Pascua Lama mine

Pascua Lama mine

Location: Andes Mountains, on the Chilean-Argentine border.

Products: Gold, Silver, Copper.

Owner: Barrick Gold.

The Mine life: The mine life is expected to be 25 years.

Deposite Type:

The gold, silver and copper mineralisation and alteration assemblages at Pascua-Lama are associated with a structurally controlled acid sulphate hydrothermal system hosted by intrusive and volcanic rock sequences of the Upper Palaeozoic and Middle Tertiary age. Alteration and mineralisation are of the high-sulphidation, epithermal type. Throughout the Pascua-Lama district, the alteration and mineralisation appear to have been strongly controlled by structure. This control is most evident along the Esperanza, Pedro and Quebrada de Pascua fault systems. As is typical with high-sulphidation epithermal deposits, the principal metal commodities at Pascua-Lama are gold and silver, the copper content is sub-economic.

The presence of hypabyssal intrusive host rocks that are not related to mineralisation is unusual for high sulphidation deposits, making Pascua-Lama (along with Barrick’s Alto Chicama deposit in Peru, which is hosted by meta-sedimentary rocks) somewhat unique among deposits of this type.

Overview

Pascua-Lama is located at an altitude of 3,800m to 5,200m. The Chilean part of the mine constitutes 75%, while 25% is located in Argentina. The development activities of Pascua-Lama were stopped in April 2013, following a Chilean court's orders on issues of sanitation and violation of the Glacier monitoring plan. The Diaguita indigenous community filed a petition for the closure of the project. Barrick Gold's plea to reopen the project was rejected by a local appellate court in Copiapó, Chile, on 24 April 2013.

The Chile's Supreme Court, however, issued a ruling in September 2013 overturning the Copiapó court order. Following the ruling, Barrick Gold will construct a water management system at the Chilean section of the mine in order to receive environmental approval for the project. The water management system is expected to be completed by the end of 2014.

Barrick Gold announced its decision to temporarily suspend the Pascua-Lama project, in October 2013, in order to reduce its debt burden. Construction of facilities required for obtaining the environmental approval will, however, be completed. The company plans to resume the mine's development in future.

The Argentinean segment was to include critical infrastructure such as the processing plant and tailings storage facility.

Barrick Gold had estimated the development capital cost of Pascua-Lama to be $3bn at 2009 prices, but the construction delay increased the estimated capital costs of the project to approximately $8bn to $8.5bn at 2012 prices. The development of the mine would have created more than 5,500 jobs during construction and more than 1,600 jobs during production phase.

Geological Setting

The Pascua-Lama deposit is situated at the crest of the high cordillera of Region III, along the international border between Chile and Argentina and on the northern edge of a major mineralised trend known as the El Indio belt. This trend, along which a number of major precious metal deposits are located (including the nearby Veladero mine), stretches 47km south of Pascua-Lama to the world-renowned El Indio deposit and adjacent Tambo deposit (both closed).

The geology in the region is dominated by extrusive volcanic rocks that are locally intruded by hypabyssal stocks of varying size and numerous dikes and sills (Figure 6-1). Volcanic activity began with deposition of the Permian Guanaco/Zonso felsic ash flows from a caldera 15km east of Pascua-Lama and subsequent intrusion of the Permian-Triassic Chollay crystalline felsic rocks along the extent of the El Indio belt. These events were followed by intrusion of the Triassic Pascua-Lama granite complex in the immediate vicinity of the Project. Deposition of extrusive volcanic rocks and continued intrusive activity resumed in the Oligocene with the Bocatoma diorite stocks (33-36Ma), the Tilito dacite ash flows (27.2-17.5Ma) the Escabroso mafic andesite and andesitic flows (21.0-17.5Ma), and the Cerro de Las Tortolas I andesites (16.0 ±0.2 -14.9 ±0.7Ma), after which volcanic activity decreased markedly in the vicinity of the El Indio belt. Subsequent activity was confined to the Vacas Heladas intermediate dacitic domes, lava flows and felsic tuffs (12.8-11.0Ma), and the Late Miocene rhyodacite dikes at Pascua. The most recent activity in the region included deposition of the post mineralisation silicic Vallecito rhyolites south of Pascua-Lama in the vicinity of Cerro de Las Tortolas, and the Upper Pliocene Cerro de Vidrio rhyolite. All ages are from Bissig et al., (2000a & 2001) and Martin et al.,(1995).

Regional structure in and around the gold deposits and prospects in the El Indio belt is dominated by northerly-trending high angle reverse faults, normal faults and fold belts oriented parallel to the major structural grain of this portion of the Andean Cordillera. Pascua-Lama is positioned near the center of a northerly trending graben that contains nearly the entire Tertiary volcanic sequence that is distributed along the spine of the cordillera in Chile and Argentina. This graben is bounded by two high angle reverse fault zones, the Baños del Toro/Chollay located 10km west of the deposit and the El Indio zone situated 16km to the east. The graben is cut at Pascua and El Indio by strong, west-northwest fracture zones, which form loci for mineralisation. Large elliptical fracture zones are also present immediately to the east and/or northeast of both El Indio/Tambo and the Pascua-Lama/Veladero deposit areas, and these zones may have contributed to host rock permeability.

Metallurgy and Mineral Processing

The Pascua-Lama (and Esperanza) ore is extremely complex and highly variable, ranging from relatively straight forward oxide zones which are amenable to cyanide leaching, to highly altered sulphide zones containing soluble sulphate minerals with some cyanide-amenable gold/silver and some refractory gold/silver hosted in sulphides. The majority of silver occurs in an enriched blanket of secondary mineralisation in the upper zones of the deposit with silver grades typically four to five times those of the underlying primary zones.

The deposit is hosted in a high-sulphidation hydrothermal system consisting of acidic material that requires a washing stage to remove soluble iron and copper sulphate salts that are detrimental to subsequent processing. Ore material in the deposit is classified as two main types:

Non-Refractory and Refractory, both ore types are crushed, wet ground and washed in similar circuits. The washed Non-Refractory ore is subject to direct cyanide leaching only with pregnant solution which is recovered from the counter current decantation (“CCD”) circuit, treated in a conventional Merrill Crowe (zinc precipitation) circuit to produce gold/silver doré. The washed

Refractory ore is subject to flotation with cyanide leaching of the flotation tails. Solution recovery and precious metal production from the leached tails is via the CCD and Merrill Crowe circuits to produce gold/silver doré. The flotation circuit produces a final gold/silver rich concentrate of nominally 12% copper for export to smelters.

The proposed nominal plant capacity is 45,000t/d of ore, 30,000t/d for Non-Refractory ore and 15,000t/d for Refractory ore, according the following schedule:

• Year 1, Q1: Two lines, 30,000t/d Non-Refractory ore;

• Year 2, Q4: Three lines, 45,000t/d Non-Refractory ore; and

• Year 3, Q3: Two lines, 30,000t/d Non-Refractory ore and one line, 15,000t/d Refractory ore.

Mine Production and Mineral Reserve Estimate

SRK audited the Mineral Reserve estimate that was prepared by Barrick (Table 2). SRK is of the opinion that the estimation strategy and methods employed meet or exceed current industry standards and the reserves have been classified according to CIM guidelines. The LoM plan was based on calculations prepared in mid-2008 for the Feasibility Study and not the end of year Mineral Reserve estimate disclosed in this report.

The difference between the LoM plan and the Mineral Reserve estimate is not considered material to Silver Wheaton.

Mining commences in 2011 with pre-stripping. The amount of pre-stripping required is 66.4Mt and this is scheduled to be mined in an 18-month period using the owner’s equipment. The first ore is produced in late 2012. The production phase commences in 2013. The LoM production schedule is shown in Table 3.

The average ore plus waste mining rate is 66.0 Mt/y, comprising 18.3Mt/y of ore and 48.8Mt/y of waste. The average overall strip ratio is 2.71:1, exclusive of the pre-production period. The average overall strip ratio inclusive of the pre-production period is 2.88:1.