Document:

sirg_ex105.htm

 

TECHNICAL REPORT ON THE

EMERALD ISLE COPPER DEPOSIT,

ARIZONA, U.S.A.

PREPARED FOR

STE-GENEVIEVE RESOURCES LTD.

 

NI43-101 Report

 

Authors:

Hrayr Agnerian, M.Sc. (Applied), P.Geo.

John T. Postle, P.Eng.

 

 

 

 

  

 

  

 

	
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TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	1.	SUMMARY 	1
	 	1.1	 Executive Summary   	2
	 	1.2	 Technical Summary   	3
	 	 	 	 
	2.	INTRODUCTION AND TERMS OF REFERENCE    	9
	 	 	 	 
	3.	RELIANCE ON OTHER EXPERTS  	13
	 	 	 	 
	4.	PROPERTY LOCATION AND DESCRIPTION  	14
	 	 	 	 
	5.	ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY   	18
	 	 	 	 
	6.	EXPLORATION AND MINING HISTORY  	19
	 	6.1	El Paso 	20
	 	6.2	USBM / El Paso Joint Venture   	22
	 	6.3	TSC / Arimetco 	24
	 	6.4	Historical Resource and Reserve Estimates 	26
	 	6.5	2001 to 2004    	26
	 	 	 	 
	7.	GEOLOGICAL SETTING 	27
	 	 7.1	Regional Geology  	27
	 	 7.2	Property Geology  	29
	 	 	 	 
	8.	DEPOSIT TYPES 	30
	 	8.1	Types of Mineralization 	30
	 	8.2	Genetic Model 	30
	 	 	 	 
	9.	MINERALIZATION 	33
	 	 	 	 
	10.	DRILLING	38
	 	10.1	Past Drilling  	38
	 	10.2	Recent Drilling 	38
	 	 	 	 
	11.	SAMPLING METHOD AND APPROACH	40
	 	11.1	El Paso  	40
	 	11.2 	Holcorp/MDA 	40
	 	11.3	SGV  	41
	 	 	 	 
	12.	SAMPLE PREPARATION, ANALYSIS AND SECURITY	43
	 	12.1 	El Paso 	43
	 	12.2	SGV 	44
	 	 	 	 
	13.	DATA VERIFICATION	46
	 	13.1	Verification of Historical Data  	46
	 	13.2	Verification of Recent Data by SGV    	48
	 	13.3	SGV Check Assays 	48
	 	13.4  	Independent Sampling by RPA     	53

 

  

 

  

 

	
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	14. 	MINERAL RESOURCES  	57
	 	14.1	 General Statement 	57
	 	14.2	 Database 	57
	 	14.3	 Density Measurements   	57
	 	14.4	 Geological Interpretation and 3D Solids  	58
	 	14.5 	Block Model and Validation  	63
	 	14.6	 Cut-off Grade 	64
	 	14.7	 Classification of Mineral Resources  	65
	 	 	 	 
	15.	MINERAL PROCESSING AND METALLURGICAL TESTING      	66
	 	15.1 	Arimetco 1988 	66
	 	15.2	Arimetco 1994 	66
	 	15.3 	SGV 	67
	 	15.4	Discussion 	68
	 	 	 	 
	
16. 

	ADJACENT PROPERTIES  	69
	 	 	 	 
	17.	 INTERPRETATION AND CONCLUSIONS  	70
	 	17.1	Exploration Potential  	70
	 	17.2 	Conclusions	
70

	 	 	 	 
	18.	RECOMMENDATIONS 	72
	 	 	 	 
	19.	REFERENCES 	72
	 	 	 	 
	20.	SIGNATURE PAGE 	75
	 	 	 	 
	21.	CERTIFICATE OF QUALIFICATIONS   	76
	 	21.1	Hrayr Agnerian  	76
	 	21.2	John Postle	78
	 	 	 	 
	 22  	APPENDIX   	80
	 	Emerald Isle Deposit, Significant Mineralized Intersections in El Paso Rotary Drill Holes 	80

 

  

 

  

 

	
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LIST OF TABLES

 

	 	 	PAGE
	 	 	 
	Table 1-1 	Recommended Work and Budget 	3
	Table 1-2 	RPA Mineral Resource Estimate 	8
	Table 4-1	List of Mineral Claims	16
	Table 6-1	Assay Values of Phase I In-Situ Leaching (USBM, 1974) 	23
	Table 6-2	Assay Values for Phase II Preshot Core (USBM, 1974)	24
	Table 6-3	Production Record by Arimetco (1992-1993) 	25
	Table 12-1	Check Assay Results (1992)................. Error! Bookmark not defined.	 
	Table 13-1	Comparison of El Paso and SGV RCD Drilling Results	47
	Table 13-2 	Comparison of SGV Reverse Circulation and Diamond Drilling Results	47
	Table 13-3	Check Assay Results 2004-2005, MSRDI vs. American Assay Labs	49
	Table 13-4 	Check Assay Results 2004-2005, MSRDI vs. ACTLAB-Skyline Laboratories	50
	Table 13-5 	RPA Independent Sampling Results (June 2004)	53
	Table 13-6 	RPA Independent Sampling Results (December 2004)	55
	Table 14-1 	Density Determinations	58
	Table 14-2 	Statistics of Drill Hole (10 ft.) Composites	61
	Table 14-3 	Comparison of Block Grades and Composite Grades	64
	Table 14-4 	RPA Mineral Resource Estimate	65
	Table 18-1	Recommended Work and Budget	72

 

LIST OF FIGURES

 

	 	 	PAGE	 
	 	 	 	 
	Figure 2-1	Emerald Isle Project, Location Map	12	 
	Figure 4-1	Emerald Isle Project, Property Map	17	 
	Figure 6-1	Emerald Isle Property, Drill Hole Location Map	21	 
	Figure 7-1	Emerald Isle Area, Regional Geology	28	 
	Figure 7-2	Emerald Isle Project, Local Geology	29	 
	Figure 9-1 	Emerald Isle Property, Plan View of Pre-stripping Copper Mineralization	34	 
	Figure 9-2 	Emerald Isle Property, Generalized Vertical Longitudinal Section	35	 
	Figure 9-3 	Emerald Isle Property, Vertical Cross Section 49+450E 	36	 
	Figure 9-4 	Emerald Isle Property, Vertical Cross Section 50+150E	37	 
	Figure 13-1 	Correlation of MSRDI and American Assay Lab Results (2005)	51	 
	Figure 13-2 	Correlation of MSRDI and ACTLab Results (2005) 	52	 
	Figure 13-3 	Plot of SGV vs.RPA Results, Total Copper (%TCu) Values of Independent Samples Collected by RPA	56	 
	Figure 14-1 	3D View of the Emerald Isle Deposit	60	 
	Figure 14-2 	Emerald Isle Deposit, Histogram of Composite Assay values 	62	 

 

  

 

  

 

	
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1  SUMMARY

 

1.1  EXECUTIVE SUMMARY

 

Roscoe Postle Associates Inc. (RPA) has been retained by Ste. Genevieve Resources Ltd. (SGV) to prepare a Technical Report and estimate the Mineral Resources of the Emerald Isle

Copper Project, located near Kingman, in northwestern Arizona. The purpose of this report is to provide an independent estimate of the Mineral Resources of the Emerald Isle Project and, if warranted, to recommend further work on the property. The Technical Report is compliant with NI 43-101 Standards of Disclosure for Mineral Projects. RPA visited the property in May and December, 2004.

 

SGV is a Canadian reporting issuer with a corporate office in Montreal and another office in Toronto. It has interests in two copper projects in Arizona and another copper project in Haiti, and is currently conducting work to assess the economics of putting the Emerald Isle Project, a former copper producer in Arizona, back into production.

 

The Emerald Isle Copper Project comprises a mineral deposit and some infrastructure. In particular these include:

 

	 	●	A small open pit mine,
	 	●	A SX/EW plant,
	 	●	A leach pad with mineralized material for heap leaching,
	 	●	A pad with tailings from previous mining and processing,
	 	●	Three small low grade stockpiles, and
	 	●	Mine infrastructure including some buildings, office trailer and equipment, which may have to be repaired or replaced.

 

Recently, SGV has completed a definition drilling program and is assessing the potential economics of re-opening the Emerald Isle Mine.

 

  

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CONCLUSIONS

 

The Emerald Isle copper deposit is hosted by Late Tertiary conglomerates and, to a lesser extent, by Quaternary alluvium and Cretaceous granitic rocks. RPA has estimated the Mineral Resource from 135 previous rotary and reverse circulation drill holes. Based on our review of past and recent exploration data, RPA concludes that:

 

	
  •  

	
The technical data generated from past as well as recent exploration on the property are acceptable for estimation of Mineral Resources.

 

	
  •  

	
The 2004 SGV drilling program has been carried out in a systematic manner and is well documented.

 

	
  •  

	
The new SGV drilling results have on an overall basis confirmed the previous drilling results, although there is considerable variability between individual twinned holes.

 

	
  •  

	
RPA has estimated Mineral Resources of the Emerald Isle copper deposit using results of the previous drilling. At a total copper cut-off grade of 0.3% TCu and 10 ft. minimum vertical thickness, Indicated Mineral Resources are 2.22 million tons with an average grade of 0.62% TCu.

 

	
  •  

	
In RPA's opinion, further work is warranted on the Emerald Isle property to advance it towards the prefeasibility stage.

 

	
  •  

	
Past exploration (seismic survey by Arimetco) results suggest that a paleochannel similar to the one hosting the Emerald Isle deposit may be present south of the current open pit. RPA is of the opinion that this represents a valid exploration target.

 

RECOMMENDATIONS

 

RPA is of the opinion that the Emerald Isle copper property contains a significant copper Mineral Resource and recommends a Scoping Study (Preliminary Assessment) to assess the economic potential of the project and advance it towards the prefeasibility stage. As part of the Scoping Study, further metallurgical testwork is recommended to determine the copper recovery in a conventional heap leaching operation. RPA also recommends drilling to test the paleochannel exploration target south of the open pit area. The estimated cost of the recommended work is C$200,000 (Table 1-1).

 

  

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TABLE 1-1   RECOMMENDED WORK AND BUDGET

	
SGV Emerald Isle Project, Arizona

	  
	
Item

	
Estimated Cost (C$)

	
Metallurgical testwork

	
25,000

	
Scoping study

	
100,000

	
Drilling of exploration targets

	
75,000

	
Total Recommended Work

	
200,000

 

1.2   TECHNICAL SUMMARY

 

PROPERTY STATUS

The Emerald Isle Project is located approximately 24 km northwest of the City of Kingman, Arizona and some 160 km (100 mi) southeast of Las Vegas, Nevada. The population of Kingman is about 10,000, and the city is situated close to US Interstate Highway 40 within Wallapai Mining District, Mohave County, Arizona.

 

The Emerald Isle copper deposit is situated within the Emerald Isle Property, which includes 37 Unpatented Lode Mining Claims and 14 Mill-site Claims, covering a total area of approximately 178 ha (440 acres). The registered owner of the 24 old (unpatented as well as Mill-site mining) claims is Western Consolidated Resources (Western), a company based in Tucson, Arizona. Recently, SGV has staked 27 new claims (total approximately 263 acres) surrounding the original 24 claims.

 

The mineral claims are in good standing until August 31, 2006. This information has been supplied by SGV. RPA has not searched or confirmed title to the Emerald Isle Property.

 

RPA understands that since the Emerald Isle Property is a former producer, environmental impact and hydrology studies have been carried out and new permitting is not required. Additional geotechnical studies, however, are required by the current operator of the project prior to the new development of the project. Included in the authorizations needed for the restart of mining at Emerald Isle are water permit and authorization from the Government of the State of Arizona.

 

  

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LOCATION AND ACCESS

 

Access to the Emerald Isle Property is by paved roads, including US Interstate Highway 93, from Las Vegas, Nevada or Phoenix, Arizona. Logistical support, in terms of power and telephone lines, is available at Kingman, which is linked to the Arizona Power grid. Water is available from wells near the property and from the Mineral Park Mine nearby. Infrastructure is good for mining activities since the area has a history of gold and copper mining. Infrastructure for mining equipment and personnel also are available at Phoenix and near Tucson, in southern Arizona, where a number of open pit copper mines are located. A high voltage power line runs alongside Interstate Highway 40, about 2 km from the property.

 

HISTORY OF EXPLORATION AND MINING

 

Historic mining activities in the Wallapai district of northern Arizona date back to the early 1860s, mostly for silver and gold within oxidized portions of veins. With the turn of the 20th Century mining companies started to explore for base metals. From 1917 to 1943 the property was worked at various times. From 1944 to 1948 a 300 tpd copper leaching plant was in operation. About 55,000 tons of copper were reported to have been recovered. Results from this operation reportedly indicated leach recoveries in the order of 80% from "ore" with a head grade of 1% Cu. Acid consumption was in excess of 10 lbs. of acid per pound of copper produced.

 

During the past half-century a considerable amount of work was done by El Paso Natural Gas Company (El Paso), Arimetco, Inc. (Arimetco) and contractors. These include completion of some 17,200 ft. of drilling in 90 rotary drill holes. In addition, some 8,600 ft. of drilling in 45 reverse circulation drill (RCD) holes were also completed by Holcorp. Past work also included development of the present open pit, and reported production of some 1.4 million tons (1.27 million tonnes) of oxide material averaging about 1% Cu.

 

During the 1970s, El Paso also carried out blasting and in-situ leaching at the bottom of the open pit. This was done in conjunction with the United States Bureau of Mines (now the United States Geological Services). Results of this test, however, were not encouraging.

 

  

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In 1980, TSC Enterprises, Inc. (TSC) acquired the Emerald Isle Property from El Paso, but the property remained inactive. In 1987, TSC was acquired by Arimetco, Inc. (Arimetco) and produced some 100,300 lbs. of cement copper (82% Cu) from the open pit. In 1992, TSC commissioned an 8,000 lbs./day SX-EW plant and reportedly produced 1,152,663 lbs. of copper from 162,565 tons with an average head grade of 0.57% total copper (TCu). These figures equate to a copper recovery of 62%. Due to the prevailing low copper price at that time, however, the plant was shut down in September 1993. In 2003, TSC changed its name to Western Consolidated Resources (Western).

 

GEOLOGICAL SETTING AND MINERALIZATION

 

The Emerald Isle Property is underlain by the Late Tertiary Gila Conglomerate and Cretaceous granitic rocks similar to those present at the nearby Mineral Park Mine. To the south, the area is covered by Quaternary alluvium.

 

There are three types of copper mineralization at Emerald Isle. The first type is primary fissure vein mineralization containing copper sulphides. This was the type of mineralization which was mined in 1917 and 1918, but which is no longer the target at the present time. The second (and the main) type is primary copper mineralization within the dark conglomerate reported to consist primarily of tenorite (CuO). The third type is secondary copper mineralization, in the form of copper staining, such as malachite (CuCO3.Cu(OH)2) and chrysocolla (CuO.SiO2.H2O), which are commonly observed on fracture planes as well as within the matrix of the dark conglomerate.

 

Copper mineralization at Emerald Isle is hosted by the Gila Conglomerate. The copper zone is in the form of a mineralized lens contained within a paleochannel some 2,500 ft long, 500 ft. to 750 ft. wide. The thickness ranges from 20 ft. to 300 ft., averaging about 100 ft. In places, the conglomerate is absent and in other places it is very thick, due to faulting.

 

The source of the copper at Emerald Isle is interpreted to be the low grade porphyry-type copper mineralization at Alum Wash, about 3.5 mi northeast of the Emerald Isle deposit, and mineralization is characterized by dark blue to black rock. In this respect, the style of mineralization appears to be somewhat similar to the Exotica deposit, a satellite of the giant Chuquicamata copper deposit in Chile.

 

  

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PAST EXPLORATION

 

The Emerald Isle deposit has been explored by some 25,800 ft. of drilling in 90 surface rotary holes drilled in the 1970s by El Paso and 45 reverse circulation holes drilled in the 1990s by another company. Systematic testing of the copper bearing zone was started by Arimetco in 1987 and continued until 1992.

 

RECENT EXPLORATION

 

During November and December 2004, SGV completed a program of confirmation drilling that totalled 5,530 ft. in 18 reverse circulation drill (RCD) holes. Fifteen of these holes twinned previous El Paso and Arimetco holes and ranged in depth from 235 ft. to 350 ft. Samples were analyzed for total copper as well as soluble copper and zinc. Due to variability in copper results between the original and twinned holes, SGV twinned four of the RCD holes by diamond drilling of four holes totalling 1,196 ft.

 

HISTORICAL RESOURCE ESTIMATES

 

There have been a number of resource and reserve estimates of the Emerald Isle copper deposit, as summarized below. RPA has not reviewed these historical estimates and is uncertain of the parameters and in some cases cut-off grades used.

 

	
  •  

	
In March 1991, MPH estimated total "reserves" to be in the order of 1.8 million tons at 0.72% TCu.

 

	
  •  

	
In March 1992, Mine Development Associates (MDA) Feasibility Study on behalf of Holcorp estimated Mineral Resources to total 2.81 million tons at 0.57% TCu of which in-pit resources totalled 1.52 million tons at 0.49% TCu, plus stockpiles estimated at 400,000 tons averaging 0.35% TCu.

 

	
  •  

	
In 1992, Arimetco estimated the oxide copper resources at a 0.11% TCu cut­off grade and a waste-to-ore strip ratio of 0.8:1 as total proven and probable reserves of 1.95 million tons at 0.58% TCu plus 1.2 million tons of mill tailings averaging 0.22% TCu.

 

	
  •  

	
In 1995, Arimetco considered a number of scenarios for the Emerald Isle deposit, but documentation is incomplete. One of these scenarios was a block model estimate with reported mineral resources of 980,000 tons, which could be mined at a strip ratio of 1:1. Later, Arimetco modified these resources to 475,000 tons averaging 0.61% TCu, at a strip ratio of 0.73:1.

 

  

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RPA notes that all of the above resource and reserve estimates are historical in nature and are included for information purposes. They are not compliant with NI 43­101. Furthermore, RPA has not reviewed them and cannot comment on their reliability, relevance or classification, but notes that they are in the same order of magnitude as the RPA current estimate described below.

 

RPA INDEPENDENT SAMPLING

 

RPA collected eighteen (18) samples of RC drill chips from the recent drilling and sent them to SGS Laboratories in Don Mills, Ontario for total copper (TCu), acid soluble copper (ASCu), total zinc (TZn) and acid soluble zinc (ASZn) determinations. In general, the RPA TCu assay values are higher than the SGV values, by 20% on average. The RPA ASCu values are also higher than the SGV values, by almost 50% on average. The RPA samples have an average ratio of ASCu to TCu of 86% compared to the SGV average of 69% for this group of 18 samples. RPA notes that the average ratio of the ASCu to TCu for all 176 SGV samples in the mineralized intervals in the holes is 78%. The RPA check sampling confirms the SGV drilling results in general and suggests that the SGV values may be on the low side: more check sampling is needed.

 

RPA ESTIMATE OF MINERAL RESOURCES

 

RPA has estimated the Mineral Resources of the Emerald Isle deposit using data from the previous 135 rotary and RCD holes. The new SGV drilling results have on an overall basis confirmed the previous El Paso and Arimetco drilling results, although the variability between individual assays from samples of the twinned holes. As part of its estimate, RPA carried out an interpretation of the geology and the mineralized zone, and developed a block model to estimate the Mineral Resources.

 

The copper mineralization was interpreted on drill sections into a single mineralized lens. Gemcom software was used to construct a 3D solid of the lens and grades were interpolated into blocks in the 3D solid using only the 10 ft. drill hole assay composites located within the solid using ordinary kriging. To validate the block model resource estimate, RPA carried out a visual inspection and comparison of block grades with composite grades, as well as a statistical comparison of the composite and block grade distributions.

 

  

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The RPA Mineral Resource estimate is shown in Table 1-2 at several TCu cut-off grades. A cut-off grade of 0.3% TCu is considered to be reasonable for reporting purposes and is based on the approximate operating costs of US$6.98 per ton, a copper recovery of 75% and a copper price of US$1.50 per pound. All of the Mineral Resources are classified as Indicated based on drill hole spacing and the range of the semi-variogram.

 

	TABLE 1-2   RPA MINERAL RESOURCE ESTIMATE
	SGV - Emerald Isle Deposit   
	 	 	 
	 	Indicated Mineral Resources	 
	Cut-off grade (% TCu)	Tons (rounded)	Total Copper (% TCu)
	0.8	420,000	1.00
	0.7	650,000 	0.91
	0.6	940,000	0.83
	0.5	1,380,000 	0.74 
	0.4 	1,870,000 	0.66
	0.3	2,220,000	0.62
	0.2	2,310,000	0.60
	0.1	2,330,000	0.60
	Note: Tonnage is estimated using a density factor of 13.54 cu. ft./ton.

 

The RPA resource estimate is in accordance with the Mineral Resource/Reserve Classification as recommended by the CIM Committee on Mineral Resources and Mineral Reserves.

 

EXPLORATION POTENTIAL

 

The Emerald Isle Project is a mineral property that contains a small oxide copper deposit hosted by a relatively flat lying conglomerate unit where it is crossed by a stream paleochannel. Past exploration work (seismic survey) by Arimetco has identified another possible paleochannel to the south of the known deposit. This represents a valid exploration target that warrants testing by drilling.

 

  

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2 INTRODUCTION AND TERMS OF REFERENCE

 

Roscoe Postle Associates Inc. (RPA) has been retained by Ste. Genevieve Resources Ltd. (SGV) to prepare a Technical Report and estimate the Mineral Resources of the Emerald Isle Copper Project, located near Kingman, in northwestern Arizona (Figure 2-1). The purpose of this report is to provide an independent estimate of the Mineral Resources of the Emerald Isle Project and, if warranted, to recommend further work on the property. The Technical Report is compliant with NI 43-101 Standards of Disclosure for Mineral Projects.

 

SGV is a Canadian reporting issuer with a corporate office in Montreal and another office in Toronto. It has interests in two copper projects in Arizona and another copper project in Haiti, and is currently conducting work to assess the economics of putting the Emerald Isle Project, a former copper producer in Arizona, back into production.

 

In preparation of this report, Messrs. Hrayr Agnerian, M. Sc. (Applied), P. Geo., Consulting Geologist with RPA and John T. Postle, P. Eng., Independent Consulting Engineer and Associate with RPA, reviewed technical documents and reports on the Emerald Isle deposit supplied by SGV. The sources of information are listed at the end of this report.

 

This report is an update of an earlier RPA report prepared in June 13, 2005. RPA understands that, since that time no new work has been carried out on the Property.

 

The Qualified Persons for the Technical Report and their involvement are:

 

	
●

	
Hrayr Agnerian, M.Sc. (Applied), P.Geo., Consulting Geologist with RPA. During his first site visit to the Emerald Isle property on May 31, 2004, Mr. Agnerian collected independent samples of mineralized rock from the pit walls and bottom and submitted them for assay at SGS Laboratories, a recognized assay laboratory in Toronto. During the recent drilling program, Mr. Agnerian visited the site again from December 18 to 20, 2004, reviewed the sampling and logging procedures and held discussions with site personnel. Mr. Agnerian also collected eighteen (18) independent samples from current drilling and submitted them for assay at SGS Laboratories in Toronto. Mr. Agnerian is responsible for all sections, except for the mining aspects, of the Technical Report.

 

	
●

	
John T. Postle, P.Eng., Consulting Mining Engineer with RPA, visited the Emerald Isle property on May 31, 2004, including the old open pit, heap leach area and the surface exposures of the Emerald Isle deposit. Mr. Postle is responsible for the mining section of the Technical Report.

 

  

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For the resource estimate, RPA retained Mr. Nathan Eric Fier, P. Eng., of Vancouver, to construct the block model of the Emerald Isle deposit, in association with Mr. David W. Rennie, P. Eng., RPA Consulting Geological Engineer, under the supervision of Mr. Agnerian.

 

During the first site visit, Messrs. Agnerian and Postle held discussions with Mr. Bryan Wilson, President and CEO of SGV and Mr. Harold R. (Roy) Shipes of Western Consolidated Resources of Tucson, Arizona (the vendor of the Emerald Isle Property) regarding past work on the property. Mr. Shipes is also President of TSC Enterprises, Inc. (TSC). Subsequent to RPA's first site visit, Messrs Agnerian and Postle also held discussions with Mr. Wilson. During the second site visit Mr. Agnerian also held discussions with SGV Contractors and professionals knowledgeable on the project including:

 

	 	●	 Mr. Joe Sawyer, Project Manager
	 	●	 Mr. Gary Clifton, Project Geologist
	 	●	 Mr. Robert Hamilton, Geologist

 

For the sake of consistency with old reports, Imperial units as well as metric units are used in this report, and costs are given in United States Dollars (US$) as well as in Canadian Dollars (CAN$).

 

On May 11, 2004, RPA was contacted by Mr. Bryan Wilson, to carry out a preliminary review of the Emerald Isle as well as the Zonia Project, another copper property and a former producer in southern Arizona. After RPA's initial review and site visit, RPA was requested to carry out a resource estimate and prepare a NI 43-101 Technical Report on the Emerald Isle Project.

 

  

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In this report, certain terms are used including total copper, acid soluble copper, and recovered copper. Total copper (TCu) is the assay value from conventional assaying for copper, acid soluble copper is the assay value obtained from dissolving the sample in a 5% solution of sulphuric acid, and recovered copper is the value obtained by dividing the recovered copper by the tonnage treated.

 

The abbreviations used in this report are listed below.

 

	  	
micron

	
km2

	
square kilometre

	
°C

	
degree Celsius

	
kPa

	
kilopascal

	
°F

	
degree Fahrenheit

	
kVA

	
kilovolt-amperes

	
Hg

	
microgram

	
kW

	
kilowatt

	
A

	
Ampere

	
kWh

	
kilowatt-hour

	
a

	
annum

	
l

	
liter

	
m3/h

	
cubic metres per hour

	
l/s

	
litres per second

	
CFM

	
cubic metres per minute

	
m

	
metre

	
bbl

	
barrels

	
M

	
mega (million)

	
Btu

	
British thermal units

	
m2

	
square metre

	
C$

	
Canadian dollars

	
m3

	
cubic metre

	
cal

	
calorie

	
min

	
minute

	
cm

	
centimetre

	
masl

	
metres above sea level

	
cm2

	
square centimetre

	
mm

	
millimetre

	
d

	
day

	
mph

	
mile per hour

	
dia.

	
diameter

	
MVA

	
megavolt-amperes

	
dmt

	
dry metric tonne

	
MW

	
megawatt

	
dwt

	
dead-weight ton

	
MWh

	
megawatt-hour

	
ft

	
foot

	
m3/h

	
cubic metres per hour

	
ft/s

	
foot per second

	
opt, oz/st

	
ounce per short ton

	
ft2

	
square foot

	
oz

	
troy ounce (31.1035g)

	
ft3

	
cubic foot

	
oz/dmt

	
ounce per dry metric tonne

	
g

	
gram

	
ppm

	
part per million

	
G

	
giga (billion)

	
psia

	
pound per square inch absolute

	
gal

	
Imperial gallon

	
psig

	
pound per square inch gauge

	
g/l

	
gram per litre

	
RL

	
relative level

	
g/t

	
gram per tonne

	
s

	
second

	
gpm

	
Imperial gallons per minute

	
st

	
short ton

	
gr/ft3

	
grain per cubic foot

	
stpa

	
short ton per year

	
gr/m3

	
grain per cubic metre

	
stpd

	
short ton per day

	
hr

	
hour

	
t

	
metric tonne

	
ha

	
hectare

	
tpa

	
metric tonne per year

	
hp

	
horsepower

	
tpd

	
metric tonne per day

	
in

	
inch

	
US$

	
United States dollar

	
in2

	
square inch

	
USg

	
United States gallon

	
J

	
Joule

	
USgpm

	
US gallon per minute

	
K

	
kilo (thousand)

	
v

	
volt

	
kcal

	
kilocalorie

	
w

	
watt

	
kg

	
kilogram

	
wmt

	
wet metric tonne

	
km

	
kilometre

	
yd3

	
cubic yard

	
km/h

	
kilometre per hour

	
yr

	
year

	
mi

	
mile

	
TCu

	
Total copper

	
lbs

	
pounds (weight)

	
ASCu

	
Acid soluble copper

	
%

	
percent

	
TZn

	
Total zinc

	
o

	
degree

	
ASZn

	
Acid soluble zinc

 

  

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3 RELIANCE ON OTHER EXPERTS

 

This report has been prepared by RPA for Ste. Genevieve Resources Ltd. (SGV). The information, conclusions, opinions, and estimates contained herein are based on:

 

	 	●	 Information available to RPA at the time of preparation of this report,
	 	●	 Assumptions, conditions, and qualifications as set forth in this report, and
	 	●	 Data, reports, and other information supplied by SGV.

 

For technical information on the Emerald Isle Property, RPA has relied on some reports by previous operators of the project as well as reports by other consultants (see References section). RPA has not verified the technical information in these reports, but has formed its opinions on the mineralized zones at Emerald Isle primarily on the basis of this technical information. RPA has visited the Emerald Isle Property and has taken independent samples.

 

RPA has not searched the title to the Emerald Isle property, but has relied on information supplied by SGV.

 

  

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4 PROPERTY LOCATION AND DESCRIPTION

 

The Emerald Isle Project is located approximately 24 km northwest of the City of Kingman, Arizona, and some 160 km (100 mi) southeast of Las Vegas, Nevada, or 275 km (172 mi) northwest of Phoenix, Arizona (Figure 2-1). The population of Kingman is about 10,000, and the city is situated close to US Interstate Highway 40 and Arizona State Highway 93 within Wallapai Mining District, Mohave County, Arizona. The geographic coordinates of the property are 35° 21' N Latitude and 114° 10'W Longitude (T22 and 23 and R 18). Primary industries supporting the City of Kingman are ranching and tourism.

The Emerald Isle copper deposit is situated within the Emerald Isle Property, which includes 37 Unpatented Lode Mining Claims and 14 Mill-site Claims, covering a total area of approximately 178 ha (440 acres, Table 4-1 and Figure 4-1). The registered owner of the 24 old (unpatented as well as mill site) mining claims, total approximately 71 ha or 175 acres) is Western Consolidated Resources (Western), a company based in Tucson, Arizona. Recently, SGV has staked 27 new claims (total approximately 107 ha or 265 acres) surrounding the original 24 claims. RPA has not searched or confirmed title to the Emerald Isle Property.

 

On July 30, 2004, SGV through its wholly owned subsidiary, SGV Resources Inc., of Nevada, acquired a 100% interest in the Emerald Isle Property from Western, by agreeing to pay a total of US$2.4 million in cash and shares (SGV, 2004b). The terms of the acquisition were as follows:

 

	
  •  

	
Cash payments of US$200,000 at the time of the closing of the agreement and a further US$250,000 within 90 days of the initial closing date, and

 

	
  •  

	
The issuance of 6.5 million shares of St. Genevieve Resources Ltd. at a deemed price of C$0.40 per share, subject to regulatory approval. At the time of the agreement, the exchange rate was considered to be C$1.00=US$0.75.

 

There are no underlying royalties on the property.

 

  

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The mineral claims are in good standing until at least August 31, 2006. RPA understands that SGV has paid the required fee of US$125 per claim. (Bryan to supply us with documentation Re claim renewal status).

 

Since the Emerald Isle Property is a former copper producer, RPA understands that environmental impact and hydrologic studies have been carried out and new permitting is not required. Additional geotechnical studies, however, are required by the current operator of the project prior to the new development of the project. Included in the authorizations needed for the restart of mining at Emerald Isle, are water permit and authorization from the Government of the State of Arizona. In terms of permitting, the current property status is as follows:

 

	
   ●   

	
Aquifer Protection Permit No. P-101846: issued on June 4, 1993 for the life of the project.

 

	
  ●

	
Air Quality Pending Class II Source (ADEQ): filed on December 5, 1995 and amended December 21, 1995.

 

	
  ●

	
ADEQ-Mining Plan of Operations MPO 388-K-03: issued December 1988 for life of mine. Revised on October 15, 1993.

 

 

	 	●	 Notice of Restart:
	 	 	 o	 ADEQ Air Quality (Pending): December 5, 1995.
	 	 	 o 	 ADEQ APP: December 22, 1995.
	 	 	 o 	 BLM: December 5, 1995
	 	 	 o 	 NPDES storm water runoff discharge permit No. AZR00B094: issued on April 4, 1996 (US EPA).

 

Annual land holding costs are minimal (US$6,500), and no State royalties exist on the property. However, the property is subject to a State Severance Tax. This tax is not a gross royalty tax, but rather a tax which is calculated on the basis of net revenue received from mining operations. "A severance tax of 2.5% is levied on metalliferous (sic) minerals. The severance is levied on a weighted mineral value calculated by multiplying mining costs by the gross value of production, dividing the results by the total production cost" (State of Arizona, Department of Revenue, 2005).

 

  

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TABLE 4-1   LIST OF MINERAL CLAIMS

	
SGV - Emerald Isle Property

	  
	
Claim Name

	
Approx.Area (ha)

	
AMC Number

	
Remark

	
Copper Hill Mill Site No. 1

	
1.4

	
105792

	  
	
Copper Hill Mill Site No. 2

	
1.4

	
105793

	  
	
Copper Hill Mill Site No. 3

	
1.4

	
105794

	  
	
Copper Hill Mill Site No. 4

	
1.4

	
105795

	  
	
Copper Hill Mill Site No. 5

	
1.4

	
105796

	  
	
Copper Hill Mill Site No. 6

	
1.4

	
105797

	  
	
Copper Hill Mill Site No. 7

	
1.4

	
105798

	  
	
Copper Hill Mill Site No. 8

	
1.4

	
105799

	  
	
Copper Hill Mill Site No. 10

	
1.4

	
105801

	  
	
Copper Hill Mill Site No. 11

	
1.4

	
105802

	  
	
Copper Hill Mill Site No. 12

	
1.4

	
105803

	  
	
Hermess Mill Site No. 13

	
1.4

	
105804

	  
	
Copper Hill No. 1 Mill Site 14

	
1.4

	
105805

	  
	
Copper Hill No. 1 Mill Site 15

	
1.4

	
105806

	  
	
Copper Hill No. 2

	
5.6

	
105785 6A55-56

	  
	
Hermes

	
5.6

	
105786 6A62-64

	  
	
Hermes No. 2

	
5.6

	
105787 6A63-64

	  
	
Jimtown Copper No. 1

	
5.5

	
105788

	  
	
Valley Copper No. 1

	
4.2

	
105789

	
Overstaked

	
Valley Copper No. 2

	
5.6

	
105790

	  
	
Valley Copper No. 3

	
5.6

	
105791

	  
	
Emerald No. 1

	
2.8

	
339597

	
Overstaked

	
Emerald No. 2

	
5.6

	
339598

	  
	
Franklin D. Roosevelt

	
5.6

	
90056

	  
	
Subtotal Old Claims

	
71.3

	  	  
	  	  	  	  
	
Emerald # 1A

	
5.6

	
364261

	  
	
Emerald # 2A

	
5.6

	
364262

	  
	
Emerald # 3

	
5.6

	
364263

	  
	
Emerald # 4

	
5.6

	
364264

	  
	
Emerald # 5

	
5.6

	
364265

	  
	
Emerald # 6

	
5.6

	
364266

	  
	
Emerald # 7

	
5.6

	
364267

	  
	
Emerald # 8

	
5.5

	
364268

	  
	
Emerald # 9

	
5.6

	
364269

	  
	
Emerald # 10

	
2.0

	
364270

	
Overstaked

	
Emerald # 11

	
4.9

	
364271

	
Overstaked

	
Emerald # 12

	
0.1

	
364272

	
Overstaked

	
Emerald # 13

	
5.5

	
364273

	
Overstaked

	
Emerald # 14

	
2.2

	
364274

	
Overstaked

	
Emerald # 15

	
5.6

	
364275

	  
	
Emerald # 16

	
4.2

	
364276

	
Overstaked

	
Emerald # 17

	
5.6

	
364277

	  
	
Emerald # 18

	
2.8

	
364278

	
Overstaked

	
Emerald # 19

	
5.6

	
364279

	
Overstaked

	
Emerald # 20

	
2.7

	
364280

	
Overstaked

	
Emerald # 21

	
5.5

	
364620

	
Overstaked

	
Emerald # 22

	
3.0

	
364621

	
Overstaked

	
Emerald # 30

	
0.1

	
364622

	
Overstaked

	
Emerald # 31

	
5.0

	
364623

	
Overstaked

	
Emerald # 43

	
1.4

	
364624

	
Overstaked

	
Emerald # 44

	
0

	
364625

	
Overstaked

	
Emerald # 45

	
0

	
364626

	
Overstaked

	
Subtotal New Claims

	
106.6

	  	  
	
Total

	
177.9

	  	  
	  
	
Source: SGV, 2005

 

  

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

 

Access to the Emerald Isle Property is by paved roads from Phoenix, Arizona or Las Vegas, Nevada (Figure 2-1). Logistical support, in terms of power and telephone lines, is available at Kingman, which is linked to the Arizona Power grid. Water is available from wells at the Mineral Park Mine near the property. Infrastructure is good for mining activities since the area has a history of gold and copper mining. Infrastructure for mining equipment and personnel also are available at Phoenix and near Tucson, in southern Arizona, where a number of open pit copper mines are located. A high voltage power line runs alongside Arizona State Highway 93, about 2 km from the property.

 

The Emerald Isle Project lies in a mountainous and semi-arid area, with moderate to rugged topographic relief characterized by wide valleys and dry rocky hills. The general area is characterized by a peneplane forming a north-south strip about 25 km wide. It is backed to the east by the Cerbat Range, a mountainous area in the western part of Arizona, which is part of the Basin and Range region in Western United States, and extends north to Nevada, and another mountain range to the west. The peneplane slopes gently to the southwest from the foot of the mountains.

 

The land around Emerald Isle is not used for agriculture. The low rainfall and hot temperatures favour only growth of sagebrush and some species of cacti. Wildlife in the area includes jackals, rabbits, various migratory birds and various species of insects and snakes.

 

The area of the Emerald Isle Property has a hot desert-type climate with an average daily temperature of about 35° C in the summer and around 15° C in the winter, and annual precipitation is about 2 inches (PAHRUMP, 2004).

 

Outcrops are common in the mountainous areas but do not occur on the peneplane. Overburden thickness ranges from 3 ft. to 90 ft. with an average thickness of about 45 ft. Overburden consists of unconsolidated conglomerate with pebbles and boulders of sedimentary and granitic rocks in a matrix of limonitic sand and minor clay. The water table lies about 100 ft. below the surface at Emerald Isle.

 

  

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6 EXPLORATION AND MINING HISTORY

 

Historic mining activities in the Wallapai district of northern Arizona date back to the early 1860s, mostly for silver and gold within oxidized portions of veins. With the turn of the 20th Century mining companies started to explore for base metals. The Emerald Isle mine appears to have been sporadically active from 1917 to 1999, with the greatest volume of ore being mined from 1917, 1943 to 1946, 1947 to 1948, 1955 to 1956, 1969, 1972, and 1976. Literature search by Donley et al (2001) indicates that the following companies have carried out work on the Emerald Isle Property:

 

	 	●	
Arimetco, Inc./Arimetco International, Inc. (Arimetco)

	
1999

	 	●	
Climax Molybdenum Company (Climax)

	
1950

	 	●	
El Paso Mining and Milling Company (El Paso M & M)

	
1976

	 	●	
El Paso Natural Gas Company (El Paso)

	
1966, 1969, 1972

	 	●	
Emerald Isle Copper Company (Emerald)

	
1943-1946, 1952

	 	● 	
Lewin-Mathes Company (Lewin-Mathes)

	
1947-1948

	 	● 	
Mohave Enterprises, Inc. (Mohave)

	
1955

	 	●	
Newmont Mining Corporation (Newmont)

	
1950

	 	●	
C.G. Patterson (Patterson)

	
1956

	 	●	
C.F. Weeks (Weeks)

	
1942

 

Of these, only Arimetco, Climax, El Paso, Mohave and Newmont have currently listed addresses (Donley et al., 2001).

 

From 1917 to 1956, the Emerald Isle property was worked at various times. Much of the early production was from underground operations. After 1943, work was almost entirely from the open pit. These included:

 

	
  •  

	
1917: 25,756 tons of ore being shipped to smelters. This material consisted of re-concentrated old tailings and 100 tons of oxidized copper ore were leached with sulphuric acid and the copper was precipitated by electrolysis (Donley et al, 2001).

 

  

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  •  

	
1918 - 1919: Leaching operations continued and copper precipitate was produced at the property. In 1919, equipment at the mine included a 50-ton plant, containing crushers, an acid leaching plant, and an electrolytic precipitating plant. In February 1919, the mine was cleaned up and closed (Donley et al., 2001).

 

	
  •  

	
1943: Some 2,100 tons of direct shipping copper ore (carbonate material) was shipped to a smelter from the Emerald Isle Mine. During that year the Emerald Isle Copper Company began building a 300 ton leaching plant, and mining continued until June 1946 (Dings, 1951) and (U.S. Mines Register, 1952).

 

	
  •  

	
1947: Lewin-Mathes Company began operations at the mine and continued until June 1948. Some 55,000 tons of copper was recovered from the ores from 1943 to 1948, including about 5,000 tons by Emerald Isle Copper Company (Donley et al, 2001). Results from this operation reportedly indicated leach recoveries in the order of 80% from "ore" with a head grade of 1% TCu. Acid consumption was reported to be in excess of 10 lbs. of acid per pound of copper produced (Dunham, 2004).

 

	
  •  

	
1950: Climax and Newmont conducted geophysical surveys over the area of the Emerald Isle Mine, and detected disseminated sulphide mineralization.

 

	
  •  

	
1955 - 1956: Mohave Enterprises, Inc. and C.G. Patterson operated the mine, which had a reported output of over 500 tons of copper per year (Donley et al., 2001).

 

6.1   EL PASO

 

During the 1960s and 1970s, a considerable amount of work was done by El Paso Natural Gas Company (El Paso). El Paso acquired the property in the late 1960s and continued development work "using a process that leaches copper from chrysocolla (copper silicate), precipitates the copper by sponge iron, and concentrates the resulting cement copper by flotation" (Arizona Bureau of Mines, 1969). El Paso is completed 82 rotary drill holes in the 1970s, developed the present open pit, and produced some 1,773 tons of copper from 257,287 tons in 1972. These production figures indicate an average recovered grade of 0.69% Cu (Donley et al, 2001). Figure 6-1 shows the locations of the old El Paso as well as the 2004 SGV twinned drill holes.

 

  

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6.2   USBM / EL PASO JOINT VENTURE

 

During the 1970s, El Paso also carried out blasting and in-situ leaching at the bottom of the open pit. This was done as a quasi-joint venture research program by the United States Bureau of Mines (USBM, now the United States Geological Services) and the mining division of El Paso. Results of this test, however, were not encouraging. The joint venture operated until 1973, when the USBM discontinued its interest in the project and assigned its interest to El Paso (D'Andrea et al., 1977, and D'Andrea and Runke, 1976). Details of the in-situ leaching program are as follows:

 

	• 	  Seven recovery wells, each 50 ft. deep and spaced 50 ft. apart.	 
	• 	  Flow rates: 115.9 gpm.	 
	• 	  Influent pH: 1.1	 
	• 	 Cu grade of effluent: 0.646 g/l.	 
	• 	  Copper production: 748 lbs./day.	 
	• 	 Total production: 142,000 lbs. Cu.	 

 

The objective of the El Paso/USBM research was to develop in-situ leaching methods for 200,000 tons of mineralized rock exposed at the bottom of the open pit and also some three million tons of mineralized rock reported to be present under about 200 ft. of overburden adjacent to and west of the pit. The research included core drilling for fragmentation analysis, in-place permeability testing, seismic surveys, blasting tests, blast vibration measurements, in-situ leaching and ground water monitoring (D'Andrea et al., 1977). USBM carried out in-situ leaching in an area known as Phase I and carried out drilling, blasting and fragmentation, also for in-situ leaching, in the western part of the deposit knows as the Phase II area.

 

6.2.1  PHASE I LEACH TEST

 

A 15,000 ton test area in the open pit bottom was blasted and leached in-place for 117 days. This was followed by leaching 100,000 tons of unblasted pit bottom ore. Prior to leaching, USBM used the following procedures:

 

	
•  

	Core drilling and sampling was done before blasting and after leaching.

 

	
•  

	
Rock quality designations (RQD) measured after the blasting.  The Phase I post-leach drill core data indicated that significant rock fragmentation occurred due to blasting. Since no core drilling was done between blasting and leaching, the exact effect of blasting was not determined.

 

	
•  

	Permeability measurements before and after blasting in both test areas.

 

	
•  

	
Seismic studies in the Phase I area before and after blasting. Results on refraction studies showed that a low velocity layer near the surface extended 3 ft. to 8 ft. deep, probably caused by previous mining activity.

 

The Phase I leach test began in March 1977 and continued for 114 days. Leach solutions were distributed over the surface of the broken ore through perforated pipes and recovered in a well located on the east side of the blasted zone. The solutions were then pumped out of the pit to a recovery plant where cement copper was produced by precipitating the copper from the pregnant liquor with shredded iron in a cementation drum (D'Andrea et al., 1977). During this test some 29,000 lbs. of copper were produced. RPA notes, however, that given the amount of material that was leached, 15,000 tons at a reported average grade of 1% TCu (with contained 300,000 lbs. of total copper), this represents a recovery of copper at 9.7%.

 

Assay results on drill core before blasting and after leaching in the Phase I area show that the average values for the drill section for the two periods are similar, but with significant differences in the top and lower portion of the holes (Table 6-1). RPA notes that interpretation of these data must take into consideration core recovery, which averaged 86% for the preshot core, but only 35% for the post-leach core (D'Andrea, 1977).

 

  

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	TABLE 6-1   ASSAY VALUES OF PHASE I IN-SITU LEACHING (USBM,1974)
	 SGV - Emerald Isle Property
	 Depth (ft.)	 Pre-shot Core	 	 	  Post-leach Core	 	 
	  % TCu	 % Fe 	 % S	  % TCu	  % Fe	  % S
	 0 - 10.0	 0.34	 2.7	 0.023	 	 	 
	 10.0 - 15.0	 0.65	 2.7	 0.041	 	 	 
	 15.0 - 20.0	 0.62	 2.7	 0.056	 1.19	 4.6	 0.140
	 20.0 - 25.0	 0.68	 2.6	 0.110	 1.03	 4.2	 0.140
	 25.0 - 30.0	 0.91	 3.7	 0.039	 1.17	 4.1	 0.110
	 30.0 - 35.0	 0.95	 3.0	 0.090	 1.17	 4.1	 0.110
	 35.0 - 40.0	 0.87	 2.6	 0.092	 0.29	 4.5	 0.100
	 40.0 - 45.0	 0.60	 3.4	 0.052	 0.19	 4.0	 0.029
	 45.0 - 50.0	 0.32	 3.3	 0.049 	 0.19	 4.0	 0.029 
	 50.0 - 55.0	 0.25	 3.4	 0.120	 0.16	 3.9	 0.037
	 55.0 - 60.0	 0.16	 2.4	 0.017	 	 	 
	 60.0 - 65.0	 0.31	 2.4	 0.026	 	 	 
	 65.0 - 68.7	 0.13	 2.3	 0.017	 	 	 
	 55.0 - 62.0	 	 	 	 0.24	 4.4 	 0.210
	 62.0 - 70.3	 	 	 	 0.12	 5.1	 0.056
	 Average	 0.52	 2.9	 0.056	 0.53	 4.3	 0.098
	 
	   Source: D'Andrea et al., 1977.

 

Results of laboratory acid leach tests on -0.5 inch material from the Phase I test area, conducted at the Salt Lake City Metallurgy Research Center, showed that best copper recoveries were obtained at a pH of 1.0 and acid consumption averaged about 6 lbs. of H2SO4 per lb. of copper, and iron consumption averaged 1.3 lbs. per lb. of copper.

 

6.2.2  PIT BOTTOM LEACHING

During the pit bottom leaching program, some 142,000 lbs. of copper were produced. RPA notes, however, that given the amount of material that was leached, i.e., 200,000 tons at a reported average grade of 1% TCu (with contained 2,000,000 lbs. of total copper), this represents a recovery of copper at 7.1%.

 

6.2.3  PHASE II TEST

Three core holes and ten blast holes (seven first blast holes and three second blast holes) were drilled in the Phase II test area. These were 9-inch diameter holes and about 280 ft. deep. The recovery wells were drilled to 300-foot depths with 12-inch diameter tricone bits and cased with 10-inch diameter polyvinyl chloride (PVC) pipe with the bottom 20 ft. perforated (D'Andrea et al., 1977).   Assay values for the preshot core in the Phase II area are listed in Table 6-2. This core had a higher copper content than that in the Phase I area, with a high-grade zone between 230 ft. and 250 ft., which averaged 1.5% TCu.

 

  

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TABLE 6-2   ASSAY VALUES FOR PHASE II PRESHOT CORE (USBM,1974)

	
SGV - Emerald Isle Deposit

	  
	
Depth (ft.)

	
% TCu

	
% Fe

	
% S

	
206 to 210

	
0.69

	
3.08

	
0.160

	
210 to 216

	
0.46

	
3.03

	
0.080

	
216 to 220

	
0.54

	
3.30

	
0.088

	
220 to 225

	
0.37

	
2.81

	
0.055

	
225 to 230

	
0.34

	
3.39

	
0.062

	
230 to 235

	
1.69

	
2.90

	
0.054

	
235 to 240

	
1.47

	
2.76

	
0..084

	
240 to 245

	
1.70

	
2.90

	
0.130

	
245 to 250

	
1.07

	
2.53

	
0.150

	
250 to 255

	
0.40

	
2.85

	
0.064

	
255 to 260

	
0.59

	
2.22

	
0.022

	
260 to 265

	
0.46

	
3.62

	
0.110

	
265 to 270

	
0.40

	
2.85

	
0.024

	
270 to 275

	
0.41

	
3.30

	
0.064

	
275 to 280

	
0.48

	
3.03

	
0.058

	
280 to 285

	
0.21

	
2.17

	
0.045

	
285 to 290

	
0.44

	
4.62

	
0.026

	
290 to 294

	
0.32

	
5.70

	
0.028

	
Average

	
0.67

	
3.17

	
0.072

	  
	
  Source: D'Andrea et al., 1997.

 

Based on the blasting and assay results, a full-scale in-situ leaching system was designed to recover the majority of the remaining copper. Water circulation tests, however, revealed that in the Phase II test area the first blast did not create adequate breakage for leaching. A second blast did improve the fragmentation, but water circulation tests were not conducted because the mine was shut down. Consequently, the larger in-situ leaching program was not implemented.

 

In 1974, the project was shut down due to high costs associated with the production of copper precipitate and subsequent treatment and refining charges. At the termination of the joint venture, Arizona Bureau of Geology and Mineral Technology reported that from 1917 to 1973, some 22,166,000 lbs. of copper were produced from 1.4 million tons of ore, indicating an recovered average grade of approximately about 0.7% Cu at Emerald Isle (Keith et al., 1986). Copper recovery was reported to be 80% (TSC, 1992?).

 

In 1976, Mining Geophysical Surveys (MGS) of Tucson, Arizona, carried out a review of induced polarization (IP) and resistivity data, and R.C. Peterson carried out a review of aeromagnetic data on the Emerald Isle Property. MGS concluded that IP results were inconclusive, except for a north-south fault interpreted to be present across the open pit area (Wieduwilt, 1976). In terms of the airborne results, Peterson concluded that the Emerald Isle deposit "appears to be spatially correlated with a very subtle low in the aeromagnetic data" but it was uncertain if there was a genetic relationship between the mineralization and the weak geophysical anomaly (Peterson,1976)

 

6.3   TSC / ARIMETCO

 

In 1980, TSC Enterprises, Inc. (TSC) acquired the Emerald Isle Property from El Paso, but the property remained inactive until 1987. In 1987, TSC was acquired by Arimetco, which produced some 100,300 lbs. of cement copper (82% Cu) from the open pit. In 1992, TSC completed 40 rotary drill holes in the general area, and commissioned an 8,000 lbs./day SX-EW plant, that produced 1,152,663 lbs. of copper from 162,565 tonnes of mineralized material Table 6-3). The indicated copper recovery was 62%. Due to the prevailing low copper price at that time, the plant was shut down in September 1993. In 2003, TSC changed its name to Western Consolidated Resources (Dunham, 2004).

 

  

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TABLE 6-3   PRODUCTION RECORD BY ARIMETCO (1992-1993)

	
SGV - Emerald Isle Project

	  
	
Month

	
Tons

	
% TCu

	
lbs. Cu to pad

	
lbs. Cu shipped

	
Cumulative recovery (%)

	
Pre July 1992

	
33,365

	
0.43

	
286,939

	  	  
	
July 1992

	
0

	
0

	
0

	
95,976

	
33.4

	
August 1992

	
21,525

	
0.58

	
249,690

	
96,017

	
35.8

	
Sept. 1992

	
19,775

	
0.58

	
229,904

	
144,066

	
42.9

	
Oct. 1992

	
10,795

	
0.56

	
120,904

	
48,058

	
43.3

	
Nov. 1992

	
9,275

	
0.87

	
161,385

	
96,082

	
45.8

	
Dec. 1992

	
0

	
0

	
0

	
96,070

	
55.0

	
Jan. 1993

	
945

	
0.69

	
13,041

	
0

	
54.3

	
Feb. 1993

	
9,975

	
0.62

	
123,690

	
0

	
48.6

	
March 1993

	
14,945

	
0.50

	
149,450

	
95,991

	
50.4

	
April 1993

	
15,015

	
0.51

	
153,153

	
48,007

	
48.4

	
May 1993

	
28,950

	
0.70

	
377,300

	
48,135

	
41.2

	
June 1993

	
0

	
0

	
0

	
144,052

	
48.9

	
July 1993

	
0

	
0

	
0

	
96,025

	
54.1

	
August 1993

	
0

	
0

	
0

	
48,027

	
56.6

	
Sept. 1993

	
0

	
0

	
0

	
96,137

	
61.8

	
Total

	
162,565

	
0.57

	
1,864,942

	
1,152,663

	  
	
Average

	  	  	  	  	
61.8

	  
	
Source: SGV, 2004.

Note: Several versions of the above table were located by RPA. Although the figures differed somewhat, the reported copper production, in general, were in the same order of magnitude.

  

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6.4   HISTORICAL RESOURCE AND RESERVE ESTIMATES

 

There have been a number of resource and reserve estimates of the Emerald Isle copper deposit, as summarized below. RPA has not reviewed these historical estimates and is uncertain of the parameters and in some cases cut-off grades used.

 

	
•  

	
In March 1991, MPH estimated total "reserves" to be in the order of 1.8 million tons at 0.72% TCu.

 

	
•  

	
In March 1992, Mine Development Associates (MDA) Feasibility Study on behalf of Holcorp estimated Mineral Resources to total 2.81 million tons at 0.57% TCu of which in-pit resources totalled 1.52 million tons at 0.49% TCu, plus stockpiles estimated at 400,000 tons averaging 0.35% TCu.

 

	
•  

	
In 1992, Arimetco estimated the oxide copper resources at a 0.11% TCu cut­off grade and a waste-to-ore strip ratio of 0.8:1 as total proven and probable reserves of 1.95 million tons at 0.58% TCu plus 1.2 million tons of mill tailings averaging 0.22% TCu.

 

	
•  

	
In 1995, Arimetco considered a number of scenarios for the Emerald Isle deposit, but documentation is incomplete. One of these scenarios was a block model estimate with reported mineral resources of 980,000 tons, which could be mined at a strip ratio of 1:1. Later, Arimetco modified these resources to 475,000 tons averaging 0.61% TCu, at a strip ratio of 0.73:1.

 

RPA notes that all of the above resource and reserve estimates are historical in nature and are included for information purposes. They are not compliant with NI 43­101. Furthermore, RPA has not reviewed them and cannot comment on their reliability, relevance or classification, but notes that they are in the same order of magnitude as the RPA current estimate described below.

 

6.5   2001 TO 2004

 

In 2001, the U.S. Department of the Interior, Bureau of Land Management (BLM) authorized Dynamac Corporation to develop a limited Potentially Responsible Party (PRP) Evaluation Search for the Emerald Isle Mine site. The PRP search activities were conducted under the guidance of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 and the Superfund Amendments and Reauthorization Act (SARA) of 1986. Dynamac concluded that the following parties may fulfill CERCLA's criteria as PRPs for the Emerald Isle Mine and Mill site:

 

	
•  

	Arimetco, Inc. / Arimetco International, Inc.

	
•  

	Climax Molybdenum Company

	
•  

	El Paso Mining and Milling Company

	
•  

	El Paso Natural Gas Company

	
•  

	Emerald Isle Copper Company

	
•  

	Lewin-Mathes Company

	
•  

	Mohave Enterprises, Inc.

	
•  

	Newmont Mining Corporation

	
•  

	C.G. Patterson

	
•  

	C.F. Weeks

 

Dynamac also concluded that it was not certain if any and all of these parties were financially viable. Furthermore, Dynamac reported that it was unable to obtain the current address for Emerald Isle Copper Company, El Paso Mining and Milling Company, Lewin-Mathes Company, Mohave Enterprises, Inc., C.G. Patterson and C.F. Weeks (Donley et al, 2001).

 

The Emerald Isle property has been dormant from 1993 to 2004, when SGV commenced the recent exploration program. This work is discussed under the Drilling section below.

 

  

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7 GEOLOGICAL SETTING

 

7.1   REGIONAL GEOLOGY

 

The Emerald Isle Property is situated near the eastern edge of the Basin and Range Province and close to the western margin of the Colorado Plateau. It is located near the Mineral Park porphyry copper-molybdenum deposit, within the Wallapai mining district. The Wallapai mining district is on the western flank of the Cerbat Mountains. The Cerbat Mountains trend north and are composed of a Precambrian basement intruded by Laramide quartz-monzonite porphyry. Tertiary extrusive rocks crop out on the flanks of the Cerbat Range (Eidel et al, 1968). The north trending Black or River Range west of the Cerbat Mountains consists of Cretaceous and Tertiary volcanic rocks overlying a poorly exposed basement (Figure 7-1).

 

The Wallapai mining district is approximately 6.5 km long wide and 18 km long and is defined by the known lateral extent of base and precious metal veining (Figure 7-1). Faults are abundant in the district, but the lack of good marker units makes offset and age relationships difficult to interpret (Wilkinson et al., 1982).

 

Several large N70°W trending faults are present in the area from Roper Ridge to Ithaca Peak and numerous smaller northwest trending faults exhibit intense fracturing and silicification (Figure 7-1). The geologic history of the Wallapai district is summarized as follows:

 

	
•  

	
A series of folded metasedimentary and metavolcanic rocks occur along the western flank of the Cerbat Mountains.

 

	
•  

	
The folded rocks were intruded by regionally northeast foliated granitic gneiss of batholithic proportions.

 

	
•  

	
The north-northwest trending contact between the folded rocks and the granitic gneisses was a major structural element in the district.

 

	
•  

	
Intrusion of the Ithaca Peak stocks at or near the intersection of this contact and the Turquoise Mountain fold.

 

	
•  

	
This contact was the locus for intrusion of rhyolite dikes and the formation of the major fault-veins of the district (Wilkinson et al, 1982).

  

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7.2   PROPERTY GEOLOGY

 

The Emerald Isle Property is located in the Sacramento Valley, about a mile from the west face of the Cerbat Range (Figure 7-1). Its geologic setting is an alluvium covered, gradually west sloping pediment and it is underlain by the Late Tertiary Gila Conglomerate and Cretaceous granitic rocks of the Ithaca Peak intrusive. The trace of fold axes in Figure 7-1 also suggests that the property area is at least partly underlain by northeast trending basement amphibolitic rocks. To the south, the area is covered by Quaternary alluvium (Figure 7-2). The relief is low and undulating due to protruding bedrock and erosional dissection. The alluvium in the vicinity of the old mine represents older alluvium, as does the bulk of the detrital apron flanking the range (TSC, 1992?).

 

The terrace beds and dissected portions of the pediment reveal poorly sorted, mixed deposits of angular to sub-angular sand, pebbles, cobbles and boulders (up to 15 ft.), representing all the rock units in the Cerbat Range. Crude stratification exists in some places, but the bulk of the apron flanking the range is largely mixed and unconsolidated.

 

The alluvial veneer at the Emerald Isle Property has been consolidated by mineralizing solutions to form the blanket of copper mineralization. Due to its proximity to the Mineral Park Cu-Mo deposit, the salts and clays eroded from the Ithaca Peak porphyry alteration halo likely have contributed to the bonding of the Gila Conglomerate.

 

The most obvious structural feature on the property is the Emerald Isle Fault. The fault is normal and has a vertical displacement of about 105 ft. and an unknown horizontal displacement, and is arcuate to the west. In the northeast corner of the pit, the strike is N60E, while on the south side of the pit near the old adit, the strike is N10E (Figure 7-3). The dip varies from -45° west to -70° west. The fault is young since both the pediment and overlying alluvium are faulted (TSC, 1992?).

 

 

  

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8 DEPOSIT TYPES

 

8.1   TYPES OF MINERALIZATION

 

There are three types of copper mineralization at Emerald Isle, as follows:

 

	
•  

	
The first type is primary fissure vein mineralization containing copper sulphides (Thomas, 1949). This was the type of mineralization which was mined in 1917 and 1918, but is no longer the target at the present time.

 

	
•  

	
The second type is blanket type primary copper mineralization and has been the exploration target during the past twenty years. It occurs within the dark conglomerate and is reported to consist primarily of tenorite (CuO). This mineral is sometimes called copper pitch or melaconite and "much of it seems to be cryptocrystalline or amorphous" (Williams, 1992). It is the pitchy dark brown to black material which commonly occurs within the Gila Conglomerate.

 

	
•  

	
The third type of mineralization is represented by secondary copper minerals, in the form of copper staining, such as malachite (CuCO3.Cu(OH)2) and chrysocolla (CuO.SiO2.H2O). These minerals occur on fracture planes as well as within the matrix of the dark conglomerate. Minor cuprite (Cu2O) and dioptase (H2CuSO4, a rare mineral of copper) have also been identified. Chrysocolla also occurs as a thin veneer around tenorite grains (Williams,1992).

 

Manganese oxides are also commonly present with the first, second, and third type of copper mineralization at Emerald Isle.

 

8.2   GENETIC MODEL

 

Copper mineralization at Emerald Isle is hosted by the Gila Conglomerate and is structurally controlled. The copper mineralization is contained within a paleochannel some 2,500 ft. long, 500 ft. to 750 ft. wide and the thickness ranges from 20 ft. to 300 ft., averaging about 100 ft. in the form of a mineralized lens. In general, the conglomerate layer has a wedge-shaped profile, with a thin northern part and a much thicker southern part. In places, the conglomerate is absent and in other places it is very thick, due to faulting. The morphology of the conglomerate unit suggests that source of the copper is the low grade porphyry-type copper mineralization at Alum Wash, and mineralization is characterized by dark blue to black rock, as noted above.

 

  

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Early work by Thomas (1949) suggested that the chrysocolla may also be a primary mineral, because:

 

	
•  

	
"There are no relict grains of sulphides, or any minerals, which might have served as a primary source of the copper.

 

	
•  

	
The texture of chrysocolla, both in vein and blanket, is delicately banded and crustified, which suggests that formation was by open space filling and not replacement".

 

Other workers disputed Thomas' contention of the "vein" being the source of primary ore at Emerald Isle. Dings (1951) argued that the "vein" is one of a series of post-Gila faults that step down the pediment of the Cerbat Range and develop the graben of the Sacramento Valley, "where the Gila and other conglomerate is very deep. Several of these faults are parallel, and while only two are indicated by topography, seismic work discloses others, successfully stepping the bedrock down to the west and deepening the overburden on the basal layer".

 

In a 1992 report by MDA, Wendt noted that there were at least two undeveloped (not mined) deposits with estimated resources in the range from 10 million to 20 million tons at an average grade in the order of +0.3% Cu in the vicinity of the Emerald Isle Property (Wendt, 1992). These were the Alum Wash and Vega's Vug deposits adjacent to the Mineral Park Mine (Figure 7-1).

 

There are several copper deposits in Arizona and New Mexico which are interpreted to have geological attributes similar to those as at Emerald Isle. Some of these deposits include:

 

	
•  

	
Mineral Creek Deposit: Located within Ray Mineral District, Pinal County, Arizona, this alluvial-hosted (stream gravels) deposit extends some 500 ft. along strike and is 30 ft. thick, and is reported to contain approximately one million tons at an average grade of 0.5% Cu. It is situated at the base of a cliff just below the porphyry copper deposit on Ray Hill. The age of mineralization is estimated at 7,000 years and the mineral constituents are recognized as malachite, azurite, cuprite and tenorite (Clifton, 2004a).

 

	
•  

	
Copper Butte Deposit: Located 3 mi. west of Ray Mineral District, Pinal County, Arizona, the deposit is hosted by stream channels within the Oligocene Whitetail Conglomerate, and is reported to contain approximately

 

100,000 tons at an average grade of 3% Cu. The mineral constituents are recognized as chrysocolla and copper wad (Clifton, 2004a).

 

  

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•  

	

Black Copper Area: Located some 1,000 ft. north of Inspiration porphyry copper deposit, Gila County, Arizona, this deposit is hosted by stream channels within the Oligocene Whitetail Conglomerate. It extends some 10,000 ft along strike, is 100 ft. wide, and is 75 ft. thick. Due to its proximity the source of mineralization is believed to be the Inspiration orebody (Clifton,2004a).

 

	
•  

	
Tyrone Oxide Deposits: Located in Burro Mountain District, southwest New Mexico, this deposit is situated about one mile southwest of the Tyrone porphyry copper deposit, and interpreted to contain several bodies totalling some 100,000 tons at an average grade of 1% Cu. It is hosted by stream channels within the Miocene Mangas Conglomerate. The mineral constituents are recognized as chrysocolla, black copper silicates and oxides, and malachite. Due to its proximity the source of mineralization is believed to be the Tyrone porphyry copper deposit (Clifton, 2004a).

 

A number of other mineral deposits in Latin America are interpreted to exhibit geological environments similar to that as at Emerald Isle (Clifton, 2004a). These include:

 

	
•  

	
El Pilar: Some 45 km northwest of Cananea, in Mexico, with reported Mineral Resources of 162 million tonnes at an average grade of 0.39% Cu.

 

	
•  

	Several Chilean deposits, such as:

 

	
      o 

	
Exotica: Situated about 2 km south of Chuquicamata, with reported Mineral Resources of 160 million tonnes at an average grade of 1.86% Cu.

 

	
      o 

	
Radomiro Tomic: Situated just north of Chuquicamata, with reported Mineral Resources containing at least one billion lbs. of copper.

 

	
      o 

	
Damiana and Quebrada Turquesa: Situated near the El Salvador copper deposit, the Damiana deposit is reported to contain 2.4 billion to 7 billion lbs. of copper, and Quebrada Turquesa is reported  to contain about 800 million lbs. of copper.

 

	
      o 

	
El Tesoro: Located near Antofagasta, no Mineral Resources are reported, but mineralization extends over an area 5 km by 2.5 km.

 

	
      o 

	
Sagasca: Located approximately 100 km north of Chuquicamata, this deposit is 4 km long, 400 m wide and is 70 m thick, and the Mineral Resources are reported to total some 300 million to 800 million lbs. of copper.

 

	
      o 

	
Huinquintipa: Located near Collahuasi, this deposit is 1 km long, 150 m wide and is 10 m thick, and the Mineral Resources are reported to total some 300 million to 800 million lbs. of copper.

 

	
      o 

	
Ichuano and Lagarto: These deposits are situated 4 km east and 4km west of El Abra, respectively. The combined resources are reported to range from 300 million to 800 million lbs. of copper.

 

  

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9 MINERALIZATION

 

Copper mineralization at Emerald Isle is hosted by units of dark blue to black east-northeast trending and gently to moderately south dipping unconsolidated Late Tertiary Gila Conglomerate in contact with a small silicified intrusive body. This is a polymict conglomerate with rounded fragments (<1 cm to 5 cm) of granitic as well as quartzitic and other material within a fine-grained matrix. Occasional larger boulders of granitic composition are also present. The contact with the central stock may be a fault contact which follows the outline of the central silicified intrusive.

 

The source of copper mineralization at Emerald Isle is the low grade porphyry type copper mineralization at the head of Alum Wash, 3.5 mi northeast of the deposit, close to the Mineral Park Mine (Figure 7-1) (Thomas, 1949 and 1951). Tenorite (CuO) is common and minor cuprite (Cu2O), chrysocolla (CuO.SiO2.H2O) and dioptase (H2CuSO4, a rare mineral of copper) have been identified. The copper mineralization occurs in fractures and as interstitial cementing material within fine sand and clay. Oxides of iron and manganese are also frequently found in many fractures. All of the copper mineralization is secondary. Figure 9-1 shows a pre-stripping plan, Figure 9-2 is a generalized longitudinal section of the deposit, illustrating the flat-lying, tongue-like nature of the deposit, and Figures 9-3 and 9-4 are vertical (north-south) cross sections in the western and central parts of the deposit.

  

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10 DRILLING

 

10.1  PAST DRILLING

 

In the 1970s, El Paso explored the Emerald Isle deposit by some 90 surface rotary holes totalling 17,170 ft. of drilling. The lengths of the drill holes ranged from 15 ft. to 610 ft. and averaged about 190 ft. Logging was done on drill chips.

 

In 1992, Mine Development Associates (MDA) of Reno drilled 37 RCD holes totalling 7,850 ft. on the Emerald Isle property on behalf of Holcorp, and in 1993, MDA completed a further 770 ft. of RC drilling in 8 holes. In total, past drilling comprised some 25,800 ft. of drilling in 135 rotary and RCD holes.

 

10.2  RECENT DRILLING

 

During November and December 2004, SGV completed a program of confirmation drilling of 5,530 ft. in 18 reverse circulation drill holes (RCD). Fifteen of these holes were twins of the previous El Paso holes and ranged in depth from 235 ft. to 350 ft. in the western part of the copper deposit. These twinned holes were labelled with a "W" prefix added to the original numbers, e.g. WEP-071 for old EP-71. The drilling rig was an Ingersoll Rand TH60 truck-mounted machine and the drilling contractor was Layne Christensen Company of Fontana, Calif. Drill bits consisted of 5.25 in. diameter button-tipped tricones. Water was trucked from the Mineral Park Copper Mine of Mercator Minerals, approximately 4.5 mi. to the east.

 

Sampling of drill chips was done at 5-ft. intervals and logging was done by the SGV Project Geologist. Samples were sent to Mountain States Research and Development International, Inc. (MSRDI) of Vail, Arizona, for total as well as soluble copper and zinc determinations.

 

  

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Due to the grade variability between the previous drilling results and the recent twinned SGV RCD results, SGV carried out a limited diamond drilling program to confirm results ot the SGV RCD holes. For this purpose, SGV twinned four holes with 1,196 ft. (392 m) of diamond drilling. The drilling contractor was Boart Longyear of Peoria, Arizona, and the drill was a truck mounted Longyear 38 machine. These twinned holes were labelled with a "C" prefix added to the original numbers, e.g. CEP-071 for old EP-71 or the RCD hole WEP-71. The holes started with a "P" size casing and drilling continued by reducing the drill rods to retrieve NQ size core. SGV elected to determine the copper content in the core by crushing and grinding the whole of the core and having assays done on 300 g aliquots of the samples at the MSRDI laboratories. MSRDI also prepared samples for metallurgical acid leach tests, but has not yet carried out these tests. Although standard industry practice is to split the core and send half to the lab for assays and keep the other half at the site, SGV wished to obtain larger samples for assay and metallurgical testwork.

 

Comparison of the SGV RCD results with the El Paso drilling and with the SGV core drilling is discussed in the section on Data Verification.

 

  

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11 SAMPLING METHOD AND APPROACH

 

11.1  EL PASO

 

During the El Paso exploration programs in the 1970s, rotary drilling was completed by El Paso, as noted above. Drill chips were logged by company geologists. This included marking lithologic contacts, relative moisture and/or clay content and relative alteration of the rocks. RPA is uncertain about the methodology of sampling of the drill chips or about the procedures for sample preparation and copper assays.

 

11.2  HOLCORP/MDA

 

In February 1992, Mine Development Associates (MDA) was retained by Holcorp to carry out a definition drilling program and to review the drilling and sampling procedures with those of El Paso. The drilling contractor completed 7,850 ft. in 37 RCD holes, ranging in total depths from 40 ft. to 440 ft. The following is an account of the sampling procedures as reported by Easdon (1992).

 

	
•  

	
"The near surface intervals down to 15 ft. in depth were collected in pans located at the collar. Once the hole was properly collared, the cuttings were blown up through the dual wall tubing into a cyclone, and then discharged into a vibratory triple tier splitter.

 

	
•  

	
Samples were collected at 5-foot intervals beginning at the surface and to the bottom of the hole...the total volume of the sample taken was estimated. The volume of the sample in the collecting pan, after the triple split, provided a rough measure of the relative volume of material taken. Typically, more than 90% of the samples weighed at 11 lbs. to 15 lbs."

 

Easdon concluded that the drilling and sampling techniques utilized in the program were properly executed (Easdon, 1992).

 

  

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11.3 SGV

 

11.3.1 SAMPLE COLLECTION

 

The sample collection procedures during the recent RCD program were reported by Clifton (2004b), as follows:

 

	
•  

	
Drill cuttings were collected from an overhead cyclone, except the first 5 ft. of each hole, which were collected by placing splitter pans next to the collar. A 50 gallon drum was placed approximately 2.5 ft. beneath the cyclone and five-gallon plastic buckets were placed on the drum to collect the cuttings as they emerged from the overhead cyclone. Samples were collected every 5 ft. Five-foot intervals were marked on the drill pipe with chalk by the drillers and the exact footage was verified several times as the hole was drilled.

 

	
•  

	
All drill cuttings for each 5-ft. interval were passed through a 4-way stainless steel splitter with fixed one-inch chutes. The splitter consisted of 4 one-way splitters mounted in a steel frame, with 3 splitters directed to the back and the fourth directed to the front. All material was collected in large metal pans; only a small fraction was not caught and this material was not added to the samples. After all material from a 5-ft. interval was collected, the frame of the splitter assembly was rapped with a rubber mallet to dislodge loose material. The splitter was kept dry at all times and brushed clean when necessary. Damp or wet cuttings were left in the buckets and split by hand. A typical 5-foot interval yielded 60 lbs. to 80 lbs. of dry cuttings.

 

	
•  

	
All or part of the material exiting from the single splitter (25% by volume) was retained for analysis. The cuttings were mixed in the collection pan by running a hand back and fourth several times and emptied into several 8 in. by 12 in. heavy plastic polyethylene bags. Excess material from the pan was added to the other pans.

	
•  

	 Depending on sample depth in the hole, material not saved in plastic bags was either:

 

	
•  

	Dumped in piles near the drill hole, or

 

	
•  

	Poured into large rice bags and stored.

 

	
•  

	
Drill cuttings were collected from an overhead cyclone, except the first 5 ft. of each Based on previous drilling, the depth and thickness of the ore zone was known. Above the mineralized zone, 2 plastic bags, each containing 2 lbs.. 3 lbs.. of material, were collected. One bag was retained for analysis, the other placed in storage for backup. Beginning 15 ft. to 20 ft. above the mineralized zone, and continuing to the bottom of the hole, 100% of the material for each 5-foot interval was split and placed in large rice bags, except for a single plastic bag that was retained for analysis. The rice bags were wired closed and placed in storage.

 

  

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  • 

	
On occasion, all or part of a 5-foot interval was damp from water added to stabilize the hole. In several holes, abundant water was encountered over 5-foot to 10-foot intervals. In each case, the sample buckets were placed next to the appropriate excess material or rice bags at the drill site and left to dry for several days. Clear water was decanted from the buckets every few hours. An appropriate amount of damp material was added to plastic bags to complete the sample. Intervals that contained buckets of very wet material, with or without a fraction of dry cuttings, were split by dumping all cuttings into a 30 gal. plastic tub. Enough water was added to turn the material into a slurry and the cuttings thoroughly mixed with a shovel. From this mixture, a single 5-gal. bucket was retained, dried, and split by hand to plastic bags. The remainder of the material from the bucket was discarded or stored in a rice bag, depending on depth.

 

11.3.2 SAMPLE MEASUREMENTS

 

Various measurements were obtained on the samples at the drill site, as described below.

	
•  

	
For each 5-foot interval, 2 cups of cuttings were washed through a 12-mesh spaghetti strainer. The percentage of plus 12-mesh material remaining was estimated by pouring it back into the measuring cup and recording the amount to 10% (by volume).

 

	
•  

	A fraction of the plus 12-mesh material was mounted on a chipboard for future logging.

 

	
•  

	
Recovery above the mineralized zone was estimated visually by examining the amount of excess material dumped in piles on the ground.

 

	
•  

	
Recovery just above the mineralized zone through the bottom of the hole was measured by weighing the rice bags for each sample interval.

 

	
•  

	
Recovery for intervals containing abundant water could not be measured; rather, the gallons of muddy material were recorded.

 

In RPA's view, the sampling procedures used by SGV for the RCD and core drilling are in keeping with industry practice.

 

  

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12 SAMPLE PREPARATION, ANALYSIS AND SECURITY

 

12.1 EL PASO

 

Sample preparation and assaying procedures used by previous operators El Paso, Arimetco, and USBM are not available to RPA. Technical records available to RPA show that during 1992 assaying for Arimetco samples was done at Barringer Laboratories (Barringer), Golden, Colorado. Barringer's QA/QC procedures included:

 

	
•  

	Assaying the samples for total copper as well as for acid soluble copper

 

	
•  

	
Sending twelve samples, as pulps, to three other laboratories for independent check assays. Results are presented in Table 12-1.

RPA is of the opinion that the quality control/quality assurance (QA/QC) measures, including sample handling, preparation and laboratory procedures by Barringer, were similar to other commercial laboratories in Canada and the United States at that time.

 

 

	TABLE 12-1 CHECK ASSAY RESULTS (1992)
	SGV - Emerald Isle Project
	  	
% ASCu / Laboratory

	
Sample No.

	
Barringer

	
RMGC

	
MPEL

	
CHEMEX

	
92-028-210-215

	
0.054

	
0.065

	
0.055

	
0.050

	
92-028-220-225

	
0.355

	
0.430

	
0.391

	
0.340

	
92-028-230-235

	
0.080

	
0.098

	
0.088

	
0.050

	
92-028-255-260

	
1.010

	
1.380

	
1.070

	
1.500

	
92-028-285-290

	
0.169

	
0.180

	
0.173

	
0.100

	
92-026-0-5

	
0.147

	
0.170

	
0.130

	
0.140

	
92-026-210-215

	
0.101

	
0.130

	
0.109

	
0.070

	
92-029-190-195

	
0.080

	
0.101

	
0.093

	
0.070

	
92-029-195-200

	
0.310

	
0.390

	
0.303

	
0.380

	
92-029-215-220

	
0.822

	
0.920

	
0.726

	
0.920

	
92-033-235-340

	
0.074

	
0.082

	
0.069

	
0.040

	
92-033-250-255

	
0.141

	
0.170

	
0.149

	
0.090

	  	  	  	  	  
	
Source: Easdon, 1992.

  

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Table 12-1 indicates that results from the MPEL laboratory compared best with original Barringer results. RPA notes that similar values were obtained for total copper assays.

 

In comparing old El Paso values with the 1992 assay results from holes drilled by MDA for Holcorp close to El Paso holes, Easdon (1992) concluded that:

 

	
•  

	El Paso assay results were only for total copper (% TCu).

 

	
•  

	
Initially, Barringer also reported assays for total copper. However, the El Paso and Barringer %TCu values differed significantly, which "indicated a major discrepancy in the values returned".

 

12.2 SGV

 

Sample preparation and assaying for the recently collected RCD chip samples are carried out at the Mountain States Research and Development International, Inc. (MSRDI) of Vail, Arizona. The following are the various protocols used at MSRDI.

 

12.2.1 ACID SOLUBLE COPPER FOR CHIP SAMPLES

 

12.2.1.1  REAGENTS

 

Five percent (5%) Sulphuric Acid Solution is used. The solution is prepared by adding 50 ml concentrated sulphuric acid to 950 ml demineralized water in a water bath.

 

12.2.1.2   SAMPLE

 

Copper Concentrate                  0.250 g

 

Ores              0.500 g to 1.00 g

 

12.2.1.3  PROCEDURE

Weigh samples into 150 ml beaker.   Add 15 ml of 5% sulphuric acid leach solution. Place on rotary shaking table for one hour. Pour into 100 ml tube add 1 drop Superfloc. Dilute to the mark and mix well. The samples are now ready to read on the atomic absorption instrument.

 

  

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12.2.2  ACID SOLUBLE COPPER FOR DIAMOND DRILL HOLE SAMPLES

 

Fifty-one buckets of diamond drill core were received at the MSRDI laboratory. Samples preparation and assay procedures are described below. These include.

 

	
•

	
Weighing and recording each sample.

	
• 

	
Dry each sample.• Crush all to nominal minus 3/4 inch. The machinery is set up with the first sample screened and all the others crushed at this setting.

	
• 

	
Blend and split out V of the crushed product for assay.

	
• 

	
Return the % to its original bag for storage pending column leach testing.

	
• 

	
Crush the V cut to nominal minus 10 mesh.

	
• 

	
Blend and split the sample to extract about 300 grams for assay.

	
• 

	
Pulverize and submit each sample for assay.

	
• 

	
Assay for TCu, A/SCu, TZn, ASZn.

	
• 

	
Initial Preparation of the leach facility.

 

12.2.3  ZINC ASSAYS

 

Prior to the 2004 RC drilling program SGV collected twenty (20) grab samples from various mineralized layers exposed at the western, northern and eastern wall of the open pit, and had them assayed for TCu, ASCu, TZn and ASZn at MSRDI. Assay results indicated >1% TCu values in thirteen samples and >1% TZn in nine of the samples collected. Seven of the samples with >1% TZn content also contain high copper (>1% TCu) values. SGV also collected a sample of a dried material (cake) at the edge of the raffinate pond, which is next to the existing heap leach pad. Assay results also showed that this sample contained >1% TCu and >1% TZn. Based on these results, SGV had the chip samples assayed for zinc for all of the RC holes completed in the recent program. Some of the new RCD holes had similar relatively high (>1% TZn) values.

 

RPA notes that the presence of zinc has not been recorded in any of the old technical documents reviewed to date. It is possible that this zinc content is due to the presence of a zinc oxide mineral, although mineralogical studies have not been carried out to confirm this.   RPA also notes that SGV is currently considering possible methods to recover the zinc from the mineralized rock at Emerald Isle. One method that is being considered is the acid purification unit (APU) technology used at the CEZinc plant in Valleyfield, Quebec, where zinc is removed from sulphuric acid by electrowinning through the use of fine mesh resin (Sheedy, 1998). This, however, is at the conceptual stage and data are not yet available for review.

 

  

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13 DATA VERIFICATION

 

13.1 VERIFICATION OF HISTORICAL DATA

 

During the Holcorp drilling campaign on the project area data verification and quality control was done by company personnel. RPA understands that assay values of TCu and ASCu available for a set of 68 samples show that both sets of values have similar frequency distribution and indicate almost 1:1 correlation (Arimetco, 1995). RPA, however, is uncertain about the locations of the samples provided by Arimetco.

 

The 2004 RCD drilling program was undertaken by SGV to confirm the results of earlier rotary drilling by El Paso. As noted in the Drilling section, fifteen El Paso holes were twinned by the SGV RCD holes. In addition, four of the SGV RCD holes were twinned by diamond drill core holes also drilled by SGV.

 

Results of the previous drilling are compared with the SGV RCD twinned holes in Table 13-1. Although there is considerable variability between the TCu grades in individual sets of twinned holes, the overall average grade of each dataset is within 15% (Table 13-1). In RPA's view, the recent SGV RCD holes confirm in general the results of the earlier drilling.

 

  

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	 TABLE 13-1 COMPARISON OF EL PASO AND SGV RCD DRILLING RESULTS      
	 SGV - Emerald Isle Deposit
	
El Paso Drill Hole No.

	
Min. Interval (ft.)

	
Avg. grade (%TCu)

	
Grade x Thickness

(GT)

	
SGV Drill Hole No.

	
Min. Interval

(ft.)

	
Avg. grade (%TCu)

	
Grade x Thickness

(GT)

	
EP-62

	
55

	
0.58

	
32.1

	
WEP-62

	
55

	
0.34

	
18.9

	
EP-63

	
85

	
0.63

	
53.3

	
WEP-63

	
85

	
0.48

	
41.0

	
EP-64

	
55

	
0.60

	
32.9

	
WEP-64

	
55

	
0.31

	
17.3

	
EP-65

	
25

	
0.27

	
6.7

	
WEP-65

	
25

	
0.17

	
4.1

	
EP-66

	
60

	
0.46

	
27.8

	
WEP-66

	
60

	
0.27

	
16.0

	
EP-67

	
100

	
0.44

	
44.1

	
WEP-67

	
100

	
0.29

	
29.2

	
EP-71

	
85

	
0.67

	
57.0

	
WEP-71

	
85

	
0.67

	
57.0

	
EP-72

	
65

	
0.75

	
48.6

	
WEP-72

	
65

	
0.47

	
30.3

	
EP-73

	
60

	
0.35

	
21.2

	
WEO-71

	
60

	
0.38

	
21.8

	
EP-74

	
35

	
0.30

	
10.6

	
WEP-74

	
35

	
0.53

	
18.7

	
92-27

	
35

	
0.22

	
7.7

	
W92-27

	
35

	
0.45

	
15.8

	
92-28

	
45

	
0.37

	
16.6

	
W92-28

	
45

	
0.63

	
28.6

	
92-29

	
55

	
0.33

	
18.1

	
W92-29

	
55

	
0.50

	
27.6

	
92-30

	
45

	
0.37

	
16.5

	
W92-30

	
45

	
0.33

	
14.8

	
92-31

	
25

	
0.30

	
7.6

	
W92-31

	
25

	
0.30

	
7.6

	
Averages

	
55

	
0.48

	
26.7

	  	
55

	
0.42

	
23.2

	  
	
Source: SGV, 2005.

 

The SGV 2004 RCD results are compared with the SGV twinned diamond core holes in Table 13-2. It can be seen that the diamond drill hole results confirm the 2004 RCD results, although there is some variation in individual sets of twinned holes.

 

	TABLE 13-2 COMPARISON OF SGV REVERSE CIRCULATION AND DIAMOND DRILLING RESULTS 
	SGV - Emerald Isle Deposit 
	
SGV RCD Hole No.

	
Min. Interval (ft.)

	
Avg. grade (%TCu)

	
Grade x Thickness (GT)

	
SGV Diamond Drill Hole

No.

	
Min. Interval (ft.)

	
Avg. grade (%TCu)

	
Grade x Thicknes s (GT)

	
WEP-62

	
55

	
0.34

	
18.9

	
CEP-62

	
55

	
0.49

	
27.2

	
WEP-64

	
55

	
0.31

	
17.3

	
CEP-64

	
55

	
0.30

	
16.5

	
WEP-71

	
85

	
0.67

	
57.0

	
CEP-71

	
90

	
0.60

	
53.7

	
W-30

	
55

	
0.34

	
18.8

	
CW-30

	
55

	
0.37

	
20.4

	
Averages

	
63

	
0.45

	
28.0

	  	
64

	
0.46

	
29.5

	  
	
Source: SGV, 2005.

 

  

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13.2  VERIFICATION OF RECENT DATA BY SGV

 

During the recent drilling program, data verification was done by Mr. Gary Clifton, Project Geologist with SGV. Mr Clifton also designed the logging and sampling procedures for the field crew as described under Sampling Methods and Approach. RPA is of the opinion that these procedures meet standard industry practice.

 

13.3  SGV CHECK ASSAYS

 

As part of its 2004 exploration program, SGV selected thirty-six samples from three drill holes, and sent them to American Assay Laboratories (American), in Reno, Nevada, for check assays. These represent fourteen samples from Drill Hole No. WEP-67, ten samples from Drill Hole No. W-31, and twelve samples from Drill Hole No. WEP-62. Results are presented in Table 13-3 and Figure 13-1, and they show that there is very good correlation between the two sets of results, although the MSRDI values tend to be slightly higher.

 

SGV carried out further check assays by having a number of assays done at ACTLABS-Skyline laboratories. Results are presented in Table 13-4, Figures 13-1 and 13-2, and show a good correlation between the two sets of data for total copper. Acid soluble copper values show very good correlation between the two laboratories

 

(Figure 13-2).

  

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	TABLE 13-3 CHECK ASSAY RESULTS 2004-2005, MSRDI VS. AMERICAN ASSAY LABS
	SGV - Emerald Isle Project   
	
Sample No.

	
MSRDI Result

	
American Result

	
Drill Hole No.

	
From (ft.)

	
To (ft.)

	
% TCu

	
ppm Cu

	
% TCu

	
WEP-67

	
130

	
135

	
0.005

	
48

	
0.005

	
WEP-67

	
135

	
140

	
0.004

	
40

	
0.004

	
WEP-67

	
140

	
145

	
0.003

	
45

	
0.005

	
WEP-67

	
145

	
150

	
0.003

	
39

	
0.004

	
WEP-67

	
150

	
155

	
0.002

	
35

	
0.004

	
WEP-67

	
155

	
160

	
0.004

	
30

	
0.003

	
WEP-67

	
160

	
165

	
0.004

	
84

	
0.008

	
WEP-67

	
165

	
170

	
0.004

	
44

	
0.004

	
WEP-67

	
170

	
175

	
0.005

	
74

	
0.007

	
WEP-67

	
175

	
180

	
0.002

	
228

	
0.023

	
WEP-67

	
240

	
240

	
0.417

	
3,990

	
0.399

	
WEP-67

	
245

	
245

	
0.415

	
4,340

	
0.434

	
WEP-67

	
250

	
250

	
0.375

	
3,250

	
0.325

	
WEP-67

	
255

	
260

	
0.288

	
2,590

	
0.259

	
W-31

	
260

	
265

	
0.162

	
1,250

	
0.125

	
W-31

	
265

	
270

	
0.115

	
818

	
0.082

	
W-31

	
270

	
275

	
0.136

	
1,110

	
0.111

	
W-31

	
275

	
280

	
0.124

	
1,170

	
0.117

	
W-31

	
280

	
285

	
0.310

	
2,090

	
0.209

	
W-31

	
285

	
290

	
0.800

	
7,330

	
0.733

	
W-31

	
290

	
295

	
0.620

	
4,800

	
0.480

	
W-31

	
295

	
300

	
0.322

	
2,850

	
0.285

	
W-31

	
300

	
305

	
0.142

	
1,080

	
0.108

	
W-31

	
305

	
310

	
0.126

	
799

	
0.080

	
WEP-62

	
170

	
175

	
0.029

	
343

	
0.034

	
WEP-62

	
175

	
180

	
0.074

	
566

	
0.057

	
WEP-62

	
180

	
185

	
0.105

	
1,160

	
0.116

	
WEP-62

	
185

	
190

	
0.236

	
2,260

	
0.226

	
WEP-62

	
190

	
195

	
0.453

	
5,810

	
0.581

	
WEP-62

	
195

	
200

	
0.275

	
2,900

	
0.290

	
WEP-62

	
200

	
205

	
0.238

	
2,060

	
0.206

	
WEP-62

	
205

	
210

	
0.414

	
3,170

	
0.317

	
WEP-62

	
210

	
215

	
0.690

	
9,860

	
0.987

	
WEP-62

	
215

	
220

	
0.312

	
3,450

	
0.345

	
WEP-62

	
220

	
225

	
0.237

	
3,310

	
0.331

	
WEP-62

	
225

	
230

	
0.490

	
6,290

	
0.629

	Source: SGV, 2005.
	 
	
Note:

  1. MSRDI assays by wet chemical method.

  2. American assays by 69-element ICP-2A method.

 

  

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	TABLE 13-4 CHECK ASSAY RESULTS 2004-2005, MSRDI VS. ACTLAB-KYLINE LABORATORIES
	SGV - Emerald Isle Deposit
	
MSRDI No.

	
Drill Hole No.

	
From (ft.)

	
To (ft.)

	
% TCu MSRDI

	
% TCu ACTLABS

	
% ASCu MSRDI

	
% ASCu ACTLABS

	
1612

	
CW-30

	
275

	
280

	
0.590

	
0.650

	
0.137

	
0.110

	
1619

	
CW-30

	
310

	
312

	
0.040

	
0.040

	
0.012

	
0.010

	
1661

	
CEP-64

	
280

	
285

	
0.083

	
0.080

	
0.060

	
0.020

	
1687

	
CEP-71

	
240

	
245

	
1.260

	
1.270

	
1.240

	
1.160

	
1688

	
CEP-71

	
245

	
250

	
1.720

	
1.760

	
1.680

	
1.540

	
1719

	
CEP-62

	
245

	
251.5

	
0.316

	
0.330

	
0.263

	
0.250

	
Averages

	  	  	  	
0.668

	
0.688

	
0.565

	
0.515

                                                          

  

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13.4 INDEPENDENT SAMPLING BY RPA

 

During the first site visit, RPA collected three grab samples from the Emerald Isle open pit, and sent them to SGS Laboratories in Don Mills, Ontario, for independent assays for total copper, soluble copper and gold. The total copper content was determined by the Induced Couple Plasma (ICP) method and the soluble copper content was determined by treating the sample with 5% sulphuric acid. Table 13-5 provides the sample description and assay results.

 

	
TABLE 13-5 RPA INDEPENDENT SAMPLING RESULTS (JUNE 2004)

	
SGV - Emerald Isle Project

	  
	
Sample Number

	
ppb Au

	
% TCu

	
% ASCu

	
Ratio ASCu/TCu

	
Description

	
A026357

	
7

	
0.94

	
0.30

	
32%

	
Grab sample of "Mineralized Unit". Dark conglomerate with Cu staining from wall of open pit.

	
A026390

	
18

	
0.43

	
0.30

	
70%

	
Grab sample with a core of dark mineral around organic stem and acicular crystals  surrounding the core, at bottom of pit

	  	  	  	  	  
	
EI-1

	
<5

	
0.29

	
0.17

	
59%

	
Grab sample of dark rock along pit access road.

 

The above results, while not representative of the deposit, show soluble copper to total copper ratios ranging from 32% to 70%. All zinc assays were >1% TZn. Sample preparation and assay procedures at SGS are described below.

 

13.4.1  SAMPLE PREPARATION

Samples received are dried and crushed to -10-mesh. Samples ranging from 200 g to 300 g are split out for pulverizing. The remainder is re-bagged to return to the Client. The pulverized sample is blended and bagged for assay.

 

13.4.2  ASSAYING

 

13.4.2.1  TOTAL COPPER DETERMINATIONS

 

The analytical method used for the determination of total copper at SGS was the

 

ICA50 Method, which is used for the determinations of base metals (Co, Cu, Ni, Pb, and Zn) by sodium peroxide fusion and ICP-OES. Details of the analytical procedures are as follows:

 

  

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•  

	Typical sample size:  0.20 g

 

	
•  

	
Type of sample applicable (media): Crushed and Pulverized rocks, soils and sediments

 

	
•  

	
Sample preparation technique used: Crushed and pulverized rock, soil and /or sediment samples are fused by Sodium peroxide in zirconium crucibles and dissolved using dilute HNO3.

 

	
•  

	
Method of analysis used: The digested sample solution is aspirated into the inductively coupled plasma Optical Emission Spectrometer (ICP-OES) where the atoms in the plasma emit light (photons) with characteristic wavelengths for each element. This light is recorded by optical spectrometers and when calibrated against standards the technique provides a quantitative analysis of the original sample.

 

	
•  

	
Data reduction by: The results are exported via computer, on line, data fed to the Laboratory Information Management System (LIMS CCLAS EL) with secure audit trail.

 

	
•  

	
Quality Control: The ICP-OES is calibrated with each work order. An instrument blank and calibration check is analyzed with each run. One preparation blank and reference material is analyzed every 46 samples, one duplicate every 12 samples. All QC samples are verified using LIMS. The acceptance criteria are statistically controlled and control charts are used to monitor accuracy and precision. Data that falls outside the control limits is investigated and repeated as necessary.

 

13.4.2.2  ACID SOLUBLE COPPER DETERMINATIONS

 

The reagent used for the determination of acid soluble copper in rock samples is 5% sulphuric acid solution. This is prepared by adding 50 ml concentrated sulphuric acid to 950 ml distilled water in a water bath. The sample sizes used for assays are 0.250 g for copper concentrate (regular samples) and ranging from 0.5 g to 1.0 g for ore samples. The procedure for assays is as follows:

 

• Weigh samples into 150 ml beaker.

• Add 15 ml of 5% sulphuric acid leach solution.

• Place on rotary shaking table for one hour.

• Pour into 100 ml tube add 1 drop Superfloc.

• Dilute to the mark and mix well.

• Determination of copper content by the atomic absorption (AA) method.

During the second site visit in December 2004, RPA collected eighteen samples of the SGV RCD chips from the stored rice bags, as described above, and sent them to SGS Laboratories in Don Mills, Ontario for TCu, ASCu, TZn and ASZn determinations. The sample preparation and assaying procedures were the same as for the first batch of independent samples collected during the first site visit.

 

Table 13-6 and Figure 13-3 compare the SGV and RPA assay results for TCu and ASCu values. In general, the RPA TCu assay values are higher than the SGV values, by 20% on average. The RPA ASCu values are also higher than the SGV values, by almost 50% on average. The RPA samples have an average ratio of ASCu to TCu of 86% compared to the SGV average of 69% for this group of 18 samples. RPA notes that the average ratio of the ASCu to TCu for all 176 SGV samples in the mineralized intervals in the holes is 78%. The RPA check sampling confirms the SGV drilling results in general and suggests that the SGV values may be on the low side: more check sampling is needed.

  

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	TABLE 13-6 RPA INDEPENDENT SAMPLING RESULTS (DECEMBER 2004)
	SGV - Emerald Isle Project
	RPA Sample No.	SGV Hole No.	From (ft)	To (ft)	Assay Value (% TCu)	 	 Assay Value (% ASCu)
	SGV	RPA	SGV	RPA
	
M619133

	
WEP 67

	
195

	
200

	
0.41

	
0.55

	
0.27

	
0.51

	
M619134

	
WEP 67

	
200

	
205

	
0.21

	
0.24

	
0.13

	
0.17

	
M619135

	
WEP 67

	
205

	
210

	
0.24

	
0.23

	
0.13

	
0.15

	
M619136

	
WEP 67

	
210

	
215

	
0.16

	
0.19

	
0.13

	
0.12

	
M619137

	
WEP 67

	
215

	
220

	
0.26

	
0.37

	
0.23

	
0.39

	
M619138

	
WEP 67

	
220

	
225

	
0.31

	
0.32

	
0.24

	
0.27

	
M619139

	
WEP 67

	
225

	
230

	
0.36

	
0.53

	
0.28

	
0.43

	
M619140

	
WEP 72

	
190

	
195

	
0.05

	
0.04

	
0.04

	
0.04

	
M619141

	
WEP 72

	
195

	
200

	
0.04

	
0.03

	
0.02

	
0.04

	
M619142

	
WEP 72

	
205

	
210

	
0.10

	
0.08

	
0.06

	
0.08

	
M619143

	
WEP 72

	
210

	
215

	
0.15

	
0.14

	
0.11

	
0.16

	
M619144

	
WEP 72

	
215

	
220

	
0.18

	
0.14

	
0.14

	
0.16

	
M619145

	
W92-28

	
240

	
245

	
0.15

	
0.32

	
0.05

	
0.16

	
M619146

	
W92-28

	
245

	
250

	
0.33

	
0.68

	
0.09

	
0.54

	
M619147

	
W92-28

	
250

	
255

	
0.94

	
1.13

	
0.87

	
1.05

	
M619148

	
W92-28

	
255

	
260

	
0.91

	
0.90

	
0.80

	
0.74

	
M619149

	
W92-28

	
260

	
265

	
0.54

	
0.61

	
0.25

	
0.54

	
M619150

	
W92-28

	
265

	
270

	
0.57

	
0.63

	
0.25

	
0.55

	
Averages

	  	  	  	
0.33

	
0.40

	
0.23

	
0.34

	
Average ASCu/TCu Ratio

	
69%

	
86%

  

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14 MINERAL RESOURCES

 

14.1  GENERAL STATEMENT

 

RPA has estimated the Mineral Resources of the Emerald Isle deposit using the results of the previous rotary and RCD holes. As part of its estimate, RPA carried out a new interpretation of the geology and the mineralized zone and developed a block model of the copper deposit. The RPA resource estimate is in accordance with the Mineral Resource/Reserve Classification as recommended by the CIM Committee on Mineral Resources and Mineral Reserves.

 

14.2  DATABASE

 

RPA has estimated the Mineral Resources of the Emerald Isle deposit, using the results of the previous 90 El Paso rotary holes and 45 Holcorp/MDA RCD holes. The results of the 2004 SGV RCD drill holes, although not used in the resource estimate, confirmed overall the results of the old holes that they twinned, although there is considerable variability between individual assays from samples of the twinned holes.

 

RPA received a hard copy database of drill logs and assay results from the 135 previous drill holes and a number of cross sections also in hard copy form. RPA converted the drill hole database into digital format and loaded it into Gemcom software to enable interpretation of geology and mineralized units. RPA retained the geology codes as before for rock types. These were (2) for alluvium, (3) for the Gila Conglomerate, (4) for altered granite and (5) for fresh granite. RPA merged the recent SGV drill hole data with the older data to form a combined Gemcom drill hole database.

 

14.3  DENSITY MEASUREMENTS

 

During the mine planning period in 1992, Arimetco had Kappes, Cassidy & Associates (Kappes Cassidy) of Sparks, Nevada, to carry out twenty density measurements (duplicates) on ten samples of mineralized material from the Emerald Isle Mine. Kappes Cassidy used the Archimedes Principle to make the density determinations. Results indicated that the average density of the mineralized material was 2.38 g/cc or 13.54 cu. ft/ton (Table 14-1). RPA has used a density factor of 13.54 cu. ft./ton to convert volume to short tons in its Mineral Resource estimate.

 

 

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	TABLE 14-1 DENSITY DETERMINATIONS
	SGV - Emerald Isle Project
	 
	  

Sample

	  

Dry weight (kg)

	  

Displaced Water (cc)

	
Measured Density

	 	 Remark
	
g/cc

 

	 cu. ft./ton	   Oxide weathered granite
	
EI 1

	
5.68

	
2,169.0

	
2.619

	
12.233

	
   Oxide weathered granite

	
EI 1

	
5.68

	
2,207.2

	
2.573

	
12.451

	
   Gila Congl. w/Cu-oxide

	
EI 2

	
16.36

	
6,387.6

	
2.561

	
12.510

	
   Gila Congl. w/Cu-oxide

	
EI 2

	
16.36

	
6,418.4

	
2.549

	
12.568

	
   Gila Congl. w/Cu-oxide

	
EI 3

	
8.30

	
3,523.7

	
2.355

	
13.604

	
   Gila Congl. w/Cu-oxide

	
EI 3

	
8.30

	
3,503.9

	
2.369

	
13.523

	
   Gila Congl. w/Cu-oxide

	
EI 4

	
13.66

	
6,465.1

	
2.113

	
15.162

	
   Gila Congl. w/Cu-oxide

	
EI 4

	
13.66

	
6,480.3

	
2.108

	
15.198

	
   Gila Congl. w/Cu-oxide

	
EI 5

	
13.26

	
5,026.6

	
2.638

	
12.144

	
   Gila Congl. w/Cu-oxide

	
EI 5

	
13.26

	
4,941.3

	
2.684

	
11.936

	
   Gila Congl. w/Cu-oxide

	
EI 6

	
9.90

	
3,681.0

	
2.689

	
11.914

	
   Very weathered granite + Cu oxide

	
EI 6

	
9.90

	
3,676.2

	
2.693

	
11.896

	
   Very weathered granite + Cu oxide

	
EI 7

	
8.68

	
4,242.7

	
2.046

	
15.658

	
   Weathered/frac. Granite + Cu oxide

	
EI 7

	
8.68

	
4,263.3

	
2.036

	
15.735

	
   Weathered/frac. Granite + Cu oxide

	
EI 8

	
1.32

	
553.4

	
2.385

	
13.433

	
   Gila Conglomerate

	
EI 8

	
1.32

	
559.7

	
2.358

	
13.587

	
   Gila Conglomerate

	
EI 9

	
9.42

	
3,980.2

	
2.367

	
13.535

	
   Gila Congl. + cobbly Cu oxide

	
EI 9

	
9.42

	
4,008.8

	
2.350

	
13.633

	
   Gila Congl. + cobbly Cu oxide

	
EI 10

	
17.66

	
7,161.3

	
2.466

	
12.991

	
   Gila Congl. + cobbly Cu oxide

	
EI 10

	
17.66

	
7,057.2

	
2.502

	
12.805

	
   Gila Congl. + cobbly Cu oxide

	
EI 11

	
34.56

	
15,120.0

	
2.286

	
14.014

	
   Gila Congl. + cobbly Cu oxide

	
EI 11

	
34.56

	
15,900.0

	
2.174

	
14.736

	
   Gila Congl. + cobbly Cu oxide

	
Average

	  	
2.380

	
13.540

	  
	 
	   Source : Albert, 1992. 

 

14.4 GEOLOGICAL INTERPRETATION AND 3D SOLIDS

 

The drill holes in the Emerald Isle database were plotted on drill sections oriented at grid north-south looking west at 100 ft. intervals, and on horizontal level plans 50 ft. intervals. RPA interpreted the higher grade mineralized unit based on Cu assays with a threshold of approximately 0.3% TCu.

 

  

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RPA carried out an interpretation of drill hole assay data generated prior to the mining activities at Emerald Isle. These data show that copper mineralization occurs primarily within the Late Tertiary Gila Conglomerate. Copper mineralization is also present in the underlying granitic rocks and occasionally in the overlying Quaternary alluvial material, and even in waste dumps. RPA notes, however, that the copper mineralization reported in the underlying granite may be due at least in part to contamination from the overlying Gila conglomerate during the drilling. In the resource area, the conglomerate fills an elongate and west trending oval-shaped fluvial basin, 2,500 ft. by 1,000 ft., which may have been controlled or affected by some structures, in particular by a set of northeast and northwest trending faults. These features are indicated by:

 

	
•  

	
The thickness of overburden: Quaternary alluvium is generally thicker on the south side of the pit than on the north side. This indicates a slope to the south, due to tilting(?) after the deposition of the Gila Conglomerate.

 

	
•  

	
The trend of the vertical thickness of the host conglomerate: this unit is generally relatively flat lying with undulating upper contact with the overlying alluvial gravel and lower contact with granitic rocks. In the eastern part of the pit the thickness of the conglomerate increases gradually (from 0 to 75 ft.) in a west-southwesterly direction. In the southwestern part of the pit, however, the conglomerate is up to 275 ft. thick, but the thickness decreases abruptly south of the current pit wall. This abrupt change in thickness, hence the pre-deposition of the conglomerate, is caused by northwest and northeast faults, in RPA's opinion. Structural thickening of the conglomerate may also have been caused by northwest trending dikes(?) unit 6 marked on TSC's sections.

 

	
•  

	
Copper mineralization which is similar to a "roll front" feature, i.e. higher grade copper (>0.5% TCu) is commonly present in the central portions of the conglomerate unit with relatively lower-grade (0.2% TCu to 0.35% TCu) to medium-grade (0.35% TCu to 0.5% TCu) material associated with the bottom and top parts. At the 0.2% TCu cut-off grade, the mineralized layer ranges in thickness from 50 ft. to 100 ft. These features may indicate different pulses of copper mineralization. Furthermore, in the upper parts of the conglomerate, the low-grade and medium-grade units are interlayered, whereas, in the bottom part only a thin layer of low-grade material is present. RPA further notes that the source of copper mineralization was from the east, because of:

	
      o 

	
Higher-grade copper (>0.5% TCu to 5% TCu) is associated with the central part of the fluvial channel (conglomerate), whereas relatively lower-grade copper mineralization (0.2% TCu to 0.5% TCu) is associated with the northern and southern flanks of the fluvial channel.

	
      o 

	A sharp contact between the high-grade and low-grade layers in the eastern part of the pit.

	
      o 

	 In general, the granitic rocks intersected in drill holes in the southern part of the pit are relatively fresh, whereas altered granite is intersected in the northern and eastern parts of the pit.

 

	
•  

	
Grade x thickness contours of pre-stripping copper mineralization, using cut­off values of 0.2% TCu and 15 ft. thickness, indicate a general east-west orientation of the mineralization with secondary northeasterly trends. Only low copper values, however, are associated with the thickest (western) part of the conglomerate (Figure 9-3).

 

RPA developed a 3D solid using Gemcom software from the mineralized lens outlines on the cross sections. RPA constructed a 3D wireframe model using 3D wobbly polylines that were snapped on to the drill hole intervals. Polylines were created both on cross sections and on level plans. The polylines were joined together using tie lines. At model extremities, polylines were extrapolated for approximately 50 ft. beyond the last drill hole intercept or terminated at the intersections with interpreted faults cutting the lens. All wireframes were clipped at the overburden surface, or the topography surface of the open pit, and all solids were validated. Figure 14-1 shows the 3D view of the old pit and the mineralized zone.

 

  

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14.5   COMPOSITING AND STATISTICS

 

Of the total number of copper assays (2,496) 420 assays were inside the 3D solid and were used in the block model. RPA composited assays into 10 ft. intervals down hole, for intervals inside the mineralized lens. Composites less than 2 ft. long were excluded from the composite database. Assay values were not capped (cut) in calculating composite values. There are a total of 207 drill hole composites within the mineralized conglomerate. Statistics for the drill hole composites are shown in Table 14-2 and Figure 14-2.

 

	
TABLE 14-2 STATISTICS OF DRILL HOLE (10 FT.) COMPOSITES

	
SGV - Emerald Isle Deposit

	  
	
Statistic

	
% TCu

	
Mean

	
0.58

	
Median

	
0.48

	
Max. Value

	
3.34

	
Standard Deviation

	
0.41

	
Coefficient of Variance

	
0.70

	
Total number

	
360

 

  

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14.5 BLOCK MODEL AND VALIDATION

 

A 3D block model was constructed in Gemcom based on the co-ordinate system used for the Emerald Isle property. The block size is 20 ft. (E-W) by 20 ft. (N-S) by 10 ft. (vertical). The blocks were coded as to "ore" or waste or air, based on the location of the centroid of the block relative to the 3D solids of the mineralized zone.

 

Grades were interpolated into the mineralized lens using only composites within the lens using ordinary kriging. RPA constructed variograms to test grade continuity in a number of different orientations. The horizontal variograms have a range in the order of 300 ft. and the vertical variogram has a range of about 50 ft. RPA found that orienting the along strike variogram search at grid north with an average dip of -10° to West was best for modelling the mineralized zones. The axes of the search ellipse were 300 ft. (east-west), 300 ft. (north-south) and 50 ft. vertically. The search ellipse was oriented almost flat with a low angle dip to the west to match the orientation of the mineralized zone. A minimum of two and a maximum to 30 composites were required for interpolation, with a maximum of 2 composites for any drill hole.

 

RPA used two methods to check and validate the block model. These were:

 

• Visual inspection and comparison of block grades with composite grades.

 

• Statistical comparison of composite and block grade distributions.

 

The visual inspection appeared reasonable. The block and composite grade statistics compare reasonably well (Table 14-3). In RPA's view the Emerald Isle deposit block model is valid, reasonable and appropriate for Mineral Resource estimation.

 

  

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TABLE 14-3 COMPARISON OF BLOCK GRADES AND COMPOSITE

GRADES

	
SGV - Emerald Isle Deposit

	  
	
Statistic

	
Block Grades (% TCu)

	
Composite Grades (% TCu)

	
Mean

	
0.58

	
0.58

	
Median

	
0.52

	
0.48

	
Standard Deviation

	
0.26

	
0.41

	
Maximum

	
2.64

	
3.34

	
Coefficient of Variation

	
0.45

	
0.71

	
Number

	
12,331

	
360

 

14.6  CUT-OFF GRADE

 

For the purposes of reporting the Mineral Resource, RPA has estimated a cut-off grade based on the approximate average copper price, operating costs and expected copper recovery using data provided by SGV.

 

	
•  

	
Copper price assumed to be US$1.50 per lb. as a long term price. 

 

	
•  

	
Operating costs US$6.98 per ton provided by SGV, based on an overall strip ratio of 3:1 from a Western States Engineering 2004 study.

 

	
•  

	
Copper recovery of 75% based on 62% recovery during Arimetco 1992 operation and available testwork that indicated 75% recovery if leaching had continued.

 

Cut-off=cost/(price*recovery)=US$6.98/(US$1.50*0.75)=6.2 lb/ton=0.31% TCu.

 

RPA recommends that a cut-off grade of 0.3% TCu be used to report Mineral Resources. RPA notes that the data provided by SGV are preliminary at this time and that the cut-off grade may be refined as more work is done on the Emerald Isle project.

 

Cut-off grade is inversely proportional to copper price. Currently copper price is significantly higher than the US$1.50 per lb. As noted in the next section, however, the Mineral resource is almost the same at lower cut-off grades.

 

  

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14.7  CLASSIFICATION OF MINERAL RESOURCES

 

All of the Mineral Resources are classified as Indicated Mineral Resources because of the good apparent continuity of mineralization and the drill hole spacing relative to the semi-variogram range. Drill hole spacing is in the order of 100 ft. and the semi-variogram range is 300 ft. in the horizontal plane. In RPA's view, none of the resources can be classified as Measured at this time because of the variability in twinned drill hole results, as discussed under Data Verification. Table 14-4 lists the Emerald Isle Indicated Mineral Resources at a range of cut-off grades. As noted above, RPA recommends reporting the Mineral Resources at the 0.3% TCu cut-off.

 

RPA notes that almost all of the blocks in the Emerald Isle wireframe are above the 0.3% TCu cut-off grade, and that the Mineral Resource changes little at lower cut­off grades.

 

	
TABLE 14-4 RPA MINERAL RESOURCE ESTIMATE

	
SGV - Emerald Isle Deposit

	 
	Indicated Mineral Resources
	
Cut-off grade (% TCu)

	
Tons (rounded)

	Total Copper (% TCu)
	
0.8

	
420,000

	
1.00

	
0.7

	
650,000

	
0.91

	
0.6

	
940,000

	0.83 
	
0.5

	
1,380,000

	
0.74

	0.4	
1,870,000

	
0.66 

	0.3	2,220,000	0.62
	0.2	2,310,000	0.60
	
0.1

	2,330,000	0.60
	   Note: Tonnage is estimated using a density factor of 13.54 cu. ft./ton

 

  

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15 MINERAL PROCESSING AND METALLURGICAL TESTING

 

15.1 ARIMETCO 1988

 

Previous metallurgical testwork on the Emerald Isle deposit was done by MSRDI and at Cyprus Baghdad's laboratory at Baghdad, Arizona. In January 1988, Arimetco collected samples of ore and tailings from Emerald Isle for leaching at Cyprus Baghdad's laboratory. This was done as part of a feasibility study by Arimetco. A 55 gal drum of "high-grade ore" was mixed and split to obtain 50 lbs. of sample for analysis and leaching evaluation. The head grades were; 1.20% TCu and 1.15% ASCu (Arimetco, 1988).

 

Portions of the sample materail were crushed to -3 mm and 10 g increments were leached in bottles with sulphuric acid solutions ranging from 5 g/l to 15 g/l. Acid consumption ranged from 5.8 g to 6.0 g of sulphuric acid per gram of copper recovered.

 

In a second set of tests, three columns 80 mm in diameter were charged with 3 kg of -10 mm "ore". Two columns were leached with weak sulphuric acid solutions containing 7.9 g/l and 14.9 g/l acid. The third column was leached with acidified Mineral Park pregnant leach solution assaying 0.57 g/l Cu, 1.5 g/l Fe, and 8.2 g/l free sulphuric acid. Acid consumption ranged from 5.7 g/l to 5.9 g of sulphuric acid per gram of copper recovered. Recovery rates increased with higher acid content in the leach solution.

 

15.2  ARIMETCO 1994

 

In a 1994 test, results on tailings showed that the average value of the samples was 0.163% TCu and the average value for soluble copper was 0.068%. MSRDI performed two acid consumption tests, which averaged 37.7 lb acid/ton of ore, and the average recovery for the samples was 50.9% of acid soluble copper and 24.5% of the total copper (Shipes, 1994).

 

  

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15.3 SGV

 

In October 2004, one sample of mineralized material from the Emerald Isle open pit and two samples of tailings were sent to MSRDI for metallurgical testwork Roman and Bhappu (2004). A screen assay test was run on each sample to determine the different chemical phases of copper and zinc. In addition, bottle-roll leach tests using sulphuric acid and ammonia were run on each sample to assess the leachability of the copper and zinc in the samples. Physical separation of the copper and zinc was evaluated through flotation and gravity concentration for the samples of tailings.

 

The pit sample weighed 129 kg and the head grade was 0.65% TCu and 1.31% Zn. Based on mineralogical assay and leach tests as described, MSRDI concluded that:

 

	
•  

	
Some 80% of the (Total copper or AS copper) copper and 96% of the zinc are soluble under typical heap leaching conditions.

 

	
•  

	Copper recovery after four days of leaching the crushed ore passing -3/4 in. was 58.1%.

 

	
•  

	Zinc recovery after four days of leaching the crushed ore passing -3/4 in. was 78.6%.

 

	
•  

	
Acid consumption was 9.74 lbs. of acid/lb. Cu dissolved, with no credit for the zinc dissolved.

 

	
•  

	
In the ammonia bottle roll leach test negligible copper and zinc were dissolved.

 

The head grade of the first tailings sample weighing 25.8 kg was 3.21% TCu and 0.156% Zn. The reason for such a high grade for a "tailing" is that the +20 mesh fraction of this sample "contained particles which resembled bbs". Based on mineralogical assay and leach tests as described, MSRDI concluded that:

 

	
•  

	
Almost 100% of the copper and 91% of the zinc is soluble under typical heap leaching conditions.

 

	
•  

	
The copper is almost entirely contained within the +20 mesh size bb-shaped particles, and can be easily recovered by screening. A concentrate grade of more than 40% Cu and a recovery of 84% of the copper were achieved.

 

	
•  

	Zinc is not recoverable by screening.

 

	
•  

	
Flotation tests did not result in a high recovery of the copper. This is probably because of the coarse size of the bbs. Zinc recovery was poor also, probably because it is present as an oxide (acid soluble) mineral.

 

	
•  

	
Gravity concentration tests did not result in a high recovery of the copper, although the larger bbs reported to the concentrate.

 

  

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•  

	
Copper recovery after four days of leaching the disaggregated tailings though a half-inch screen was 41.1%.

 

	
•  

	
Zinc recovery after four days of leaching the disaggregated tailings though a half-inch screen was 53.7%.

 

	
•  

	
Acid consumption was 3.07 lbs. of acid/lb. Cu dissolved, with no credit for the zinc.

 

	
•  

	In the ammonia bottle roll test negligible copper and zinc were dissolved.

 

The second tailings sample weighed 15.9 kg and the head grade was 0.171% TCu and 0.121% Zn. Based on mineralogical assay and leach tests as described, MSRDI concluded that:

 

	
•  

	
Almost 67% of the copper and 64% of the zinc is soluble under typical heap leaching conditions.

 

	
•  

	
Flotation tests did not result in a high recovery of the copper. This is probably because of the low grade of the tailings and that the copper is present as an oxide (acid soluble). Zinc recovery was poor, probably because it is also present as an oxide (acid soluble) mineral.

 

	
•  

	
Gravity concentration tests did not result in a high recovery of the copper or the zinc in the concentrate.

 

	
•  

	
Copper recovery after four days of leaching the disaggregated tailings though a half-inch screen was 52.1%.

 

	
•  

	
Zinc recovery after four days of leaching the disaggregated tailings though a half-inch screen was 54.2%.

 

	
•  

	
Acid consumption was 15.4 lbs. of acid/lb. Cu dissolved, with no credit for the zinc.

 

	
•  

	In the ammonia bottle roll test negligible copper and zinc were dissolved.

 

15.4 DISCUSSION

 

The testwork indicates that copper and zinc can be recovered by leaching the sampled materials. The recovery for copper will be verified by further leach testing. Zinc recovery will require more development work to ensure that a technically and economically process can be established, and SGV is pursuing this work.

 

  

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16 ADJACENT PROPERTIES

 

Mineral Concessions situated close to the Emerald Isle Property belong to other parties. A quarter section to the south of the open pit belongs to Santa Fe Mining Company (Santa Fe) and another quarter section is held by private parties. RPA is not aware of any exploration work currently being carried out on these properties, or any significant results from past work (Wilson, 2004).

 

The Mineral Park Mine is situated approximately 4 mi. east of the Emerald Isle Property, as noted above, and produces approximately 6 million lbs. of copper per year by heap leaching with solvent extraction and electrowinning (SX/EW). The mine is owned by Mercator Minerals Ltd. (Mercator, a TSX Venture listed company) and the Cu-Mo deposit is reported to contain Proven and Probable Mineral Reserves totalling some 84.6 million tons at an average grade of 0.24% Cu. Current plans by Mercator are to increase production by expanding the SX/EW plant capacity to approximately 15 million lbs. per year (Surratt, 2005).

 

  

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17 INTERPRETATION AND CONCLUSIONS

 

17.1  EXPLORATION POTENTIAL

 

The Emerald Isle Project is a mineral property that contains a small copper deposit hosted by a relatively flat lying conglomerate unit. Mineralization occurs as an oxide facies in the conglomerate, but narrow zones of copper mineralization are also present in the overlying Quaternary alluvium as well as the underlying granitic rocks.

 

Results of RCD drilling completed in 2004 indicate that the trend of copper mineralization continues along strike to the west. New targets are reported to be situated just south and adjacent to the Emerald Isle Property. These targets were detected by past seismic surveys, and may indicate the presence of paleochannels, which could represent geological environments similar to the one at Emerald Isle (Figure 4-1). RPA recommends a program of drilling to test these new targets: in the order of 3,000 ft. should be sufficient for an initial program.

 

17.2  CONCLUSIONS

 

The Emerald Isle copper deposit is hosted by Late Tertiary conglomerates and, to a lesser extent, by Quaternary alluvium and Cretaceous granitic rocks. RPA has estimated the Mineral Resource from 135 previous rotary and reverse circulation drill holes. Based on our review of past and recent exploration data, RPA concludes that:

 

	
•  

	
The technical data generated from past as well as recent exploration on the property are acceptable for estimation of Mineral Resources.

 

	
•  

	
The 2004 SGV drilling program has been carried out in a systematic manner and is well documented.

 

	
•  

	
The new SGV drilling results have on an overall basis confirmed the previous drilling results, although there is considerable variability between individual twinned holes.

 

	
•  

	
RPA has estimated Mineral Resources of the Emerald Isle copper deposit using results of the previous drilling. At a total copper cut-off grade of 0.3%

 

  

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TCu and 10 ft. minimum vertical thickness, Indicated Mineral Resources are 2.22 million tons with an average grade of 0.62% TCu.

 

	
•  

	
In RPA's opinion, further work is warranted on the Emerald Isle property to advance it towards the prefeasibility stage.

 

	
•  

	
Past exploration (seismic survey by Arimetco) results suggest that a paleochannel similar to the one hosting the Emerald Isle deposit may be present south of the current open pit. RPA is of the opinion that this represents a valid exploration target.

 

  

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18 RECOMMENDATIONS

 

RPA is of the opinion that the Emerald Isle copper property contains a significant copper Mineral Resource and recommends a Scoping Study (Preliminary Assessment) to assess the economic potential of the project and advance it towards the prefeasibility stage. As part of the Scoping Study, further metallurgical testwork is recommended to determine the copper recovery in a conventional heap leaching operation. RPA also recommends drilling to test the paleochannel exploration target south of the open pit area. The estimated cost of the recommended work is C$200,000 (Table 18-1).

 

	
TABLE 18-1 RECOMMENDED WORK AND BUDGET

	
SGV Emerald Isle Project, Arizona

	  
	
Item

	
Estimated Cost (C$)

	
Metallurgical testwork

	
25,000

	
Scoping study

	
100,000

	
Drilling of exploration targets

	
75,000

	
Total Recommended Work

	
200,000

 

19 REFERENCES

 

	
  

	
Albert, T.E., 1992, Letter to James Golden of Mine Development Associates Re Density Measurements on Emerald Isle Samples: Kappes, Cassidy & Associates, Sparks, Nevada, March 16, 1992.

	
  

	
Arimetco, 1988, Emerald Isle Ore Leach Study: Interoffice Memorandum, March 1,1988.

 

	
  

	Arimetco, Inc., 1996, Miscellaneous Cross Sections and Level Plans

 

	
  

	
Arimetco, Inc., 1995, Miscellaneous Notes on Mineral Resource and Mineral Reserve Estimates and open Pit Design, December 4, 1995.

 

	
  

	
Arizona Bureau of Mines, 1969, Mineral and Water Resources of Arizona: The Arizona Bureau of Mines Bulletin 180, University of Arizona, Tucson, 1969.

 

	
  

	Canada Stockwatch, 2004, August 9, 2004 Issue.

 

	
  

	
Clifton, G., 2004a, Summary of Exotic Copper Occurrences (Unpublished): Personal Communication, December, 2004.

 

	
  

	
Clifton, G., 2004b, Description of Sampling of Chips from the Reverse Circulation Program, Emerald Isle Project, Arizona; SGV Internal Company Memorandum, December 2004.

 

	
  

	
D'Andrea, D.V., Larsen, W.C., Fletcher, L.R., Chamberlain, P.G. and Englemann, W.H., 1977, In Situ Leaching Research in a Copper Deposit at the Emerald Isle Mine: United States Department of the Interior, Bureau of Mines, Report of Investigations 8236, 1977.

 

	
  

	
D'Andrea, D.V. and Runke, S.M., 1976, In Situ Copper Leaching Research at the Emerald Isle Mine (Chapter 24): United States Department of the Interior, Bureau of Mines Internal Report on World Mining and Metals Technology, pp. 409-419,1976.

 

	
  

	
Dings, M.G., 1951, The Wallapai Mining District, Cerbat Mountains, Mohave County, Arizona: U.S. Geological Survey Bulletin 978-E, Contributions to Economic Geology, pp. 124-153, U.S. Government Printing Office, Washington,D.C., 1951.

 

	
  

	
Donley, E., Lamb, A. and Sykes, T., 2001, Potentially Responsible Party Evaluation Search, Emerald Isle Mine Site, Mohave County, Arizona: Draft Report Prepared by Dynamac Corporation for the U.S. Department of the Interior, Bureau of Land Management, Germantown, MD, November 2001.

 

  

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Dunham, H.E., 2004, Valuation of Emerald Isle Property: Fairness Opinion Document Prepared for Atlas Minerals, Inc., Denver, Colorado, by H.E. Dunham and Associates, Tucson, Arizona, March 2, 2004.

 

	
  

	
Easdon, M., 1992, Emerald Isle, Mohave County, AZ, 1992 Drilling Program Report: Report by Mine Development Associates, April 2, 1992.

 

	
  

	
Eidel, J.J., Frost. J.E. and Clippinger, D.M., Copper-Molybdenum Mineralization at Mineral Park, Mohave County, Arizona in Ore Deposits of the United States, 1933-1967, The Graton-Sales Volume, John D. Ridge, (Ed.): The American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc., New York, 1968, pp. 1258-1281.

 

	
  

	
Keith, S.B., Gest, D.E., DeWitt, E., Woode Toll, N. and Everson, B.A., 1986, Metallic Mineral Districts and Production in Arizona: Arizona Bureau of Geology and Mineral Technology, Geological Survey Branch Bulletin 194, p. 26, 1986.

 

	
  

	
Mountain States Research & Development International Inc. (MSRDI), 2005, Check Assay Results on Total Copper, Acid Soluble Copper, Total Zinc and Acid Soluble Zinc Values on Samples Assayed at MSRDI and ACTLAB-Skyline Laboratories, May, 2005.

 

	
  

	
Mine Development Associates, 1992, Emerald Isle Copper Mines Feasibility Report: Report Prepared for Holcorp Mines Limited, March 1992.

 

	
  

	
Roman J.R., and Bhappu, R.B., 2004, Evaluation of Ore and Tailings From Emerald Isle Mine: Report by Mountain States Research and Development International Inc., Vail, Arizona, December 1, 2004.

 

	
  

	
PAHRUMP, 2004, Nevada, 30 Year Daily Temperature and Precipitation Summary: The Internet, October 2004.

 

	
  

	
Peterson, R.C., 1976, Review of Aeromagnetic Data over the Emerald Isle Prospect: Report Prepared for Mine Development Associates, 1976.

 

	
  

	
Sheedy, M., 1998, Recoflo® Ion Exchange Technology: Paper on Behalf of Prosep Technologies Inc., a Subsidiary of Eco-Tec Ltd., Proceedings of the TMS Annual Meeting, San Antonio, Texas, 13 pp.

 

	
  

	
Shipes, M.H., 1994, EIM Tailings Tests: Arimetco Interoffice Memorandum to Roy Shipes, July 14, 1994.

 

	
  

	
State of Arizona, 2005, Department of Revenue: Information on State Severance Tax.

 

	
  

	
Ste-Genevieve Resources Ltd., 2004a, Miscellaneous Correspondence and Technical Data.

 

	
  

	
Ste-Genevieve Resources Ltd., 2004b, Property Purchase Agreement between SGV Resources Inc. and Western Consolidated Resources Inc.: SGV Internal Document, July 30, 2004.

 

  

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Ste-Genevieve Resources Ltd., 2005, Miscellaneous Correspondence and Technical Data.

 

	
  

	
Surratt, M.L., 2005, Mercator Announces Plans to Maximize Copper Production at its Mineral Park Mine in Arizona: Mercator Minerals Ltd. Press Release, March 14,2005.

 

	
  

	
The Toronto Stock Exchange, 1990, Excerpts from Listing No. 3735 of Arimetco International Inc.

 

	
  

	
Thomas, B.E., 1951, The Emerald Isle Copper Deposit, Discussion: Econ. Geol. Vol. 46, pp. 231-233, 1951.

 

	
  

	
Thomas, B.E., 1949, Ore Deposits of the Wallapai District, Arizona: Econ. Geol. Vol. 44, pp. 700-703, December 1949.

 

	
  

	
TSC Enterprises, Inc., 1992?, Emerald Isle Mine, Arizona: Internal Company Report.

 

	
  

	
U.S. Mines Register, 1952,: U.S. Bureau of Mines, Mines Register, (Successor to The Mines Handbook and The Copper Handbook) Vol. XXIV, pp. 158-159.

 

	
  

	
Wendt, C.J., 1992, Exploration Potential, Emerald Isle Mine: Report for Mine Development Associates, February 10, 1992.

 

	
  

	
Wieduwilt, W.G., 1976, Review of Induced Polaraization and Resistivity Data, Emerald Isle Area, Mohave County, Arizona: Report Prepared for Perry, Knox, Kaufman, Inc., Project 0620, Tucson, June 6, 1976.

 

	
  

	
Wilkinson Jr., W.H., Vega, L. and Titley, S.R., 1982, Geology and Ore Deposits at Mineral Park, Mohave County, Arizona, in Advances in Geology of the Porphyry Copper Deposits, Southwestern North America, Spencer R. Titley, (Ed.): University of Arizona Press, Tucson, Arizona, pp. 523-541.

 

	
  

	
Williams, S.A., 1992, Correspondence with M. Easdon of Holcorp Mines Ltd. Re. Preliminary Mineralogical Analysis of Samples from the Emerald Isle Mine: Globo de Plomo Enterprises, Douglas, Ariz., March 5, 1992.

 

	
  

	
Wilson, B., 2004, Personal Communication.

 

	
  

	
Wilson, B., 2005, Personal Communication.

 

  

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20 SIGNATURE PAGE

 

This report titled "Technical Report on the Emerald Isle Copper Deposit Prepared for Ste-Genevieve Resources Ltd." and dated March 10, 2006 was prepared and signed by the authors:

 

	 	 (Signed&Sealed)
	 	 
	
Dated at Toronto, Ontario

	Hrayr Agnerian, M.Sc.(Applied), P.Geo.
	March 10, 2006	Consulting Geologist
	 	Roscoe Postle Associates Inc.

	 	 (Signed&Sealed)
	 	 
	
Dated at Toronto, Ontario

	
John T. Postle, M.Sc., P.Eng. 

	March 10, 2006	Consulting Mining Engineer 
	 	Roscoe Postle Associates Inc.

                                                                                                               

  

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21 CERTIFICATE OF QUALIFICATIONS

 

21.1 HRAYR AGNERIAN

 

I, Hrayr Agnerian, M.Sc.(Applied), P.Geo., as an author of this report entitled "Technical Report on the Emerald Isle Copper Deposit, Arizona", prepared for Ste. Genevieve Resources Ltd. and dated March 10, 2006, do hereby certify that:

 

	
1.  

	
I am a Consulting Geologist with Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.

 

	
2.  

	
I am a graduate of the American University of Beirut, Lebanon in 1966 with a Bachelor of Science degree in Geology, of the International Centre for Aerial Surveys and Earth Sciences, Delft, the Netherlands, in 1967 with a diploma in Mineral Exploration, and of McGill University, Montreal, Quebec, Canada, in 1972 with a Masters of Science degree in Geological Engineering.

 

	
3.  

	
I am registered as a Professional Geoscientist in the Provinces of Ontario (Reg.# 0757) and Saskatchewan (Reg.# 4305), and as a Professional Geologist in the Province of Quebec (Reg.# 302). I have worked as a geologist for a total of 35 years since my graduation. My relevant experience for the purpose of the Technical Report is:

 

• Review and report as a consultant on more than seventy mining operations and Projects around the world for due diligence and regulatory requirements, including: 

 

o Estimate of the Mineral Resources of the Anoki deposit and Anoki outh Zone in the Kirkland Lake area, for Queenston Mining Inc. 

o Preparation of a Technical Report on the Salave Gold Project, Spain for Rio Narcea Gold Mines Ltd. 

o Preparation of a Technical Report on the Volta Grande Gold Project for Verena Minerals Corporation. 

o Audit of the Mineral Resources of the Boston, Doris and Madrid areas of the Hope Bay Gold Project, Nunavut Territory, for BHP Minerals Canada.

o Audit of the Mineral Resources of the Joe Mann Mine, Quebec, for Campbell Resources Inc. 

o Mineral resource estimate of the Randell-Jackman and Hammerdown gold deposits, Newfoundland, for ajor General Resources Ltd. 

o Mineral Resource estimate of the Holloway Zone, Kirkland Lake area, for Freewest Resources Ltd. 

o Audit of the Mineral Resources of the Huampar Mine, Peru, for Oroperu Resources. 

o Audit of the Mineral Resources of the Berezitovoye gold deposit, Amur Oblast (Siberia) Russia, for High River Gold Mines Ltd.

 

• District Geologist for Canadian mining company

• Project/Exploration Geologist for several Canadian exploration companies.

 

  

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4.  

	
I have read the definition of "qualified person" set out in National Instrument 43-101 ("NI43-101") and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI43-101.

 

	
5. 

	I visited the Emerald Isle Project on May 31, 2004, and a second time from December 18 to 20, 2004.

 

	
6.  

	
I am responsible for overall preparation of the Technical Report, including all sections.

 

	
7.  

	
I am independent of the Issuer applying the test set out in Section 1.4 of National Instrument 43-101.

 

	
8.  

	
I have had no prior involvement with the property that is the subject of the Technical Report.

 

	
9.  

	
I have read National Instrument 43-101F1, and the Technical Report has been prepared in compliance with National Instrument 43-101 and Form 43-101F1.

 

	
10.  

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

 

Dated 10th day of March, 2006

 

( Signed & Sealed )

 

Hrayr Agnerian, M.Sc.(Applied), P.Geo

 

  

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21.2 JOHN POSTLE

 

I, John T. Postle, M.Sc., P.Eng., as an author of this report entitled Technical Report on the Emerald Isle Copper Deposit, Arizona", prepared for Ste. Genevieve Resources Ltd. and dated March 10, 2006, do hereby certify that:

 

	
1.  

	
I am a Consulting Mining Engineer with Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.

 

	
2.  

	
I am a graduate of the University of British Columbia, Canada, in 1965 with a Bachelor of Science (Applied) degree in Mining Engineering and Stanford University, Stanford, California, in 1968 with a Master Degree in Earth Sciences.

 

	
3.  

	
I am registered as a Professional Engineer in the Provinces of Ontario (Reg.# ) and British Columbia (Reg.# ). I have worked as a professional mining engineer for a total of 38 years since my graduation. My relevant experience for the purpose of the Technical Report is:

 

	
•  

	Planning and management of mining projects in various parts of Canada

 

	
•  

	
Variety of assignments including valuations of mineral projects, review of feasibility studies, monitoring of mine construction, estimation and confirmation of operating and capital costs, conceptual mine design, and cash flow modelling.

 

	
4.  

	
I have read the definition of "qualified person" set out in National Instrument 43-101 ("NI43-101") and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI43-101.

 

	
5.  

	I visited the Emerald Isle Project on May 31, 2004.

 

	
6.  

	
I am responsible for the section dealing with mining aspects of the Technical Report.

 

	
7.  

	
I am independent of the Issuer applying the test set out in Section 1.4 of National Instrument 43-101.

 

	
8.  

	
I have had no prior involvement with the property that is the subject of the Technical Report.

 

	
9.  

	
I have read National Instrument 43-101F1, and the Technical Report has been prepared in compliance with National Instrument 43-101 and Form 43-101F1.

 

  

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ROSCOE POSTLE ASSOCIATES INC.

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 10.

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

 

Dated 10th day of March, 2006

 

( Signed & Sealed )

 

John T. Postle, M.Sc., P.Eng.

 

  

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22 APPENDIX

 

EMERALD ISLE DEPOSIT, SIGNIFICANT MINERALIZED INTERSECTIONS IN EL PASO ROTARY DRILL HOLES

	
Hole #

	
From

	
To

	
Length (ft)

	
% TCu

	
A-2

	
220.00

	
290.00

	
70.00

	
0.68

	
A-3

	
281.00

	
361.00

	
80.00

	
1.02

	
A-4

	
509.00

	
517.00

	
8.00

	
0.51

	
DH92-04

	
40.00

	
60.00

	
20.00

	
0.50

	
DH92-27

	
230.00

	
235.00

	
5.00

	
0.43

	
DH92-28

	
245.00

	
260.00

	
15.00

	
0.72

	
DH92-29

	
215.00

	
235.00

	
20.00

	
0.47

	
DH92-30

	
242.00

	
252.00

	
10.00

	
0.87

	
DH92-31

	
245.00

	
250.00

	
5.00

	
0.65

	
DH92-42

	
0.00

	
55.00

	
55.00

	
0.82

	
DH92-43

	
5.00

	
10.00

	
5.00

	
0.63

	
E-004

	
130.00

	
135.00

	
5.00

	
0.40

	
E-004

	
200.00

	
245.00

	
45.00

	
0.87

	
E-005

	
88.00

	
128.00

	
40.00

	
0.96

	
E-007

	
190.00

	
256.00

	
66.00

	
0.75

	
EI-013

	
290.00

	
330.00

	
40.00

	
0.85

	
EP-001

	
73.00

	
223.50

	
150.50

	
0.94

	
EP-002

	
73.00

	
143.00

	
70.00

	
1.61

	
EP-003

	
24.00

	
85.50

	
61.50

	
1.83

	
EP-004

	
46.00

	
121.00

	
75.00

	
1.93

	
EP-005

	
44.00

	
89.00

	
45.00

	
0.94

	
EP-007

	
44.00

	
74.00

	
30.00

	
1.18

	
EP-008

	
47.00

	
89.00

	
42.00

	
1.21

	
EP-009

	
109.00

	
185.90

	
76.90

	
0.77

	
EP-010

	
0.00

	
44.00

	
44.00

	
1.81

	
EP-011

	
24.00

	
59.00

	
35.00

	
1.97

	
EP-012

	
21.00

	
54.00

	
33.00

	
0.92

	
EP-013

	
9.00

	
49.00

	
40.00

	
0.87

	
EP-014

	
24.00

	
74.00

	
50.00

	
0.88

	
EP-015

	
19.00

	
49.00

	
30.00

	
0.57

	
EP-016

	
9.00

	
44.00

	
35.00

	
0.47

	
EP-017

	
3.00

	
39.00

	
36.00

	
1.29

	
EP-018

	
24.00

	
39.00

	
15.00

	
0.60

	
EP-019

	
29.00

	
64.00

	
35.00

	
0.53

	
EP-020

	
3.00

	
19.00

	
16.00

	
0.92

	
EP-022

	
44.00

	
89.00

	
45.00

	
0.56

	
EP-023

	
44.00

	
120.00

	
76.00

	
0.61

	
EP-024

	
10.00

	
110.00

	
100.00

	
0.81

	
EP-025

	
95.00

	
160.00

	
65.00

	
0.50

	
EP-026

	
50.00

	
100.00

	
50.00

	
0.52

	
EP-027

	
120.00

	
125.00

	
5.00

	
0.42

	
EP-028

	
120.00

	
145.00

	
25.00

	
0.42

	
EP-029

	
130.00

	
200.00

	
70.00

	
0.85

 

  

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82ex10-1.htm

EXHIBIT 10.1

 

OPTION AGREEMENT

This Option Agreement (“Agreement”) is made and entered into as of the ___ day of _________ 2010, by and between CADIZ INC., and FENNER MUTUAL WATER COMPANY, on the one hand (collectively, “CADIZ”), and SANTA MARGARITA WATER DISTRICT (referred to herein as either “SMWD” or “Optionee”), on the other hand, with reference to the following facts and intentions:

 

 

RECITALS

 

A.           CADIZ owns and controls approximately 35,000 acres of land located in the Cadiz and Fenner valleys of San Bernardino County (the “Property”).

 

B.           Substantial quantities of percolating groundwater exist within the aquifer system underlying the Property that naturally migrates to the Bristol and Cadiz dry lakes and then is lost to evaporation, such that water that would otherwise be wasted can be conserved and made available for reasonable and beneficial use in accordance with modern sustainable groundwater management practices.

 

C.           Existing and potential aquifer capacity exists within the underlying aquifers that can be prudently used to store conserved and imported water for subsequent beneficial use.

 

D.           The County of San Bernardino has previously approved a Conditional Use Permit in 1993 authorizing the withdrawal of water for agricultural uses on the overlying land and CADIZ has made substantial investments in continuing its agricultural concern on up to 9,600 acres.

 

E.           CADIZ has acquired a 99-year right of way along an active railroad line from the Arizona & California Railroad to construct a pipeline and power line to convey water to and from the Property to the Colorado River Aqueduct (“CRA”).

 

F.           The Parties acknowledge and agree that other public water purveyors within six Southern California counties (Ventura, Los Angeles, Orange, Riverside, San Bernardino and San Diego) are evaluating their potential participation in the Program (as defined below) as potential purchasers of conserved water.

 

G.           The Parties intend to conserve groundwater and manage the available groundwater supply in accordance with the directives stated by the California Supreme Court in City of Los Angeles v. City of San Fernando (1975) 14 Cal.3d 199 thereby withdrawing any temporary surplus required to obtain optimal groundwater water levels and to manage extractions within the long-term safe annual yield.

 

H.           CADIZ will operate the Program on a long-term sustainable basis and in a manner consistent with its covenants to the Natural Heritage Institute so as to avoid unreasonable environmental harm as set forth in Exhibit “A” attached hereto.

 

I.           Prior to the initiation of environmental review, CADIZ will cause the preparation of a watershed analysis and technical evaluation of the water supply availability by a qualified national engineering firm which must demonstrate the potential for recovery of conserved water in quantities sufficient to meet the promised deliveries to the purchasers of conserved water.

 

J.           CADIZ is prepared to reserve up to a maximum of 10% of the conserved water and storage developed from the Property for reasonable and beneficial uses by public water purveyors within San Bernardino County.

 

K.           CADIZ desires to grant an option to the Optionee to acquire certain quantities of conserved water and storage capacity rights, and the Optionee desires to acquire such an option, subject to the terms and conditions of this Agreement.

 

L.           The method of delivery of water from CADIZ to the CRA, the potential that the Program may earn Intentionally Created Surplus Credits (“ICS Credits”) for MWD under federal law, the eligibility of the Program to receive state and federal grants, CADIZ’ offer to grant a portion of the available Storage to MWD, and the MWD Local Resources Program (“LRP”), all create potential opportunities for a direct and dollar-for-dollar reduction in the price of water to be made available by the Program as it is finally delivered to the purchasers of the conserved water.

 

M.           The Parties acknowledge that the final price for water, adjusting for other consideration, cannot be determined until several contingencies to the operation of the Program, including but not limited to the items set forth in Recital L above and as may be learned through environmental review, are satisfied.

 

N.           Notwithstanding the contingencies of environmental review and the availability of third party funding which may impact the as-received price for water to the purchasers of conserved water, CADIZ is willing to grant the rights to the Optionee as set forth in this Agreement.

 

O.           CADIZ intends to facilitate the implementation of this Agreement through the Fenner Mutual Water Company, a private non-profit water company, that will own or control various water, storage, easement and conveyance rights.

 

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

 

ARTICLE 1

THE PROGRAM

 

1.1 Program Summary.  The “Program” is defined and summarized in the attached Exhibit “B” and incorporated by this reference.

 

1.2 Definitions.  The following definitions shall apply.

 

(a)           “Annual Quantity” means the quantity of water that is made available by CADIZ through its intended water conservation program.

 

(b)           “Carry-Over Storage” means the use of unsaturated soils that provide available subsurface storage capacity to store water from year to year for subsequent withdrawal and delivery to Optionee.  Carry-Over Storage may be used to store imported or foreign water, provided that sufficient pipeline capacity exists to convey water from the CRA to the Property.

 

(c)           “Supplemental Storage” means the use of available subsurface capacity to store Conserved Water in the event that CADIZ is unable to or prevented from delivering Conserved Water to the CRA because there is insufficient capacity in the CRA, and is further defined in Section 2.2(d).

 

ARTICLE 2

 

OPTION

 

2.1 Option Consideration.  As consideration for the Option and as a condition precedent to the exercise of the Option, the Optionee must have first executed and be bound by mutually agreed terms whereby it will pay a fair portion of an expected environmental review costs (the “Environmental Cost Sharing Agreement”).  Optionee’s share of environmental review costs under the Environmental Cost Sharing Agreement attached hereto as Exhibit “A” will not exceed $125,000 without further written agreement between the Parties.

 

2.2 Grant of Option and Exercise Price.  Subject to the Optionee’s performance of its obligations hereunder and the execution of the Environmental Cost Sharing Agreement, CADIZ hereby grants to Optionee an option to acquire Conserved Water along with the following interests as set forth in Exhibit “C” (the “Price Schedule”) (collectively, the “Option”):

 

(a)           Conserved Water.  The Optionee shall have the option, but not the obligation to acquire up to 5,000 acre-feet per year of conserved water as an Annual Quantity Right (the “Initial 5K AF”).  The exercise price for the acquisition of the Initial 5K AF and the timing of such payments are set forth on the Price Schedule. Further, the Optionee shall have the option, but not the obligation, to acquire up to an additional 10,000 acre-feet per year of conserved water at the exercise price set forth on the Price Schedule (the “Additional 10K AF”) (collectively, the water acquired pursuant to this Section 2.2(a) being the “Conserved Water”).

 

(b)           First Fill Storage and Fill Water.  Upon Optionee’s exercise of its option for the Initial 5K AF, Optionee shall be entitled to 15,000 acre-feet of First Fill Storage and 15,000 acre-feet of Fill Water on a Space Available capacity through the Pipeline that delivers water to the CRA.  Optionee may re-fill any available First Fill Storage capacity with Carry-Over and Imported Water on the same terms as applicable to Carry-Over storage.  However, Optionee’s entire cost for the First Fill Storage and Fill Water shall be equal to $20 (in April 2010 dollars) per acre-foot per year (“Annual Management Obligation”) for 15,000 acre-feet unless Optionee, in its discretion, waives its re-fill right to First Fill Storage, in which case the Annual Management Obligation shall be assessed only on that quantity of water actually held in First Fill Storage.  If Optionee waives its rights to First Fill Storage, then it shall have no right to store any water other than Fill Water.  No losses will be assessed upon the Fill Water held in First Fill Storage.

 

(c)           Carry-Over Storage.  Upon Optionee’s exercise of its option for the Initial 5K AF, Optionee shall have the additional option, but not the obligation, to acquire additional Carry-Over Storage in accordance with the terms hereof:

 

(i)           Class A Carry-Over Storage.  Upon purchase of Class B Carry-Over Storage (as described below), Optionee shall be entitled to 5,000 acre-feet of Class A Carry-Over Storage on a Firm capacity and an additional 5,000 acre-feet of Fill Water that may be transported on a Space Available capacity through the Pipeline that delivers water to the CRA, at no charge.  No losses will be assessed upon water held in Class A Carry-Over Storage.

 

(ii)           Class B Carry-Over Storage.  The Optionee shall have the option, but not the obligation, to acquire up to 5,000 acre-feet of Class B Carry-Over Storage at the exercise price set forth on, and payable in accordance with, the Price Schedule.  No losses will be assessed upon water held in Class B Carry-Over Storage.  Upon acquisition of Class B Carry-Over Storage, the Optionee shall elect, in writing to CADIZ, whether it wishes to acquire firm or space-available pipeline capacity, which shall enable the Optionee to utilize the purchased Class B Carry-Over Storage in its discretion.

 

(d)           Illustrative Example.  By way of illustration, if Optionee exercises its Option to acquire the Initial 5K AF, Optionee is entitled to 15,000 acre-feet of First Fill Storage and 15,000 acre-feet of Fill Water at no additional cost with the exception of the Annual Management Obligation fees.  If Optionee further elects to exercise its option to acquire Class B Carry-Over Storage, Optionee will receive 5,000 acre-feet of Class B Carry-Over Storage and 5,000 acre-feet of Class A Carry-Over Storage.

 

(e)           Supplemental Storage.  In the event that CADIZ is unable to deliver or is prevented from delivering Conserved Water to the CRA because there is insufficient capacity to exchange or wheel the Conserved Water for beneficial use within Optionee’s service area, then CADIZ will provide storage capacity in sufficient quantity to retain and store the Conserved Water for the benefit of the Optionee (“Supplemental Storage”).  The Supplemental Storage will be made available free of charge to Optionee and for as long as there is insufficient capacity in the CRA for Optionee to receive delivery of the Conserved Water stored within the Supplemental Storage.  No losses will be assessed to Conserved Water held in Supplemental Storage.

 

(f)           Pipeline Capacity.  First Fill Storage shall include the right to transport Fill Water on a Space Available basis.  Class A Carry-Over Storage (if obtained through the purchase of Class B Carry-Over Storage) shall include the right to transport 5,000 acre-feet of any acquired Conserved Water through Class A Firm pipeline capacity to the CRA, at no extra cost to the Optionee.  Upon acquisition of Class B Carry-Over Storage, the Optionee shall elect, in writing to CADIZ, whether it wishes to acquire Class B Firm or Space Available pipeline capacity in accordance with the Price Schedule.

 

(g)           Administrative Fees.  Upon exercise of the Option (in whole or in part), the Optionee shall pay an annual storage administrative fee to CADIZ in accordance with the Price Schedule for the term of the exercised Option.

 

(h)           No Additional Fees.   CADIZ will not impose, and the Optionee will not be responsible for, any additional fees and costs, other than as expressly set forth in this Agreement and the Price Schedule.

 

(i)           Term of Exercised Option.  Upon exercise, the Conserved Water and Carry-Over Storage rights acquired through the Optionee’s exercise of the Option shall be for a term of fifty (50) years from the date construction of the Program is deemed complete and Conserved Water is made available for delivery to the CRA (the “initial term”).  In the event CADIZ fails to deliver to the Optionee the acquired Conserved Water as requested by the Optionee during the initial term for any reason (other than as a result of a force majeure), the initial term shall be extended by that number of years necessary to fulfill CADIZ’ obligation to deliver the acquired Conserved Water.  This means if the well-field fails to produce sufficient water to meet Optionee’s scheduled delivery request for Conserved Water, regardless of whether the Conserved Water is Annual Quantity or from Carry-Over Storage, the initial term of the Agreement will be extended for so long as necessary to complete the delivery.  In addition, the initial term of the exercised Option may be mutually extended by CADIZ and the Optionee by the Optionee’s transmittal of written notice (delivered no later than 36 months prior to the expiration of the initial term) of its intent to negotiate an extension of the term of an additional thirty (30) years no later than December 31, 2050.  Upon receipt of the written notice, the Parties will exercise good faith and reasonable best efforts to extend the term under mutually agreeable terms.

 

(j)           Cost Off-Sets. The final cost of water, as delivered by CADIZ and as received by the Optionee, may be subject to the resolution of state and federal grants applications, contracts for services, exchanges and other consideration that may be obtained from the state and federal government, MWD and other third parties (collectively “Cost Off-Sets”).  These Cost Off-Sets may substantially reduce the cost of water as delivered by CADIZ and as received by the Optionee.  The Parties recognize and CADIZ expressly agrees that any Cost-Off Sets will be applied as a dollar-for-dollar credit against some or all of the Program costs as may be requested by the Optionee so as to reduce the actual cost of Conserved Water delivered by CADIZ and as received by the Optionee, as more fully detailed in Exhibit “D” attached hereto.  Further, CADIZ acknowledges that the Optionee may elect in its sole discretion to participate in an alternative public financing of some or all of the capital costs attributable to conveying water to and from the Property to the CRA and that the final cost will be incrementally reduced to reflect this decision.

 

(k)           Effective Cost The adjusted cost of Conserved Water and Storage to the Optionee after accounting for the application of any Cost Off-Sets is the “Effective Cost” and is generally described in Exhibit “D”.  Specifically, following completion of Environmental Review for the Program, Optionee may elect on its own or in coordination with some or all of the other purchasers of conserved water, to assume complete responsibility for the design, financing, construction and operation of the pipeline that conveys water between the CRA and the Property.  The Effective Cost will reflect Optionee’s assumption of these costs.

 

2.3 Exercise Period.  The Option for acquiring the Initial 5K AF shall be exercisable for a period commencing upon the date of execution of this Agreement and continuing until 5:00 p.m. PST on the 60th day following the satisfaction of the condition precedent set forth in Section 2.4(b).  For acquiring the Additional 10K AF, such period shall not extend beyond the 30th day following the satisfaction of the condition precedent set forth in Section 2.4(b) (each and as applicable, the “Exercise Period”).  This Option, this Agreement and any rights accrued to the Optionee shall terminate immediately as to the Optionee, without further notice, if the Environmental Cost Sharing Agreement referenced in Section 2.1 terminates as to the Optionee pursuant to the terms thereof.

 

2.4 Conditions Precedent to Exercise of Option.  The obligations of the Parties shall be conditioned as follows:

 

(a)           Option Exercise.  The obligations of CADIZ under this Article 2 are conditioned upon the Optionee’s timely exercise of the Option pursuant to this Article 2 and performance of its obligations under the Environmental Cost Sharing Agreement referenced in Section 2.1.

 

(b)           Environmental Review and Approval.  The obligations of the Parties under this Article 2 are conditioned upon the completion of environmental review, as may be required under federal and state environmental resource protection laws and regulations and compliance with all other applicable law.  In the event litigation is commenced following the completion of the environmental review process, the Parties will meet and confer to determine whether the condition of environmental review and approval has been satisfied and whether to toll any applicable time periods under the Option while the litigation is unresolved.

 

(c)           ICS Credit. CADIZ and Optionee will make application for an ICS Credit, which if obtained, shall be shared equally (50/50) on a per acre-foot basis.  CADIZ and Optionee will coordinate their efforts in support of an application and will exercise good faith and reasonable best efforts to secure ICS Credits.

 

           (d)           LRP Credit.  Optionee may, in its discretion, apply for an LRP Credit from MWD by and through a MWD member agency and the value of the LRP Credit is presently estimated at $250 per acre-foot.  Upon request by Optionee, CADIZ will provide good faith assistance in support of Optionee’s application.

 

(e)           Purchase/Sale Agreement.  If SMWD elects under Article 2 to exercise the Option, the Parties will exercise reasonable best efforts to negotiate a definitive purchase and sale agreement that incorporates the terms of this Option Agreement, taking into account environmental review, the Parties’ collective efforts to secure potential financial off-sets and incentives, and other relevant considerations prior to approval of the Program (“Purchase and Sale Agreement”).

 

2.5 Exercise of Option.  Provided the Optionee has satisfied its respective obligations under this Agreement and the Environmental Cost Sharing Agreement to be negotiated concerning a fair apportionment of environmental costs, the Optionee may exercise the Option, in whole or in part as set forth above, in its sole and complete discretion by providing written notice to CADIZ within the Exercise Period.  If any part of the Option is not timely exercised or this Agreement is terminated, then CADIZ, in its sole and complete discretion and without notice to or approval from the Optionee, may allocate the unexercised portion of the Conserved Water, Carry-Over Storage rights, and pipeline (firm or space-available) capacity to any other person or entity.

 

2.6 Reversion.  In the event the Optionee withdraws from participation in the Program, all rights and interests previously held by the Optionee under the Option (exercised or otherwise) shall revert to CADIZ.  For purposes of this Section 2.6, “withdraws”shall mean any of the following:  (i) the Optionee’s failure to timely pay its obligations under the Environmental Cost Sharing Agreement; or (ii) the Optionee’s failure to complete its environmental review.

 

2.7 Other Covenants.  The Parties hereby agree further to the following covenants:

 

(a)           Conveyance and Distribution System.  The Parties intend to coordinate their efforts and to work constructively with Metropolitan Water District (“MWD”) and MWD member agencies to determine the most efficient method to achieve their objectives and to obtain access to the MWD conveyance and distribution system.  The Parties may coordinate their proposed conservation efforts with MWD to facilitate the generation of Intentionally Created Surplus Credits for the benefit of MWD.  In addition, in its complete discretion, CADIZ may offer an “in kind” contribution to MWD for the purpose of reducing the cost of conveying and exchanging water or otherwise reducing the cost of water delivered by CADIZ or as received by the Optionee.  If CADIZ makes such an “in kind” offer and MWD accepts, the Parties will exercise best efforts to negotiate equitable remuneration for CADIZ that fairly reflects the benefit that has been conferred by CADIZ on the other Parties.

 

(b)           Cooperation.  The Parties shall cooperate with each other and with other Primary and Secondary Participants for the purpose of obtaining all regulatory approvals, including, without limitation, an environmental review and compliance analysis and other state and federal approvals required to satisfy conditions necessary to implement the Program.

 

(c)           Suppliers and Contractors.  CADIZ will exercise good faith and best efforts to select companies based primarily within the Inland Empire to provide the materials and services that will be required to construct and operate any water related projects on the Property.

 

(d)           Environmental Betterment.  The Parties acknowledge the goal of a general “environmental betterment” whereby the Property and the operation of the groundwater bank will be evaluated for use in connection with providing water to beneficial environmental uses.  The Optionee hereby agrees to meet to-be-determined demand management strategies that will indirectly reduce stress on the San Francisco / San Joaquin Bay-Delta.

 

(e)           Solar Power.  CADIZ agrees to exert reasonable best efforts to provide solar power to operate the Program facilities.  The Program will be evaluated using both solar power and, in the event solar power is not available in sufficient quantity to operate the Program, then traditional forms of energy.

 

(f)           Most Favored Nation.  Notwithstanding any other provision of this Agreement, the Optionee has, in its sole and complete discretion, the right to elect the same price terms offered to any other purchaser of Conserved Water or Storage made available by CADIZ from the date of execution of this Agreement until CADIZ has executed binding definitive agreements for more than fifty (50) percent of the identified Program capacity to deliver Conserved Water.

 

(g)           Environmental Cost Reimbursement or Credit.  Subject to circumstances described in the Environmental Cost Sharing Agreement, Optionee may be eligible for a reimbursement of its costs paid pursuant thereto or a credit against the exercise of the Option hereunder.

 

2.8           Buy-In.  Notwithstanding anything herein, in lieu of exercising the Option, SMWD may elect in its complete discretion to negotiate with CADIZ for the acquisition of water, water rights, storage, storage rights, well-field capacity, pipeline capacity and real property interests owned or controlled by CADIZ (collectively “Buy-In”).  Upon request by SMWD, CADIZ and SMWD will exercise reasonable best efforts to negotiate a mutually agreeable Buy-In prior to completion of the environmental review process and the execution of a definitive Purchase and Sale Agreement.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties by the Parties.  Each Party hereby makes the following covenants, representations and warranties to each other Party:

 

(a)           Authority.  It has the authority to enter into this Agreement and perform as set forth herein and therein.  This Agreement has been duly authorized by all required action.

 

(b)           No Violations.  The execution of this Agreement and performance of its obligations under this Agreement will not violate any contract, transaction, option, covenant, condition, obligation of undertaking of such Party, nor to the best of its knowledge, will it violate any law, ordinance, statute, order or regulation.

 

(c)           Enforceability.  This Agreement and all documents required hereby to be executed by such Party are and shall be valid, legally binding obligations enforceable against such Party in accordance with their terms.

 

ARTICLE 4

 

GENERAL PROVISIONS

 

4.1 Interpretation.  The provisions of this Agreement should be liberally interpreted to effectuate its purposes.  The language of this Agreement shall be construed simply according to its plain meaning and shall not be construed for or against either Party, as each Party has participated in the drafting of this Agreement and has had the opportunity to have their counsel review it.  Whenever the context and construction so requires, all words used in the singular shall be deemed to be used in the plural, all masculine shall include the feminine and neuter, and vice versa.  The word “including” means without limitation, and the word “or” is not exclusive.  Unless the context otherwise requires, references herein: (i) to Articles, Sections and Exhibits mean the Articles and Section of and the Exhibits attached to this Agreement; (ii) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (iii) to a statute means such statute as amended from time to time and includes any successor legislation thereto.

 

4.2 Notice.  All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be conclusively deemed to have been duly provided: (i) when transmitted via e-mail; (ii) seventy-two (72) hours after the writing is deposited in the mail system of the United States Postal Service prepaid for standard or certified mail return receipt requested; or (iii) at 4:59 p.m. PDST on the Business Day after the writing is deposited with a national overnight delivery service, e.g., Federal Express, DHL Worldwide Express or United Parcel Service, postage prepaid, with next-business-day delivery guaranteed, provided that the sending Party receives a confirmation of delivery from the delivery service provider.  Notices shall be directed as indicated below, or as may be changed or supplemented from time to time by the recipient Party by giving the other Party written notice in the manner stated above.

 

	
If to CADIZ:

	
CADIZ, Inc.

550 S. Hope Street, Suite 2850

Los Angeles, CA 90017

(213) 271-1600

(213) 271-1614 (facsimile)

Attn:  Scott Slater

sslater@bhfs.com

 

	
If to Optionee:

	
Santa Margarita Water District

26111 Antonio Parkway

Rancho Santa Margarita, CA  92688

(949) 459-6601

(949) 459-6463 (facsimile)

Attn:  John Schatz

Jschatz13@cox.net

 

4.3 Date and Delivery of Agreement.  The Parties intend that this Agreement, upon execution, shall be deemed effective, executed and delivered for all purposes under this Agreement, subject to the conditions precedent set forth in Section 2.4.

 

4.4 Good Faith.  The Parties agree to exercise their commercially reasonable best efforts and good faith to effectuate all the terms and conditions of this Agreement.

 

4.5 Other Instruments.  Each Party shall cause to be executed any further documents reasonably necessary in the opinion of the requesting Party.  The requesting Party shall pay the cost of the further documents, except that each Party shall pay its own attorney fees.

 

4.6 Successors and Assigns.  This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective successors and permitted assigns, except as restricted by this Agreement.  Notwithstanding the foregoing, the Option and SMWD’s rights hereunder shall not be assignable to any other person or entity without the express prior written consent of CADIZ, which shall be exercised in its sole discretion.

 

4.7 No Third-Party Rights.  Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the Parties to this Agreement and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligations or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement.

 

4.8 Dispute Resolution.  The Parties shall seek to resolve any dispute concerning the interpretation or implementation of this Agreement through good faith negotiation, involving, as and when appropriate, the general manager or chief executive officer of each of the Parties.  Any dispute that remains unresolved thirty (30) days after notice of the dispute is made to the Parties, shall be resolved by a single arbitrator with substantial experience on the matter or matters in dispute, conducted in accordance with JAMS.  If the Parties cannot agree on a single arbitrator within ten (10) days of the written election to submit the matter to arbitration, either Party may request JAMS to appoint a single, neutral arbitrator.  The Parties shall use their reasonable best efforts to have the arbitration proceeding concluded within ninety (90) business days of selection of the arbitrator.  In rendering the award, the arbitrator shall determine the rights and obligations of the Parties according to the substantive and procedural laws of California.  All discovery shall be governed by the CCP with all applicable time periods for notice and scheduling provided therein being reduced by one-half.  The arbitrator may establish other discovery limitations or rules.  The arbitrator shall have the authority to grant provisional remedies and all other remedies at law or in equity, but shall not have the power to award punitive or consequential damages.  The decision of the arbitrator shall be final, conclusive and binding upon the Parties, and either Party shall be entitled to the entry of judgment in a court of competent jurisdiction based upon such decision.  The losing Party shall pay all costs and expenses of the arbitration; provided, however, if neither Party is clearly the losing Party, then the arbitrator shall allocate the arbitration costs between the Parties in an equitable manner, as the arbitrator may determine in his or her sole discretion.

 

4.9 Default.  The failure by either Party to perform its obligations under this Agreement, which continues for more than thirty (30) days after receipt of written notice from the other Party stating the existence and nature of such default (unless the default cannot be cured in said thirty (30) days, and in that event, if the defaulting Party fails to continuously and diligently remedy the default) shall constitute a default, which default shall entitle the other Party to terminate this Agreement at its option by notification to the defaulting Party.  Said termination option shall be in addition, not in lieu of, other rights and remedies of the nondefaulting Party under this Agreement and by law.

 

4.10 Waiver.  No waiver of any provision or consent to any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar.  No waiver or consent shall constitute a continuing waiver or consent or commit a Party to provide a waiver in the future except to the extent specifically stated in writing.  Any waiver given by a Party shall be null and void if the Party requesting such waiver has not provided a full and complete disclosure of all material facts relevant to the waiver requested.  No waiver shall be binding unless executed in writing by the Party making the waiver.

 

4.11 Attorney Fees.  If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing Party shall be entitled to recover reasonable attorney fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

 

4.12 Entire Agreement.  This Agreement and its exhibits is the entire understanding of the Parties. There are no other promises, representations, agreements or warranties by any of the Parties.  This Agreement may be only be amended or supplemented by a writing signed by all Parties.  Each Party waives its right to assert that this Agreement was affected by oral agreement, course of conduct, waiver or estoppel.

 

4.13 Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

4.14 Authorizations.  All individuals executing this and other documents on behalf of the respective Parties certify and warrant that they have the capacity and have been duly authorized to so execute the documents on behalf of the entity so indicated.  Each signatory shall also indemnify the other Parties to this Agreement, and hold them harmless, from any and all damages, costs, attorney fees and other expenses, if the signatory is not so authorized.

 

IN WITNESS WHEREOF, the Parties have set forth their signatures as of the date first written above.

 

	
“OPTIONEE”

	
SANTA MARGARITA WATER DISTRICT

By: ________________________________

Title:_______________________________

 

	
“CADIZ”

	
CADIZ INC.

By: ________________________________

Title:_______________________________

 

FENNER MUTUAL WATER COMPANY

By: ________________________________

Title:_______________________________

	  	  

 

Exhibit A:                      Environmental Cost Sharing Agreement

Exhibit B:                      Program Summary

Exhibit C:                      Price Schedule

Exhibit D:                      Example of Effective Cost Range

  

  

 

  

EXHIBIT A

 

ENVIRONMENTAL COST SHARING AGREEMENT

 

 

[See Attached]

 

  

  

 

  

EXHIBIT B

 

PROGRAM SUMMARY

 

A groundwater banking operation on the Cadiz Property for the purpose of conserving water that is presently lost through evaporation from the Cadiz and Bristol Dry-Lakes and conjunctively managing imported surface water that is spread and stored for recovery.  The proposed project would make new and reliable water available for irrigation, solar, municipal water supply, environmental and other beneficial uses.

This Program may conserve, store and deliver to public water systems: (a) native groundwater water conserved by reducing controllable losses from the aquifer system and implementing prudent groundwater management strategies, and (b) water imported from outside the property (probably from the Colorado River) and percolated to actively recharge the aquifer.  The Program will be conducted consistent with prevailing groundwater management methodology governed by three primary principles: (a) Recharge and extraction of native and imported water within the Property will be conducted in a manner that achieves and then maintains optimal, long-term, safe (sustainable) yield and conjunctive use of water; (b) Management of the groundwater levels will not result in harm to the aquifers, or cause material adverse changes in water quality, differential land subsidence, or impairment of habitats dependent upon near-surface expressions of groundwater (such as phreatophytic vegetation, wetlands or surface stream flows); and (c) The banked water will directly and indirectly result in restoration of unrelated aquatic ecosystems currently impaired by water development.

The Program is intended to achieve environmental restoration benefits through the banking of imported water for active recharge and its use for environmental restoration purposes.

All native and imported water, whether conserved or stored, will be recovered and conveyed between the Cadiz Property and the CRA along an active railroad line right-of-way that Cadiz has acquired from the Arizona & California Railroad.

The proposed well-field and pipeline will be sized to accommodate the expected long-term recoverable yield of conserved water from the Fenner Valley and Orange Blossom Watersheds and foreign water that is stored in wet years and recovered in dry-years.

The initial term of the Program will be 50 years.

  

  

 

  

EXHIBIT C

 

PRICE SCHEDULE

 

 

	A.           Conserved Water  	For Initial 5K AF - $775.001 per afy2      
	 	For Additional 10K AF - $975.003 per afy4      

The per acre-foot per year is the complete and final cost for the delivery of water to the CRA.  There are no added costs for this service.

 

	B.           Supplemental Storage	$0 

CADIZ will provide Supplemental Storage to Optionee without charge.  Supplemental Storage will be provided for the benefit of Optionee in the event CADIZ is unable to deliver or is prevented from delivering water to the CRA because there is insufficient capacity in the CRA to accept the Conserved Water.

C.           ICS Credits

CADIZ and Optionee will share the benefit of any ICS Credits that are obtained equally (50/50) on a per acre-foot basis.  This means that if an ICS Credit is earned for the 5,000 acre-feet purchased by Optionee, CADIZ and Optionee will equally shared the compensation attributable or fairly apportioned to that 5,000 acre-feet.

D.           Price Reductions

Further reductions in the price of Conserved Water may occur from applications from state and federal grants applications, contracts for services, exchanges of storage, Conserved Water and other consideration that may be obtained from the state and federal governments, MWD and other third parties (collectively, “Cost Off-Sets”).  These Cost Off-Sets may reasonably reduce the cost of water as delivered by CADIZ to the CRA as provided in Exhibit “D” as well as further reductions in cost being obtained and applied for the benefit of the Optionee after the delivery of water to the CRA and prior to the Conserved Water being received by the Optionee.  The Parties recognize and CADIZ expressly agrees that any Cost Off-Sets will be applied as a credit against some or all of the Program costs as may be requested by the Optionee so as to reduce the actual cost and the purchase price of Conserved Water delivered by CADIZ and as received by the Optionee.  (See Exhibit “D”).

E.           Storage

 

	 	1.           First Fill Storage (1 unit of 15,000 acre-feet) 	**5 
	 	2.           Class A Carry-Over Storage (1 unit of 5,000 acre-feet) 	**6 
	 	3.           Class B Carry-Over Storage (1 unit of 5,000 acre-feet) 	$1,500.007 per af  
	 	4.           Supplemental 	No Charge8 

 

F.           Pipeline Capacity9

 

	 	1.           Class A Firm (1 unit of 5,000 acre-feet) 	**10 
	 	2.           Class B Firm (per units of 5,000 acre-feet) 	$2,400.0011 per af12 
	 	3.           Space Available Use 	TBD13 
	 	4.           First Fill Space Available 	**14 

 

G.           Annual Storage Administration Fee

 

 

	 	1.           First Fill Storage Capacity 	$20.0015 per af (subject to Section 2.2(b))  
	 	2.           Class A and B Carry-Over Storage Capacity 	$20.0016 per af  
	 	3.           Supplemental Storage 	$0  

 

EXAMPLE

If SMWD exercises its option to purchase 5,000 acre-feet per year of Conserved Water, it will receive 15,000 acre-feet of First Fill Storage and 15,000 acre-feet of Fill Water on a space available pipeline capacity at no additional cost excepting the Annual Management Obligation described in Section 2.2(b).  Further, if SMWD elects to purchase 5,000 acre-feet of Class B Carry-Over Storage, it will receive 5,000 acre-feet of Class A Carry-Over Storage at firm capacity without paying additional compensation.  The Optionee would then make an election as to whether it wished to purchase additional Firm capacity or elect to move a portion of its Conserved Water on a Space Available basis.

	
Conserved Water – Initial 5K AF

	
Paid Upon Delivery of Water to Canal or Carry-Over Storage

	
$775 Per AFY subject to a 5% cap on annualized escalation (see fn 1 and 2) prior to Cost Off-Sets.

	
Conserved Water – Additional 10K AF

	
Paid Upon Delivery of Water to Canal or Carry-Over Storage

	
$975 Per AFY subject to a 5% cap on annualized escalation (see fn 3 and 4) prior to Cost Off-Sets.

	
Supplemental Storage

	
No Charge

	
No Charge

	
First Fill Storage

	
Upon Exercise of Initial 5K AF

	
No Charge, excepting Annual Management Obligation

	
Class A Carry-Over Storage

	
No Charge upon acquisition of Class B Carry-Over Storage

	
$0

	
Class B Carry-Over Storage

	
Paid Upon Project Approval17

	
$7.5 million18 for 5,000 af of storage capacity

	
First Fill Water – 15,000 acre-feet

	
Dedicated Upon Project Approval

	
$0

	
Class A Pipeline Capacity

	
Paid Upon Project Approval

	
$0 Firm

	
Class B “Firm” Pipeline Capacity

	
Paid Upon Project Approval

	
$12 million19 per 5,000 af of storage

	
Class B “Space Available” Pipeline Capacity

	
Paid Upon Actual Use of Pipeline Capacity

	
Buyer pays actual incremental cost to Cadiz plus a share of pro-rated capital to reimburse the costs of those parties holding firm capacity.

 

 

Accordingly, by way of example and without commitment, if SMWD exercised its option for 5,000 acre-feet of the Initial 5K AF and also exercised its option to acquire Class B Carry-Over Storage at Firm Capacity, SMWD would be entitled to 25,000 acre-feet of Storage (i.e., 15,000 First Fill Storage plus 5,000 Class B acquired plus 5,000 Class A) of which 10,000 would be at Firm Capacity and 15,000 at Space Available Capacity, resulting in a total up-front cost of $19.5 million with an annual charge of $775 for the water and an ongoing maintenance charge of $20 per acre-foot.  The decision to purchase Space Available Pipeline Capacity would reduce the upfront costs by $12 million so that a total of $7.5 million would be due and payable for the purchase of Class B Carry-Over Storage.  However, the purchaser would then pay both CADIZ’ incremental cost in transporting the water, if any, and a share of pro-rated capital costs.  Note all dollar amounts are stated in April 2010 dollars.

 

  

1 April 2010 dollars.

  

2 Subject to a 5% cap on average annualized escalation.

  

3 April 2010 dollars.

  

4 Subject to a 5% cap on average annualized escalation.

  

5 Made available

  

6 Made available upon purchase of Class B Carry-Over.

  

7 April 2010 dollars.

  

8 Made available.

  

9 Charges may be subject to Cost Off-Sets as provided in C. and D. above.

  

10 Made available with Class A Carry-Over.

  

11 April 2010 dollars.

  

12 LOI quotes at $12 million per 5,000 af.

  

13 Actual incremental cost plus a reasonable share of pro-rated capital.

  

14 Made available.

  

15 April 2010 dollars.

  

16 April 2010 dollars.

  

17 The approval of the Project by the Lead Agency.

  

18 April 2010 dollars.

  

19 April 2010 dollars.

  

  

 

  

EXHIBIT D

 

EXAMPLE OF EFFECTIVE COST RANGE

 

(in April 2010 dollars)

 

	COST OF INITIAL 5K AF 	$775 
	 	 
	ICS Credits 	($200)
	 	 
	Sub Net 	$575 
	 	 
	LRP Funding 	($250)
	 	 
	Net of Combined Credits 	$325 
	 	 
	COST OF WHEELING 	$314 
	 	 

 

RANGE OF AS DELIVERED PRICE TO MWD MEMBER AGENCY: $639-$1089

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