0.4 1.65 23 0.4 1.65 23 0.2 1.80 12 Fresh 0.5 0.0 0.00 0 3.9 2.29 287 3.9 2.29 287 3.1 1.71 171 Pisolita Oxide 0.5 0.3 2.25 24 2.0 1.45 95 2.4 1.57 119 1.3 1.09 45 Trans 0.5 0.2 2.31 18 0.3 1.90 18 0.5 2.09 36 0.3 1.35 14 Fresh 0.5 0.1 1.96 5 0.2 1.60 8 0.2 1.72 13 5.5 2.66 470 VBK Oxide 0.5 0.0 0.00 0 0.3 2.03 22 0.3 2.03 22 0.4 1.21 15 Trans 0.5 0.0 0.00 0 0.2 2.21 13 0.2 2.21 13 0.2 1.17 9 Fresh 0.5 0.0 0.00 0 35.1 2.67 3,017 35.1 2.67 3,017 25.3 2.26 1,844 S/Total Oxide 0.5 0.6 2.22 41 4.8 1.67 259 5.4 1.72 300 2.2 1.28 93 Trans 0.5 0.4 2.58 33 1.1 1.77 65 1.5 1.98 98 0.8 1.48 40 Fresh 0.5 1.7 3.15 170 50.3 2.54 4,107 52.0 2.56 4,277 39.8 2.26 2,885 Grand Total 2.6 2.86 243 56.3 2.45 4,432 58.9 2.47 4,675 42.9 2.19 3,017
1) It cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration.
2) Mineral resources which are not mineral reserves do not have demonstrated economic viability.
It should be noted that the mineral resources shown in Table 1.1 include mineral reserves that support the existing operation at Choco 10. The present preliminary assessment on the potential for expansion of output at Choco 10 is based on the stated mineral resources.
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The mineral resources for Increible 6 are summarized in Table 1.2, reproduced from Laudrum et al., 2008. The resources are quoted separately for oxide and sulphide material for four deposits: Culebra, Cristina, Elisa-Ingrid and Olga-Enoc. These estimates are based on data available at June 21, 2007, and have an effective date of September 21, 2007.
Table 1.2 Increible 6 Mineral Resource Estimate
Zone Resource
ounces) Indicated 0.5 0.79 2.39 0.06
Cristina Oxide Inferred 0.5 0.58 1.77 0.03 Indicated 0.5 1.79 1.98 0.11 Cristina
Sulphide Inferred 0.5 1.35 1.54 0.07 Indicated 0.5 1.77 2.10 0.12
Culebra Oxide Inferred 0.5 0.54 2.20 0.04 Indicated 0.5 3.78 1.84 0.22 Culebra
Sulphide Inferred 0.5 1.91 1.39 0.09 Indicated 0.5 1.19 2.04 0.08 Elisa-Ingrid
Oxide Inferred 0.5 0.73 1.71 0.04 Indicated 0.5 13.89 2.19 0.98 Elisa-Ingrid
Sulphide Inferred 0.5 11.11 2.14 0.76 Indicated 0.5 0.00 1.41 0.00 Olga-Enoc
Oxide Inferred 0.5 0.29 1.88 0.02 Indicated 0.5 0.24 1.91 0.01 Olga-Enoc
Sulphide Inferred 0.5 1.03 1.71 0.06 Indicated 0.5 3.74 2.14 0.26
Total Oxide Inferred 0.5 2.13 1.87 0.13 Indicated 0.5 19.71 2.10 1.33
Total Sulphide Inferred 0.5 15.40 1.96 0.97 Indicated 0.5 23.45 2.11 1.59
Overall Total Inferred 0.5 17.53 1.95 1.10
1) It cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration.
2) Mineral resources which are not mineral reserves do not have demonstrated economic viability.
Exploration has been carried out by Rusoro on both the Choco 10 and Increible 6 properties since the effective date of the resource estimates quoted in Table 1.1 and Table 1.2. The results have not been reviewed for the preliminary assessment that is the subject of this report. Rusoro has reported that it will complete updated mineral resource estimates for the Choco 10 and Increible 6 properties in 2009. In addition to the reported resources for the Choco 10 and Increible 6 concessions, two other small deposits, Capia and Cerro Azul, have been included in the preliminary assessment. Although Gold Fields, the previous owner of the Choco property, constructed block models for both of these deposits, no resource estimate has been reported for either of them. In total, the Capia and Cerro Azul deposits account for only 2.6% of the tonnage and 1.6% of the
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recovered gold ounces scheduled to be mined in the preliminary assessment. They are not material to the findings of the study. 1.3 CURRENT OPERATIONS The Choco 10 mine commenced production in August, 2005. Current operations consist of open pit mining and a processing plant comprising conventional comminution and carbon-in- pulp processing. The Choco 10 mine uses typical open pit mining methods of drilling, blasting, loading and hauling. Two pits are currently being operated within the Choco 10 concession, Pisolita and Rosika-Coacia. The pits are located 2-3 km from the main plant. The Choco 10 concession has a Certificate of Exploitation granted to PMG for an area of 2,124.53 ha and a term running to December 25, 2025. The Choco 4 concession has a Certificate of Exploitation granted to PMG for an area of 1,458.12 ha and a term running to December 25, 2025. On January 14, 2009, Rusoro announced that for Increible 6, “approval for the Certificate of Exploitation was published in Venezuela’s Official Gazette on December 23, 2008”. On receipt of the Exploitation Certificate, application will be made for the Permit to Affect Natural Resources. 1.3.1 Property Description and Location Choco 10 lies in an area of low hills between elevations 200 masl and 300 masl. The area is partly savannah and partly tropical forest. The soil is nutrient-poor and present land use is confined to rural cultivation, cattle ranching and minero (small mining) activity. The climate at Choco 10 is tropical, with temperatures averaging around 25.7°C and humidity ranging from 76% to 82%. The average annual precipitation at El Callao is 1,325 mm. The heaviest rainfall occurs during the months from June to August. 1.3.2 Accessibility, Local Resources and Infrastructure A paved secondary road passes through the concessions in Choco 10 and provides access to the town of El Callao, about 15 km to the east of the concessions. Access to Increible 6 from El Callao is by paved road, except for the last two to three kilometres which are unpaved. El Callao has a population of approximately 25,000 and is the centre of population in the area. It is a historic gold mining centre and a number of present and past producing mines are located nearby. The main highway, between the regional centre of Puerto Ordaz, a major city on the Orinoco River 190 km to the north, and other gold mining centres of El Dorado and Kilometre 88, and the Brazilian frontier to the south, passes through El Callao. A major high voltage 400 kV electrical supply line carrying power from the Guri dam, and destined for Brazil, passes near El Callao. A substation about 5 km from the Choco
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concessions supplies power to El Callao. The Choco 10 mine is connected to the main electricity grid that transmits energy from Venezuela to Brazil. A rain-dependent reservoir supplies water for use at the mine, and this is supplemented by a well field. A potential water supply is from the Yuruarí River, which passes north of the concessions, approximately 8 km distant, and from which other local mines and the El Callao municipality draw water. Most of the personnel working at the mine live in and around El Callao. The population is familiar with mining and can provide the majority of the local labour force. 1.3.3 History Gold mining in the El Callao district dates back to the early Spanish Conquest in the 1500s in the search to find El Dorado. On October 11, 2007, Rusoro acquired all of the Venezuelan assets of Gold Fields, including the Choco 10 gold mine. Prior to Rusoro’s acquisition, Gold Fields held the rights to Choco 10 and other Venezuelan assets that were acquired through a plan of arrangement with Bolivar Gold Corp. (Bolivar) on February 28, 2006. Under the plan of arrangement Gold Fields acquired all of the outstanding securities in Bolivar which it did not already hold. Gold Fields owned its interest in the Choco 10 mine through its holding in Promotora Minera de Guayana S.A. PMG remains the operating company for Choco 10 and is owned 95% by Promotora Minera de Venezuela SA (Promiven) and 5% by CVG Minerven C.A. Promiven is wholly owned by Rusoro through Venezuela Holdings (BVI) Ltd. and Carisma Corporation AVV. There has been a significant amount of shallow artisanal gold mining within the Increible 6 concession in the past. There are no records of when this work commenced or the total production to date. Through a wholly-owned subsidiary, Rusoro acquired the Increible 6 property in 2004 and has been actively exploring it since that time. 1.3.4 Mineral Processing and Metallurgical Testing Metallurgical testwork carried out prior to 2008 was undertaken to support the mineral resource estimate for Choco 10 and the selection of the processing flowsheet for the existing mill at Choco 10. The existing Choco mill has a rated capacity of 5,400 t/d, when treating material of average hardness. 1.3.4.1 2008 Testwork In 2008, metallurgical testing of the competent fresh rock was conducted at the laboratory of Process Research Associates Ltd. (PRA) in Richmond, British Columbia. A total of 200 drill core samples of material from Increible 6 were shipped and combined into similar ore types
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to form nine composites. The composites consisted of three saprolite and six hard rock samples. A total of 10 composites were prepared from samples of material from Choco 10. Material from four of the Choco 10 composites was prepared for hardness testing. Choco 10 composites E5, F6 and G7 underwent bottle roll leaching on 4-kg batches in order to produce leach tailings for further testwork Bond mill grindability tests were conducted on four typical hard rock samples from Choco 10. The samples were also subjected to semi-autogenous mill comminution and Bond abrasion work index testing. SAG mill comminution (SMC) tests were carried out by Hazen and the results sent to JKTech Pty Ltd (JKTech) in Australia for evaluation. JKTech reported that the results from the samples provided indicate that the material is moderately hard to hard. Two kilograms of each of the nine composites from Increible 6 were subjected to bottle roll testing by crushing to minus 6 mesh and grinding to approximately 80% passing 100 µm. The 2-kg samples were leached in sodium cyanide solution initially at 0.5g/L and then maintained at a concentration of 0.2 g/L throughout each test. The percentage recovery rates for gold were generally in the high 80s and mid 90s. Leach tests for the Choco 10 composite samples indicated that the material responded well, with gold recoveries generally over 84%. These results demonstrate that the current process treatment, using a grind of approximately P80 at 74 µm and 48-h leach time, is applicable to future mined material and will result in anticipated gold recovery of 90%. The completion of the PRA testwork program has demonstrated that further tests should be carried out. Variability testing and optimization of such parameters as leach retention time, carbon addition, grind size variation, leach enhancers and oxygen uptake are recommended. Employing a coarse gold gravity scalping circuit and flotation of the high sulphide material, with intensive leaching of the concentrate should be investigated on the competent material from Choco 10 and Increible 6. This will ensure that alternative, possibly more cost- effective treatment options are considered. 1.4 PIT OPTIMIZATION AND MINING Pit optimization and mine planning for the preliminary assessment presented in this report are based on mining from the Choco 10, Increible 6, Capia and Cerro Azul deposits at a combined rate of 20,000 t/d or 7.3 Mt/y of mill feed. The existing resource block models were used as the basis for open pit design. Since two separate block models exist for the Rosika-Coacia-Pisolita (RCP) and the Villa Balazo-Karolina (VBK) areas at Choco 10, five distinct block models were used. The mine design process involved the following steps:
Construction of economically-optimized ultimate open pit shells for each deposit.
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Scheduling of the production of mill feed and waste from within each ultimate pit
shell.
Selection of the fleet of drilling, loading, hauling and auxiliary equipment required to meet the design production schedule.
Estimation of mine capital expenditures and operating costs to the level of accuracy
appropriate for a preliminary assessment. Open pit optimization was completed using Gemcom Software’s Whittle 4X open pit optimization program. For the preliminary assessment, five block models were optimized separately and then combined to generate a production schedule. Three different rock types (oxide, transition, and fresh) and average gold value above a cut-off were exported into the Whittle model. Geotechnical parameters used in the Whittle analysis are based on work completed by Golder in 2003. Pit slopes used are 40o in oxide and transition materials, and 47o in fresh rock. Pit optimization was based on a gold price of $700/oz. Mine operating costs were supplied by Rusoro, based on its experience at the Choco 10 mine. Processing and general administration costs were based on preliminary estimates appropriate to a mill throughput of 20,000 t/d. The overall mine production schedule for the five optimized pits, as developed from iterative runs of the Whittle software, is shown in Table 1.3.
Table 1.3 Mine Production Schedule for 20,000 t/d Mill Feed
Year Measured + Indicated
(t) Strip Ratio
(t) (g/t Au) (t) (g/t Au) 1 1,387,000 3.29 438,000 3.29 12,675,000 14,500,000 6.95 2 1,387,000 3.03 438,000 3.03 12,675,000 14,500,000 6.95 3 1,387,000 3.18 438,000 3.18 12,675,000 14,500,000 6.95 4 5,488,000 2.60 1,812,000 2.74 39,068,000 46,368,000 5.35 5 5,348,000 2.49 1,952,000 2.58 69,700,000 77,000,000 9.55 6 5,218,000 2.58 2,082,000 2.67 69,721,000 77,021,000 9.55 7 4,883,400 2.29 2,416,600 2.30 62,705,000 70,005,000 8.59 8 4,818,000 3.25 2,482,000 3.25 41,043,000 48,343,000 5.62 9 4,818,000 3.01 2,482,000 3.01 25,448,000 32,748,000 3.49
10 4,818,000 3.40 2,482,000 3.40 14,888,000 22,188,000 2.04 11 4,114,500 2.25 3,185,500 2.87 24,700,000 32,000,000 3.38 12 2,018,080 1.85 4,360,920 1.77 17,195,000 23,574,000 2.70
Totals 45,684,980 2.73 24,569,020 2.69 402,493,000 472,747,000 5.73
Various combinations of loading and haulage equipment were investigated in the course of the preliminary assessment. Ultimately, Caterpillar 777F haulage trucks (91 t) and a Komatsu PC3000 hydraulic front shovel (14.5 m3) were selected for mining and hauling ore. For
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waste, Caterpillar 793D trucks (218 t) and a Komatsu PC5500 hydraulic front shovel (27.2 m3) were selected. This combination provides maximum selectivity in ore and maximum productivity in waste. The Whittle pits developed as part of this study will require several waste storage dumps at various locations on the property. Rusoro has designed waste rock dumps for the RCP, VBK, Capia, and Increible 6 deposits. No waste rock dump design for the Cerro Azul deposit has been completed to date. 1.5 PROCESSING The Choco 10 gold recovery plant was installed and commissioned in 2005, with the majority of equipment sourced from a previously closed operation in Canada. The existing plant has achieved throughput rates approaching 7,000 t/d while processing saprolite or oxidized material with low work indices. Following evaluation of a number of expansion options, these were narrowed down to three cases for preliminary assessment:
Case 1 A new plant operating at 10,000 t/d. Case 2 The existing plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d each, for a total of 20,000 t/d.
Case 2 provided optimum results as discussed in Section 18 of this report. The process flowsheet for the 20,000 t/d expansion is based on retaining the existing plant, at a capacity of 5,000 t/d (to account for the harder material that will be mined and processed), together with new facilities for 15,000 t/d. The flowsheet is conventional, consisting of primary crushing, two-stage milling, cyanide leaching, carbon adsorption and elution, electro-winning and gold smelting (See Figure 1.2). Tailings disposal is undertaken in a valley dam, with decant solution returned as process water to the plant. 1.6 INFRASTRUCTURE The overall site layout is shown in Figure 1.3. The majority of infrastructure items remain essentially unchanged for the planned expansion scenario. With the exception of the proposed new tailings storage facility (see below), the expanded facilities will be located within the site of the existing Choco 10 facilities and represent a brownfields expansion of the operation. The initial evaluation for additional requirements of a site electrical substation and distribution lines was prepared based on a 20,000 t/d production rate.
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Figure 1.2 Flowsheet for Case 2 - 20,000 t/d Processing Plant
11
12
A new substation or, more specifically, an expansion of the existing outdoor 115/4.16 kV substation, has to be built to accommodate an additional power demand of 32.3 kVA. No modification is required to existing installations, except for an expansion of the existing 115 kV bus to feed the new power equipment. 1.7 TAILINGS STORAGE FACILITY A tailings storage facility (TSF) site trade-off study was carried out by Golder in October, 2006. The study evaluated and ranked eight potential sites, named Sites A, B, C, D, F, G, H, and I, for storage of 80 Mt of tailings solids. The sites were evaluated for three different tailings management options: dilute slurry tailings, paste tailings and thickened tailings. The sites were ranked using a number of criteria, including:
Confining embankment volumes. Total plan area footprint. Final dam crest and tailings surface elevations. Distances from the existing process plant.
The study concluded that Site D is the preferred tailings storage site based on net present cost. Paste tailings was identified as a preferred method of tailings handling in the Golder study (Golder, 2006). However, the Golder study was based only on tailings generated from oxide ore which are expected to comprise approximately 30% of the future total tailings. Testwork has been carried out to determine the geotechnical and rheological properties of the hard rock tailings, which are expected to exhibit superior settling characteristics that will allow dilute slurry tailings deposition. Knight Piésold was retained by Rusoro to complete a conceptual design of a TSF at Site D on the basis of dilute slurry tailings as the method of tailings transport and deposition. Site D is situated approximately 6 km east-northeast of the current process plant, in the basin immediately northeast of the existing TSF. The principal objectives of the design for the TSF are to ensure protection of regional groundwater and surface waters both during operations and in the long term, and to achieve effective reclamation at mine closure. Geochemical testwork has not historically been done on tailings at the Choco mine. Tailings were generated at the PRA laboratories in November, 2008 using hard rock core samples and will be used for geochemical testwork under the guidance of Knight Piésold to delineate characteristics of the tailings which will assist in the design of the TSF. Should the tailings be considered acid generating, special management conditions will be required so as to minimize or prevent oxidation of the tailings. The testwork to be conducted will include:
Acid-Base Accounting (sulphur speciation, neutralization potential).
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Kinetic Tests (Humidity Cells, should the static testwork warrant the longer-term
tests). The existing TSF had approximately 1.3 Mm3 of storage capacity remaining as of April 1, 2009. At the current tailings deposition and water reclaim rates, the facility will be full by approximately November, 2009. The tailings deposition and water reclaim rates were obtained from the mine staff and are assumed to represent average conditions for 2008 and the first three months of 2009. A plan to increase the storage capacity of the existing facility has been devised which includes the construction of cyclone packs, located on the hills above the existing TSF and raising of the existing dams to allow for approximately two additional vertical metres of tailings storage. This plan should add to the useful life of the facility and allow enough time for construction of the new TSF. The additional capacity achieved by raising the present dams will provide approximately 11 months of additional storage from April 1, 2009. This should provide adequate time for construction of the new TSF starter dam. A geotechnical site investigation program on the preferred TSF Site D, consisting of 11 drill holes and approximately 150 test pits, was completed in early February, 2009. The program evaluated the geotechnical conditions of the TSF basin and embankment foundation. Testing included Shelby Tube sampling and Standard Penetration Testing (SPT) in overburden soils, Packer permeability testing in bedrock, and falling head permeability tests at various intervals in the drill holes. Standpipe piezometers were installed in the completed drill holes for future testing and monitoring. Two long term monitoring wells have been installed downstream of the proposed embankment. The surficial geology generally consists of residual soil and weathered rock overlying fresh bedrock. The tailings facility will comprise an earthfill confining embankment along the north and northeast ends of the valley. The dam alignment keeps the ultimate facility footprint, including the embankment and downstream facilities, entirely within the Choco 4 concession. The embankment will be raised in stages using the centreline method of construction, reaching an ultimate elevation of approximately 240 masl. The embankment will have final slopes of no steeper than 2.5H:1V and a final minimum crest width of 15 m. The shell zones of the embankment will be built using low-permeability residual soils from local borrow sources, augmented with suitable non-reactive waste rock to the extent possible. Riprap,
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filter and drain zone materials will be imported to the site. Waste rock from mining operations will be used as construction material wherever feasible. 1.8 SITE WATER REQUIREMENTS Knight Piésold undertook an analysis of site water requirements and prepared a water management plan for the present preliminary assessment. The water management plan for the Choco 10 operation will ensure a sustainable long-term water supply to the mill for the base case and the three expansion cases. The key water management facilities include the water storage reservoir, the proposed Site D tailings storage facility and the process plant. Other facilities that may be used for water management are groundwater wells, the existing TSF, flooded open pits (Rosika), a pumping scheme from the Yuruarí River, and historical underground mine workings. Historically, there has been a shortage of water for operations at the project site, with interruptions to processing occurring in the past. Remedial measures have been taken, including installation of 12 groundwater wells that are currently able to supply approximately 50 to 60 L/s, amounting to about 80% of the process water demand. Further water shortages are not anticipated given the current operating conditions. Water reclaim from the TSF is expected to improve from the current conditions, as mining transitions from oxide ores to hard rock. Settled tailings densities in the TSF should increase, allowing a higher reclaim rate to be achieved. 1.9 ENVIRONMENTAL AND SOCIAL ISSUES Venezuela has extensive legislation relating to the environment and social protection of the country. In addition, there are various new legislative changes in progress. There is no assurance that future changes in environmental regulation will not adversely affect the operations. The nearest community to the mine is the village of Choco while El Callao is the closest commercial centre. There are few indigenous people in the communities surrounding the Choco 4, Choco 10, and Increible 6 concessions, and no fully indigenous communities. Indigenous communities are generally located farther south on the Rio Cuyuní. The majority of the population surrounding the operations are criolla communities, which are relatively recent, transient, and tied to small mining activities. Cultural heritage resources have been already impacted in the area, but should be considered for any expansion activities in the future. Relationships and consultation with the communities, workers, and small miners are important to keep the mine operating. Rusoro has proven its ability to maintain working relations with these groups since its acquisition of the Choco mine and the Isidora mine.
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The Choco mine management has engaged in development activities in the communities near the mine and communities further away where workers live. PMG agreed to work with Corporación Venezolana de Guayana (CVG), in an addendum to the Choco 4 and Choco 10 lease agreements, to include a formal obligation to contribute at least $250,000/y in social contributions for the development of the mining area after the commencement of commercial production. Choco 10 operates in accordance with the standard procedures, codes of safety and regulations of health and effective labour safety in Venezuela, such as Covenin Norms, LOPCYMAT and regulation of the conditions of hygiene and industrial safety. The Choco 10 operation’s focus has been to ensure legal compliance in all its activities. The operation is in the process of implementing an Environmental Management System (EMS) to help manage water, various wastes, hazardous materials, emission, hydrocarbons, energy consumption, and other environmental protection measures. Venezuelan law requires mining operations to rehabilitate land disturbed by mining. The company has established a four-year plan to fulfill the Plan for Compensatory Rehabilitation and Reforestation of Impacted Areas. The law also requires the development of a closure program for the operation, and it is mandatory that an environmental audit be undertaken to determine the real scope and magnitude of the environmental impacts produced during the project life. PMG has entered into an agreement with a local university (Universidad Experimental de Guayana, UNEG) to develop a detailed decommissioning and mine closure program, including a plan for progressive rehabilitation. This study will need to be revised with the changes proposed in this preliminary assessment in order to determine rehabilitation objectives and prescriptions for the Increible 6 operation, new TSF, plant site and waste rock storage areas. 1.10 RESULTS OF PRELIMINARY ASSESSMENT Micon has prepared its assessment of the project on the basis of a discounted cash flow model, from which Net Present Value (NPV), Internal Rate of Return (IRR), payback and other measures of project viability can be determined. Assessments of NPV are generally accepted within the mining industry as representing the economic value of a project after allowing for the cost of capital invested. The objective of the study was to evaluate the potential for expansion of the project. In order to do this, the cash flow of the unexpanded (5,000 t/d) base case and each of three expansion options has been forecast, enabling a comparison to be made of the NPV of each option versus the base case. The expansion options considered have total plant throughputs of 10,000 t/d and 20,000 t/d, as follows:
Case 1 A new plant operating at 10,000 t/d.
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Case 2 The existing plant (5,000 t/d) plus a new plant at 15,000 t/d, for a total of
20,000 t/d. Case 3 A new plant with two new lines at 10,000 t/d each, for a total of 20,000 t/d.
The analysis has been undertaken in United States constant dollars of January, 2009 value, i.e., without provision for inflation. Micon’s analysis assumes a constant gold price of $700/oz over the full project life. It assumes, also, that the gold price of $700/oz is received net of any applicable taxes. Capital and operating costs have been estimated at an overall accuracy of +30% which is considered appropriate for preliminary assessment of a mining project of this nature. As part of its sensitivity analysis, Micon tested a range of prices and costs 30% above and below the base case values. All of the gold production from the Choco expansion project is assumed to be sold within Venezuela. Nevertheless, the cash flow forecast assumes that these revenues are received in US dollars. Table 1.4 summarizes the life-of-mine (LOM) cash flow projections and economic results for each of the production rate scenarios considered in the study. This preliminary assessment is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary assessment will be realized.
Table 1.4 LOM Cash Flow Projections
($ million)
Item
Net Sales Revenue 2,930.6 3,564.9 3,564.7 3,564.7 Total cash operating costs 1,763.9 1,990.5 1,829.0 1,829.0 EBITDA 1,166.7 1,574.4 1,735.7 1,735.7 Capital Expenditure 93.8 305.3 307.5 362.4 Initial Contingency Sustaining Working capital movement
42.5 2.9
60.5 (12.0)
184.9 27.5
105.0 (12.0)
251.3 39.5 83.7
(12.0) Taxation payable 361.2 431.5 485.7 467.1 Net cash flow after tax 711.7 837.6 942.5 906.2 Cash operating cost ($/oz Au) 388.50 360.23 331.04 331.04 NPV 215.1 264.8 449.8 417.1 IRR (%) n/a 34 52 41
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Item
Case 3 2x10,000 t/d
Life of mine (years) 27.0 21.0 12.0 12.0 Payback period (years, undisc.)1 n/a 1.8 1.7 2.4 Payback period (years, disc at 8%)1 n/a 2.2 2.1 2.9 Average annual revenue 108.5 169.8 297.1 297.1 Average annual gold production (oz) 168.2 263.1 460.4 460.4 Operating cost ($/t) 37.7 28.3 26.0 26.0 Operating cost ($/oz) 388.5 360.2 331.0 331.0 Profitability index 4.7 1.2 1.9 1.4 Stripping ratio 7.6 5.9 5.9 5.9
1 Payback is calculated from the commissioning of an expanded plant.
For Case 2, LOM average cash operating costs are estimated at $26.00/t milled or $331/oz of gold produced. For Case 2, at a discount rate of 8%/y, the NPV (NPV8) of project cash flows is $450 million over a mine life of 12 years. The undiscounted payback period for invested capital is 1.7 years. Case 2 was selected as the case for presentation in this Technical Report. Figure 1.4 shows the main elements of the LOM cash flow for the expansion to 20,000 t/d under Case 2.
Figure 1.4 LOM Cash Flow Projection – Case 2
(5,000+15,000 t/d)
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The results of sensitivity analysis at a discount rate of 8%/y are summarized in Figure 1.5. Sensitivity to gold price is also presented in Table 1.5, showing the NPV8 and IRR for Case 2 over a range of $250/oz above and below the base case forecast of $700/oz.
Figure 1.5 NPV8 Sensitivity Diagram
Table 1.5 Economic Sensitivity to Gold Price
Gold Price
($/oz) NPV8
(thousand $) IRR (%)
450 (58,555) 3.7% 500 50,624 12.0% 550 154,075 20.8% 600 254,352 30.0% 650 352,208 40.1% 700 449,768 51.7% 750 547,318 66.3% 800 644,646 86.3% 850 741,975 120.7% 900 839,304 n/a 950 936,633 n/a
1.11 INTERPRETATION AND CONCLUSIONS Micon has examined the potential for expansion of output at the Choco 10 gold operation through consideration of the relative economics of the existing nominal production rate of 5,000 t/d compared with 10,000 t/d, and two alternative 20,000 t/d cases.
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Optimum results were obtained in Case 2 for expansion to 20,000 t/d, or 7.3 Mt/y, to be achieved through the use of the existing mill and construction of new facilities to add 15,000 t/d of capacity. Feedstock for the expanded mill will be provided by mined output from the existing Choco 10 operation (comprising the presently operating Rosika, Coacia and Pisolita open pits) and planned mine production from the Villa Balazo-Karolina pit at Choco 10 and from the Increible 6 concession which is located 4 km northeast of Choco 10 and from the small Capia and Cerro Azul deposits. Development of the schedule of mine output was based on mineral resource estimates for Choco 10 and Increible 6 previously disclosed and filed on SEDAR. On this basis, mine output supports a mining and processing operation at a rate of 20,000 t/d for 12 years. Discounted cash flow analysis of the Choco 10 expansion yields an NPV of $450 million at a discount rate of 8%/y and an IRR of 52% at a gold price of $700/oz. On the basis of the analysis described above, it is concluded that the project appears robust and warrants study at the feasibility study level of detail. It should be noted, however, that results from study at the feasibility level of detail may differ from those noted above and as discussed in this Technical Report. It is emphasized that the resource base for Choco 10 and Increible 6 used for the preliminary assessment includes inferred resources. There is no assurance that further exploration will result in upgrading any of the inferred resources to the indicated or measured category. The next stage in the development of the expansion project for the Choco mill is likely to be a feasibility study. Accepted professional practice, and NI 43-101, preclude the inclusion of inferred resources as part of the resource base for such a study. It should be noted, also, that Rusoro has conducted exploration and drilling on the Choco 10 and Increible 6 concessions since the effective dates of the mineral resource estimates. Rusoro has reported that it will complete updated mineral resource estimates for the Choco 10 and Increible 6 properties in 2009. There is no assurance that continued exploration has, or will, result in upgrading any of these inferred resources to the measured or indicated category, as would be required for their inclusion in any subsequent prefeasibility or full feasibility study. 1.12 RECOMMENDATIONS As a result of its preliminary assessment of the expansion of output at Choco 10, Micon recommends that Rusoro proceeds to preparation of a project feasibility study. The following recommendations are made for that work:
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Update the mineral resource estimates for the Choco 10 and Increible 6 properties in order to reflect the results of drilling and exploration carried out since their respective effective dates (September 30, 2007 and September 21, 2007, respectively).
Prepare mineral resource estimates for the Capia and Cerro Azul deposits.
To the extent necessary, conduct additional drilling with the objective of upgrading
inferred resources to the indicated category.
Re-assess the potential for underground mining of the VBK deposit.
Continue to conclusion the metallurgical testwork program currently in hand by PRA.
Implement the planned metallurgical testwork program to assess the possibility of heap leaching the more competent material and flotation plus intensive leaching of high-sulphide material.
On the basis of the results of testwork on tailings samples from hard rock and mixed
ores, determine whether the design of the tailings storage needs to be reassessed.
Undertake additional geochemical characterization of waste rock in order to assist in the detailed design of waste rock storage in order to prevent/minimize the potential for acid rock drainage from unweathered sulphide-bearing material.
Continue the geotechnical site investigation program presently in hand to optimize pit
slopes.
Continue with feasibility design of the TSF and undertake all permitting activities required for construction of the new facility.
Assess the potential for use of water collected in the existing TSF, mined-out and
flooded open pits and historical underground workings; further assess options to reclaim water and minimize evaporation losses, in order to optimize the site water balance.
Optimize project design in the next stage of planning in order to minimize
environmental impacts and risks to the extent possible.
Integrate the decommissioning and mine closure program that is currently in hand with future feasibility studies for the Choco 10 operation.
Maintain government relations and continue efforts to obtain water extraction and
exploitation extension permits.
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Continue environmental management initiatives at the Choco 10 and related sites, and prepare additional environmental management plans for new construction and development initiatives.
Continue proactive worker and community development, communication and support
activities. Rusoro’s proposed budget for work over the 12 month period between May, 2009 and April, 2010, is shown in Table 1.6
Table 1.6 Rusoro Proposed Budget for 12 Months to April, 2010
Description Unit Costs $
Exploration/resource upgrades Diamond drilling 20,000 m @ $75/m 1,500,000 Assaying 10,000 samples @ $15/sample 150,000 Geology and support 95,000 Metallurgical testwork 150 samples @ $200/sample 30,000 Environmental and permitting work all-in cost 20,000 Updated resource models all-in cost 25,000 Subtotal 1,820,000 Contingency, 10% 180,000 Total 2,000,000 Feasibility study Technical studies 500,000 Metallurgical testwork/mill studies 100 samples @ $200/sample 20,000 Environmental and permitting work 40,000 Travel and other support 45,000 Report preparation 55,000 Subtotal 660,000 Contingency, 10% 65,000 Total 725,000 Tailings storage facility Technical studies (drilling) 2,000 m @ $50/m 100,000 Laboratory testwork 200 samples @ $200/sample 40,000 Environmental and permitting work 75,000 Report preparation 35,000 Subtotal 250,000 Contingency, 10% 25,000 Total 275,000 Grand total 3,000,000
Micon concludes that the work items and cost estimates are reasonable and recommends that Rusoro implements its planned program. Further work will be contingent upon the success of the proposed program shown in Table 1.6. The effective date of the preliminary assessment presented herein is 22 April, 2009. The effective dates of the mineral resource estimates on which the preliminary assessment is based are 30 September, 2007 for Choco 10 and 21 September, 2007 for Increible 6.
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2.0 INTRODUCTION
Micon International Limited (Micon) was retained in May, 2008 by Rusoro Mining Ltd. (Rusoro) to prepare a preliminary assessment (scoping study) of the potential for increased capacity and throughput at the Choco mill, based principally on mine production from the Choco 10 mine and concessions, and the Increible 6 property. The Choco 10 and Increible 6 concessions are located near El Callao, Venezuela. The results of the preliminary assessment are discussed in this Technical Report. Rusoro’s operations are located in the vicinity of El Callao and El Dorado, Bolívar State, in eastern Venezuela. These comprise two operating mines, Choco 10 and Isidora, and 10 exploration projects (including development and exploration around the mines). Output from both the Choco 10 and Isidora mines, near El Callao, is processed through the Choco mill. Ore from Isidora has been processed through the Choco mill since late 2008 and reserves are expected to be exhausted by mid-2009. Rusoro owns and operates the Choco mill and has an ownership interest of 95% in the Choco 10 mine. Production from the Isidora mine is subject to a joint venture with the Venezuelan government. The Increible 6 property is under development and is located 4 km northeast of Choco 10. The preliminary assessment is based on the construction of facilities to treat material from the existing Choco 10 mine and the nearby Increible 6 property as an expansion of the existing Choco 10 plant. With the exception of the construction of a new tailings storage facility, the expanded facilities will be essentially located within the site of the existing Choco 10 operation and represent a brownfields expansion. The Choco property was originally under control of Bolivar Gold Corp. (Bolivar), through the local entity Promotora Minera de Guayana SA (PMG), which developed the property and constructed a mine and processing facility, currently rated at 5,400 t/d. Gold Fields Limited subsequently purchased and operated the mine until the acquisition by Rusoro in late 2007. PMG remains the operating company for Choco 10 and is owned 95% by Promotora Minera de Venezuela SA (Promiven) and 5% by CVG Minerven C.A. Promiven is wholly owned by Rusoro through Venezuela Holdings (BVI) Ltd. and Carisma Corporation AVV. Gold Fields completed a significant amount of drilling, metallurgical testing and local studies which indicated potential for increasing production. The Increible 6 gold project is 100% owned by Rusoro through a wholly-subsidiary, General Mining de Guayana, C.A. (General Mining) and was acquired in 2004. Micon was retained by Rusoro in 2007, to provide an independent audit, compliant with requirements of National Instrument 43-101 (NI 43-101), of the Choco 10 mineral resource estimate and to report on the technical aspects of the Choco 10 property and operating mine. This request was made following the announcement that Rusoro had reached an agreement with Gold Fields Netherlands Services BV (Gold Fields), a wholly-owned subsidiary of Gold Fields Limited, whereby Rusoro acquired all of Gold Fields’ Venezuelan assets, including the producing Choco 10 mine. Micon was also retained by Rusoro in 2007 to prepare a
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mineral resource estimate and independent Technical Report compliant with NI 43-101 on the Increible 6 concession. These reports, referred to herein as Leader et al., 2007 and Laudrum et al., 2008, were filed on SEDAR on November 29, 2007 and April 2, 2008, respectively, and are entitled:
Technical Report on the PMG (Gold Fields) Choco 10 Concession and Mine, Estado Bolivar, Venezuela, dated November 21, 2007. (Leader et al., 2007).
Technical Report on the Increible 6 Property, Bolivar State, Venezuela, dated
November 14, 2007, revised and updated February 14, 2008. (Laudrum et al., 2008). The mineral resources reported in Leader et al., 2007 for the Choco 10 concession, and in Laudrum et al., 2008 for the Increible 6 concession form the basis for the preliminary assessment which is the subject of this report. These resource estimates include inferred resources, which are also included in the open pit designs and production schedules for the preliminary assessment. There is no assurance that further exploration will result in upgrading any of these inferred resources to the measured or indicated category, as would be required for their inclusion in any subsequent prefeasibility or full feasibility study. It should be noted, also, that Rusoro has conducted exploration and drilling on the Choco 10 and Increible 6 concessions since the effective dates of the mineral resource estimates. Rusoro has reported that it will complete updated mineral resource estimates for the Choco 10 and Increible 6 properties in 2009. There is no assurance that continued exploration has, or will, result in upgrading any of these inferred resources to the measured or indicated category, as would be required for their inclusion in any subsequent prefeasibility or full feasibility study. In addition to the reported resources for the Choco 10 and Increible 6 concessions, two other small deposits, Capia and Cerro Azul, have been included in the preliminary assessment. Although Gold Fields constructed block models for both of these deposits, no resource estimate has been reported for either of them. In total, the Capia and Cerro Azul deposits account for only 2.6% of the tonnage and 1.6% of the recovered gold ounces scheduled to be mined in the preliminary assessment. They are not material to the findings of the study. Table 2.1 provides a summary of the preliminary assessment study team and their areas of responsibility. Knight Piésold Ltd (Knight Piésold) was retained directly by Rusoro. Met- Chem Canada Inc. (Met-Chem) was retained by Micon.
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Mineral resource estimates Prior NI 43-101 Technical Reports Mine design Sam Shoemaker, Micon Mine schedule, mine equipment and facilities, mining costs Sam Shoemaker/Jim Leader, Micon Metallurgical testing Vic Bryant, Micon Process engineering Ian Ward/Vic Bryant/Met-Chem Tailings management Knight Piésold Water management Knight Piésold Environmental Jenifer Hill, Micon Infrastructure and costs Met-Chem Plant design, plant capital expenditures and operating costs Met-Chem Economic evaluation Christopher Jacobs/Jim Leader, Micon
The Qualified Persons responsible for this report are the following:
Mary Jean Buchanan, Eng., M.Env. Michael Godard, P.Eng. Christopher Jacobs, C.Eng. Jeremy P. Haile, P.Eng. Christopher Lattanzi, P.Eng. Dave Laudrum, P.Geo. James Leader, P.Eng. John Perry, P.Geo. Sam Shoemaker, MAusIMM Ian Ward, P.Eng. John Zbeetnoff, P.Geo.
Site visits have been undertaken by Dave Laudrum and James Leader, and others on Micon’s team, and by Knight Piésold, on the following dates:
Victor Bryant, I.Eng, MIMM 14-16 August, 2007 Jenifer Hill, R.P.Bio. 14-16 August, 2007 Dave Laudrum, P.Geo. 8-13 December, 2006
16 April, 2007, 14-16 August, 2007 James Leader, P.Eng. 14-16 August, 2007 15-20 October, 2007 Jeremy P. Haile, P.Eng. 8-9 April, 2008 John Perry, P.Geo. 15-20 October, 2007
Table 2.2 provides a list of the abbreviations used in this report.
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Term Abbreviation
Acceleration due to gravity g Acid base accounting ABA Acid rock drainage ARD Best available technology not involving excessive cost BATNIEC Biochemical oxygen demand BOD Carbon-in-pulp CIP Centimetres per second cm/s Cost and freight cfr Cubic metre(s) m3 Cubic metre(s) per day m3/d Cubic metres per second m3/s Degree(s) o Degrees Celsius oC Effective Grinding Length EGL Environmental management plan EMP Environmental and Socio-Economic Impact Assessment ESIA Environmental and Social Management and Monitoring Plan ESMMP Foot(feet) ft Gallons per minute gpm Gigawatt(s) GW Gigawatt hour(s) GWh Gram(s) g Grams per litre g/L Gold equivalent AuEq Hertz Hz High density polyethylene HDPE Horsepower HP Hour(s) h Hour(s) per day h/d Inch(es) in Intensity duration frequency IDF Internal rate of return IRR Kilometre(s) km Kilopascal(s) kPa Kilovolt(s) kV Kilovolt ampere kVA Kilowatt(s) kW Kilowatthours per tonne kWh/t Litre(s) L Life-of-mine LOM Litres per second L/s Megavolt ampere MVa Megawatt(s) MW Metre(s) m Metres above sea level masl Metres per second m/s Micron(s) μm Milligrams mg
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Term Abbreviation Milligrams per litre mg/L Millimetre(s) mm Millimetres per year mm/y Million M Million US dollars $M Million tonnes Mt Million tonnes per year Mt/y Million years old Ma Minute(s) min Motor control centre MCC Net present value NPV Net present value at discount rate of 8% per year NPV8 Neutralization potential NP Neutralization potential ratio NPR Non-governmental organization(s) NGO(s) Not acid generating NAG Not applicable n.a. Ounce(s) (troy ounce) oz Parts per million ppm Parts per billion ppb Peak ground acceleration PGA Particulate matter < 10 μm diameter PM10 Potentially acid generating PAG Pound lb Probable maximum precipitation PMP Public Consultation and Disclosure Plan PCDP Reverse circulation RC Rock quality designation RQD Second s Semi-autogenous grinding SAG Square metre(s) m2
Square kilometre(s) km2 Standard penetration test SPT Tailings storage facility TSF Tonne(s) t Tonnes per day t/d Tonnes per hour t/h Tonnes per year t/y Total suspended solids TSS United States dollars $ Volt(s) V
In this report, all currency amounts are stated in US dollars ($) or Venezuelan Bolivars, as specified, with costs and commodity prices typically expressed in US dollars. Quantities are generally stated in Système International d’Unités (SI) metric units, the standard Canadian and international practice, including metric tons (tonnes, t) and kilograms (kg) for weight, kilometres (km) or metres (m) for distance, hectares (ha) for area, grams (g) and grams per tonne (g/t) for gold grades (g/t Au). Gold grades may also be reported in parts per million (ppm) or parts per billion (ppb). Quantities of gold are typically reported in Troy ounces (oz).
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3.0 RELIANCE ON OTHER EXPERTS
Micon has reviewed and analyzed data provided by Rusoro, Gold Fields and others, and has drawn its own conclusions therefrom, augmented by its direct field examination. Micon has not carried out any independent exploration work, drilled any holes or carried out any extensive sampling and assaying on the Choco 10 and Increible 6 properties. During the field visit to Choco 10, Micon did not collect any samples to confirm the mineralization as it is an operating gold mine and any samples collected by Micon would only reflect the mineralization at the sample location and not necessarily the economic nature of the mineralization at the mine. During its visit to Increible 6, Micon selected nine samples of quarter-core from holes drilled on the property, for independent check assays. The results confirmed the presence of gold at similar grades to the original assays. While exercising all reasonable diligence in checking, confirming and testing, Micon has relied upon Rusoro’s presentation of the Choco 10 and Increible 6 data from both itself and previous organizations in formulating its opinion. Micon has not reviewed any of the documents or agreements under which Rusoro holds title to the Choco gold mine or the underlying mineral concessions, or to the Increible 6 property, and Micon offers no legal opinion as to the validity of the mineral titles claimed. A description of the properties, and ownership thereof, is provided for general information purposes only. Rusoro has confirmed the material presented in Section 4.3 of this report and Micon has relied upon it as input to the cash flow model for the expansion of output at Choco 10. The existing environmental conditions, liabilities and remediation have been described where required by NI 43-101 regulations. These statements also are provided for information purposes only and Micon offers no opinion in this regard. The descriptions of geology, mineralization and exploration are taken from reports prepared by Rusoro, its predecessors or its consultants. The conclusions of this report rely on data available in published and unpublished reports and information supplied by the organizations which have conducted exploration on the property, and information supplied by Rusoro and its consultants. In Micon’s opinion, the information provided to Rusoro was supplied by reputable organizations and Micon has no reason to doubt its validity. Section 18.7 of this report has been prepared by Jenifer Hill, R.P.Bio., Senior Environmental Consultant with Micon.
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4.0 PROPERTY DESCRIPTION AND LOCATION
The preliminary assessment discussed in this report is based principally on identified mineral resources on the Choco 10 and Increible 6 concessions. For the purpose of the preliminary assessment, the Choco property also includes the Choco 4 concession on which some of the production facilities and infrastructure are located. The Choco 10 concession has a Certificate of Exploitation granted to PMG for an area of 2,124.53 ha and a term running to December 25, 2025. The Choco 4 concession has a Certificate of Exploitation granted to PMG for an area of 1,458.12 ha and a term running to December 25, 2025. The Increible 6 concession totals 2,472.5 ha in area. The Increible 6 mineral title is granted by the Corporación Venezolana de Guayana (CVG), a regional governmental development organization, to General Mining, for the exploration, development and exploitation of gold, silver, zinc, copper, chromium, tin, nickel, tungsten, vanadium, manganese, molybdenum, niobium, cobalt and tantalum. The CVG granted General Mining a concession leasing executed on May 13, 1991. The leasing has the same term as the concession; two years for exploration and 20 years for exploitation, this last term beginning on the publication date of the Certificate of Exploitation in the Official Gazette, subject to 10-year extensions, up to a maximum of 40 years. On January 14, 2009, Rusoro announced that “approval for the Certificate of Exploitation was published in Venezuela’s Official Gazette on December 23, 2008”. On receipt of the Exploitation application will be made for the Permit to Affect Natural Resources. Surface rights have been acquired or negotiated over a number of small areas within the Increible 6 gold project in order to facilitate access and drilling activities. 4.1 LOCATION The Choco 10 gold mine is located in the southeastern part of Venezuela, in Bolívar State (Figure 4.1), approximately 15 km west of the town of El Callao. The mine is located on an exploitation project, which amalgamates the Choco 10 and Choco 4 concessions (Figure 4.2). The major industrial city of Puerto Ordaz is located 190 km northwest of El Callao and is linked to the mine by paved road. Venezuela has a good road infrastructure, although road conditions have been deteriorating during the last 15 years near the mine. Under the terms of its exploitation certificate the Company is obligated to maintain a portion of the access road for the Choco 10 mine. The Choco 10 mine commenced production in August, 2005. Current operations consist of open pit mining and a processing plant comprising conventional comminution and carbon-in- pulp processing. The Choco 10 mine uses typical open pit mining methods of drilling, blasting, loading and hauling. Two pits are currently being operated within the Choco 10 concession, Pisolita and Rosika-Coacia. The pits are located 2-3 km from the main plant.
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Figure 4.1 Location of the Choco 10 Mine in Southeastern Venezuela
Figure 4.2 El Callao District Showing Locations of Rusoro Concessions
The Increible 6 concession is located 4 km northeast of Choco 10, as shown in Figure 4.3.
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Figure 4.3 Location of Surface and Mineral Tenements, Increible 6
4.2 PERMITS AND LICENCES A summary description of the title and terms of the Choco 4 and Choco 10 concessions is provided in Table 4.1.
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Mining Rights Held by Promotora Minera de Guayana, P.M.G., S.A.
Titles Rights and Minerals Area and Location Term
CHOCO 4
The mining rights over this area were first granted by the MEM to the CVG by means of a concession on May 10, 1993, which was then leased by the CVG to PMG. Later, an exploitation permit named “Certificate of Exploitation” was granted to the CVG on February 4, 1994.
Exploration and subsequent exploitation of alluvial and vein manganese, niobium, tantalum, molybdenum, vanadium, chromium, nickel, cobalt, tungsten, gold, copper, zinc, silver and tin.
Concession was originally granted for a 2,941.8570 hectares area, El Callao Municipality, Bolívar State, Venezuela. PMG selected for exploitation an area of 1,458.12 hectares, divided into 4 plots (CH4- 1, CH4-2, CH4-3 and CH4-4) of 493.87, 307.40, 204.76 and 452.09 hectares, respectively.
The Choco 4 Certificate of Exploitation grants to its holder the right to exploit the minerals for a term of 20 years commencing on the date of publication in the Official Gazette, renewable for periods no longer than 10 years each and no longer than 20 years in total. Having been published on December 5, 2005, the Choco 4 CE will expire on December 5, 2025, unless an extension is granted.
CHOCO 10
The mining rights over this area were first granted by the MEM to the CVG by means of a concession on May 10, 1993, which was then leased by the CVG to PMG. Later, an exploitation permit named “Certificate of Exploitation” was granted to the CVG on February 4, 1994.
Exploration and subsequent exploitation of alluvial and vein manganese, niobium, tantalum, molybdenum, vanadium, chromium, nickel, cobalt, tungsten, gold, copper, zinc, silver and tin.
Concession was originally granted for a 4,249.3490 hectares area, El Callao Municipality Bolívar State, Venezuela. PMG selected for exploitation an area of 2,124.53 hectares, divided into 5 plots (CH10-1, CH10-2, CH10- 3, CH10-4 and CH10-5) of 499.95, 403.31, 389.78, 373.19 and 458.30 hectares, respectively.
The Choco 10 Certificate of Exploitation grants to its holder the right to exploit the minerals for a term of 20 years commencing on the date of publication in the Official Gazette, renewable for periods no longer than 10 years each and no longer than 20 years in total. Having been published on December 5, 2005, the Choco 10 CE will expire on December 5, 2025, unless an extension is granted.
Based on discussions with Choco staff, official gazettes, exploitation permits, and monthly and quarterly reports, it is Micon’s understanding that all permits and licences are in place to operate the mine. In addition to the rights and titles discussed previously, authorization was granted to occupy Choco 4 (#000439) and Choco 10 (#000580) with expiry dates of April 8, 2014 and February 4, 2014, respectively. The environmental permits are in place for the mineral exploitation in Choco 4 and 10. The mine is currently fulfilling the permit obligations. The groundwater well field permit is also in place. Details of the Increible 6 concession are summarized in Table 4.2.
Table 4.2 Summary of Land Holdings for the Increible 6 Concession
Mineral Title Registered Company Rights Area
Increible 6 General Mining de Guayana C.A. Hard Rock and Alluvial
2,470.53 ha
As noted above, the Certificate of Exploitation for the Increible 6 concession was approved in December, 2008.
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In addition to the Choco 4, Choco 10 and Increible 6 concessions, Rusoro holds title to the following concessions located in the area of El Callao: Bochinche B1 and B2; Choco 1, 2, 6, 9, 12 and 13; and Increible 16. Details of those concessions, which are not relevant to the preliminary assessment discussed herein, are provided in Leader et al., 2007. 4.3 ROYALTIES, PAYMENTS AND OTHER AGREEMENTS When it acquired Promiven and its 70% subsidiary PMG in 2003, Bolivar agreed to pay to the prior owner of PMG (Cemex Venezuela C.A., or Cemex) a royalty on gold production from Choco 10 and/or Choco 4. The royalty becomes payable once PMG’s gold production reaches 700,000 oz of gold produced. The royalty is calculated and paid on ounces of gold attributable to Promiven’s equity interest in PMG. This was increased to 95% following Bolivar’s acquisition. Once this level of production is reached, the amount of the royalty will be calculated monthly using the average London PM fixing price of gold during the calendar month, but will be payable quarterly in arrears. The royalty is $10/oz, but increases to $15/oz if the average price of gold for the relevant calendar month reaches $315 or more, and $20/oz if the average price of gold for the relevant calendar month reaches $400 or more. If Cemex wishes to sell its right to receive the royalty to a third party, it must first offer it to the Company on the same terms. In addition, pursuant to the Choco 4 and Choco 10 lease agreements between CVG and PMG, PMG must pay a monthly production royalty to CVG and CVG Técnica Minera C.A. (a CVG subsidiary). The royalty is paid monthly in arrears in Venezuelan Bolivars, at the official exchange rate in place (or in gold at the request of CVG), within the first 10 days of each calendar month, based on the production of the immediately preceding calendar month. It is calculated monthly, is based on the number of ounces of gold produced and ranges between 1.0% and 3.5%, depending on the average price of gold in the New York market for the relevant month, as determined by CVG. This royalty amount is subject to value added tax. As part of the exploitation phase, the following taxes are payable upon the commencement of commercial production from the Choco 4 and 10 concessions:
Decree Law of Mines: Exploitation Tax of 3% on gross production based on the commercial value of the gold in the city of Caracas, payable monthly. Pursuant to article 90 of the Decree Law of Mines of 1999 the exploitation tax is credited towards the payment of the surface tax. Therefore in practice no additional surface taxes will apply.
The Choco 10 Lease Agreement originally included a monthly royalty payable to
CVG based on monthly gold production, ranging from 0.28% to 10%, depending on the grade of gold per ton (g/t), and a royalty to CVG Técnica Minera (Tecmin) as a finder’s fee equivalent to a monthly gross production royalty of 1% during the first 10 years after the date of execution of the lease agreement. These royalties were renegotiated between PMG and CVG on March 12, 2004 and were substituted by a
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gross royalty payable to CVG and CVG Tecmin calculated on production of gold (oz Au). The CVG and CVG-Tecmin royalty is shown in Table 4.3.
The CVG royalty includes a gross royalty on production to CVG-Tecmin of 1% for the first 10 years of the Choco 10 lease. Rusoro has advised that these royalties remain in place and as summarized in Table 4.3.
Table 4.3
Royalty Payments to CVG and CVG-Tecmin
Average Gold Price (US$/oz Au) Royalty to CVG and CVG-Tecmin < $300/oz 1.0% $300/oz to $350/oz 1.6% $350.01/oz to $375/oz 2.23% $375.01/oz to $400/oz 2.70% $400.01 to $450/oz 3.00% >$450/oz 3.5%
The royalty payable to Cemex in connection with the acquisition of Promiven by Carisma is detailed below:
Carisma agreed to pay Cemex a royalty of $10/oz of produced gold, exceeding the first 700,000 oz produced by PMG. The royalty will be paid quarterly in arrears within the first 15 days of each calendar quarter. In addition, it will be calculated on the same proportion as the equity interest attributable to Promiven in Promotora Minera de Guayana C.A. (PMG). The royalty shall be increased to (i) $15/oz, if the average price of gold is $315 or more in the London Bullion Market, (ii) $20/oz, if the average price of gold is $400 or more in the London Bullion Market. Carisma has a right of first refusal to purchase the royalty.
In addition to the purchase price and the royalty, Carisma agreed to make a bonus
payment of $1,500,000 to Cemex as follows: (i) $750,000 on each of the eighth and ninth anniversaries of the date of commencement of commercial production, or (ii) a single instalment of $1,500,000 within 90 days of reaching a total production of 700,000 ounces of gold.
Under the Choco 10 lease agreement, the lease holder is obliged to pay annual surface taxes, according to a sliding scale that varies with the age and the surface of the concession (the older and larger the concession, the surface tax rate increases). Micon has been informed that these taxes have been paid and are current, and that there are no defaults in terms of existing permitting and licencing. The information on the royalty payments was provided to Micon by Rusoro’s predecessor, Gold Fields and has been confirmed subsequently by Rusoro for the purpose of the present report. Micon has not independently verified the terms and requirements of the royalties.
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5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE
AND PHYSIOGRAPHY The following has been extracted from Leader et al., 2007 and Laudrum et al., 2008. 5.1 TOPOGRAPHY, CLIMATE AND VEGETATION Choco 10 lies in an area of low hills between elevations 200 masl and 300 masl. The area is partly savannah and partly tropical forest. The soil is nutrient-poor and present land use is confined to rural cultivation, cattle ranching and minero (small mining) activity. The climate at Choco 10 is tropical, with temperatures averaging around 25.7°C and humidity ranging from 76% to 82%. The average annual precipitation at El Callao is 1,325 mm. The heaviest rainfall occurs during the months from June to August, which average 150 mm of precipitation per month. During the remainder of the year the rainfall is about 80 mm per month excep