The Ortiz Gold Project consists of 232 contiguous square kilometers (57,267 acres) of the Ortiz Mine Grant in Santa Fe County, New Mexico. Historical production exceeded 350,000 ounces of gold. Drilling by several companies up to the early 1990’s indicated 2.0 million ounces of gold contained in several deposits across the extensive project area.
In 2012 Independent Mining Consultants, Inc. (“IMC”) carried out mineral resource estimates on the Carache and Lucas deposits in compliance with Australia’s JORC standards. Mineral Resources contained within two conceptual open pits were stated as follows:
Measured and Indicated Resources contained in the Carche and Lucas deposits total 0.973 million ounces of gold and 18,416 tonnes (40.6Mlb) of copper. In addition, Inferred Resources total 62,700 ounces of gold. The Carache resource is estimated as 11.7 million tonnes grading 1.58g/t gold. The Lukas gold-copper resource is lower grade, estimated as 13 million tonnes at 0.91g/t gold, however with a very low stripping ratio. The resource report noted that significant exploration upside exists on Carache and Lukas deposits, as well as on other prospects within the project area which have existing historic resource estimates.
The Mineral Resource is based on 109,355m (358,684 ft) of core and reverse circulation drilling.
In 2013 Minerals Advisory Group, LLC (“MAG”) completed a Preliminary Economic Assessment (“PEA”) of the Carache and Lucas gold deposits, which shows the deposits could form the basis of an environmentally friendly and economically viable mining operation. The PEA estimates the Carache and Lucas deposits could produce 874,000 ounces of gold from two open cut mines over an operating life ranging from 9 to 18 years depending on the development sequence employed. At a three-year moving average gold price of $1550 per ounce, revenues would total $1.35 billion and cash flows would approximate $350 million net of all costs including royalties, operating costs, taxes and capital expenses.
Gold recoveries of 90% or higher are achievable using gravity and flotation techniques alone, avoiding chemical leaching and minimizing environmental impact. Water also is a sensitive issue, and the development plan proposes to employ a dry stacking system for the tailings and thereby reduce water usage by about two-thirds.
MAG’s study analyzed three development scenarios and generated capital and operating costs for each, including 1) Carache and Lucas mined simultaneously at 3.0 million tons per year, 2) Carache alone at 1.5 million tons per year, and 3) Carache then Lucas also at 1.5 million tons per year. These development options yielded the following major results at a three-year moving average gold price of $1550 per ounce:
|Plan||Direct Operating Cost||Capex||%IRR||NPV5|
|Carache/ Lucas||3.0 Mpt||$684/0z||$259.5 M||25.5||$215.3 M|
|Carache alone||1.5 Mpt||670/oz||183.7 "||19.6||121.8 "|
|Carache then Lucas||1.5 Mpt||768/oz||202.9 "||20.5||175.1 "|
Santa Fe Gold is in the early stage of the permitting process at Ortiz, which is expected to require a minimum of two years to complete. Environmental baseline studies were initiated in January 2013 and in July 2013 a Sampling and Analysis Plan was submitted to the NM Mining and Minerals Division. The Company also is actively reaching out to a wide range of interested parties to solicit community input on mining development.
Project Location and Tenure
The Ortiz Gold Project consists of 232 contiguous square kilometers of the Ortiz Mine Grant in Santa Fe County, New Mexico (see figure above). Santa Fe’s land tenure is based on a lease agreement with Ortiz Mines, Inc. whereby Santa Fe has exclusive rights for exploration, development and mining of gold, silver, copper and other minerals on the area of the Ortiz Mine Grant. The initial term of the lease extends until 2015 (in certain circumstances until 2022) and continues year-to-year thereafter for so long as gold or other leased minerals are produced in commercial quantities. The agreement provides for annual lease payments of US$130,000; a sliding-scale production royalty varying from 3% to 5% depending on the price of gold; the requirement that Santa Fe comply with governmental permitting and other regulations; and other terms common in mining leases of this type.
The Ortiz Gold Project is located 48 kilometers (30 miles) by road northeast of Albuquerque, New Mexico. The villages of Golden, Madrid and Cerrillos, with a combined population of less than 1,000 people, lie in and adjacent to the project. Paved New Mexico Highway 14 traverses the western portion of the Project. The main line of the Santa Fe Railway crosses the northeast corner of the Project. A network of unimproved ranch roads provides access to the various land holdings. High-voltage electric power lines cross the southern part of the Project.
Historic mining was conducted within the Project by Consolidated Gold Fields, which in 1973 leased the eastern portion of the Mine Grant from Ortiz Mines, Inc. and developed and mined the Cunningham Hill deposit (Ortiz Mine). In the period 1980-1986, Gold Fields produced approximately 250,000 ounces of gold from an open-pit, heap-leach operation. Historical production exceeded 350,000 ounces of gold.
Drilling by several companies up to the early 1990’s resulted in historical resource estimations as part of a 1990 pre-feasibility study completed by Pegasus Gold Corporation in Joint Venture with LAC Minerals (USA) Inc. The sampling database and resource estimate was audited by Independent Mining Consultants, Inc. (IMC) in 1992. IMC subsequently updated the mineral resource estimate in 2006 for AZCO Mining Inc. (now Santa Fe Gold) to allow for higher prevalent commodity prices and evolving reporting standards.
The Ortiz Gold Project is underlain by mid-Tertiary monzonite and latite porphyry stocks, plugs, dikes and sills that have intruded Paleozoic to early-Tertiary sedimentary rocks. The intrusive rocks are part of the Ortiz Porphyry Belt. Structurally, the Grant straddles the Tijeras-Canoncito fault system, a northeast trending zone of a deep-seated crustal break. The fault zone has been active intermittently since Precambrian time and has provided a zone of weakness for the emplacement of granitic magmas and associated mineralization. Late-stage volcanism resulted in the formation of breccia pipes and zones of intense fracturing that provided access for hydrothermal fluids carrying gold, silver, tungsten, molybdenum and base metals.
The Ortiz Porphyry Belt exhibits a number of styles of mineralization that occur in a variety of geologic settings:
- Gold mineralization is associated with a collapse breccia at Carache Canyon. At the Carache deposit, relatively coarse-grained free gold is contained in open space fractures developed in four gently dipping andesite porphyry sills and a sandstone unit around the collapsed margins of a breccia pipe (see figure below).
- Gold and copper mineralization occurs in calcareous rocks at Lukas Canyon and San Pedro. At the Lucas gold-copper deposit, mineralization occurs in garnet skarn developed in a limestone unit, the outcropping portion of which forms a dip slope at the surface (see figure below).
- Gold-tungsten mineralization is found in a breccia pipe at Cunningham Hill adjacent to a volcanic vent, the Ortiz diatreme.
- Gold and copper are disseminated in stockworks and fractures in monzonite at the Cunningham Gulch (gold) and Cerrillos (copper-gold) deposits (bulk tonnage low-grade “porphyry”-type deposits).
- Lead – zinc – silver veins are found at the Cash Entry and other old mines north of Cerrillos.
- Lead – zinc – silver pipe-like mantos occur in limestone at the Carnahan mine, San Pedro area.
- Molybdeniteis found in stockworks and fractures in the San Lazarus monzonite stock, San Pedro area.
- Placer gold deposits occur on Cunningham Mesa, on the northern pediment of the San Pedro Mountains, and in most of the arroyos draining the Ortiz and San Pedro Mountains.
The information included in this release that relates to Santa Fe Gold resources for the Ortiz Project is based on information compiled by Michael G. Hester, FAusIMM. Mr. Hester is employed as Vice President and Principal Mining Engineer by Independent Mining Consultants, Inc. (IMC) of Tucson, Arizona, USA, and has worked as a consultant in resource modeling, mine evaluation and mine development for 33 years in precious and base metal deposits. Mr. Hester has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person. Mr. Hester consents to the inclusion in the release of the matters based on his information in the form and context in which it appears.