alto quemado project, peru property geology

86 Pages·2011·17.76 MB·English

Report on the Geology and Mineralization
of the Alto Quemado Gold-Copper Property
Near Arequipa, Peru
by
John Nebocat, P.Eng.
June 10, 2011
Prepared for Mawson Resources Ltd.
Table of Contents
1.0 Summary 1
2.0 Introduction 2
3.0 Reliance on Other Experts 2
4.0 Property Description and Location 2
5.0 Accessibility, Climate, Local Resources, Infrastructure and Physiography 7
6.0 History 9
7.0 Geological Setting 11
7.1 Regional Geology 11
7.2 Property Geology 16
7.3 Structural Geology 23
8.0 Deposit Types 24
9.0 Mineralization 24
9.1 Ximena Vein 25
9.2 Fiorella Vein 26
9.3 La Banda Vein 26
9.4 La Lomada Vein 27
9.5 Union Vetas 27
9.6 Santa Maria Porphyry Zone 27
10.0 Exploration 28
10.1 Surface Sampling—Santa Maria Target 28
10.2 IP Survey Interpretation 32
10.3 Surface Sampling: Veins and Reconnaissance 36
10.4 Underground Sampling: Ximena Vein 36
10.5 La Banda Vein 44
11.0 Drilling 46
12.0 Sampling Method and Approach 46
13.0 Sample Preparation, Analyses and Security 48
14.0 Data Verification 50
15.0 Adjacent Properties 51
16.0 Mineral Processing and Metallurgical Testing 52
17.0 Mineral Resource and Mineral Reserve Estimates 53
18.0 Interpretations and Conclusions 53
19.0 Recommendations 54
20.0 Budget 54
21.0 References 55
Tables
Table 1. Claim Statistics 2
Table 2. Ximena Vein Surface Samples, Mawson Resources 40
Table 3. Ximena Vein Underground Samples, Mawson Resources 40
Table 4. La Banda Vein Surface Samples, Mawson Resources 44
Table 5. La Banda Vein Surface Samples, Mawson Resources 44
Table 6. Projected Conceptual Target: Ximena and La Banda Veins, Mawson Resources 44
Table 7. Comparison of J. Nebocat and Mawson Resources Samples, Ximena 2-3 Vein 50

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Table of Contents, Cont.d
Table 8. Comparison of BISA Samples with J. Nebocat Samples, Ximena 4 Vein 50
Figures
Fig. 1. Alto Quemado Project, Peru, Index Map 3
Fig. 2. Alto Quemado Project, Peru, Department of Arequipa, Location Map 4
Fig. 3. Alto Quemado Project, Peru, Claim Map 6
Fig. 4. Alto Quemado Project, Peru, Regional Geology and Cretaceous Copper-
Molybdenum-Gold Deposits 12
Fig. 5. Alto Quemado Project, Peru, Tectonic Terranes, Southwestern Peru 14
Fig. 6. Alto Quemado Project, Peru, Cretaceous to Eocene Porphyry Deposits 15
Fig. 7. Alto Quemado Project, Peru, Property Geology 17
Fig. 8. Alto Quemado Project, Peru, Local Geology 18
Fig. 9. Alto Quemado Project, Peru, Structural Geology 19
Fig. 10. Alto Quemado Project, Peru, Structural Controls, Zafranal Deposit 20
Fig. 11. Alto Quemado Project, Peru, Santa Maria Zone, Sample Locations 29
Fig. 12. Alto Quemado Project, Peru, Santa Maria Zone, Rock Samples—PPM Cu 30
Fig. 13. Alto Quemado Project, Peru, Santa Maria Zone, Rock Samples—PPM Mo 31
Fig. 14. Alto Quemado Project, Peru, Santa Maria Zone, Chargeability: 115 m Depth 33
Slice
Fig. 15. Alto Quemado Project, Peru, Santa Maria Zone, Resistivity: 115 m Depth Slice 34
Fig. 16. Alto Quemado Project, Peru, Santa Maria Zone, Magnetics: TMIsm RTE H 35
Fig. 17. Alto Quemado Project, Peru, Regional Sampling by Company 37
Fig. 18. Alto Quemado Project, Peru, Regional Sampling—Gold 38
Fig. 19. Alto Quemado Project, Peru, Regional Sampling—Copper 39
Fig. 20. Alto Quemado Project, Peru, Ximena 1 Vein 41
Fig. 21. Alto Quemado Project, Peru, Ximena 2-3 Vein 42
Fig. 22. Alto Quemado Project, Peru, Ximena 4 Vein 43
Fig. 23. Alto Quemado Project, Peru, La Banda Vein 45
Appendices
Appendix I. Mawson Resources Analytical Database 56
Appendix II. Selected Maps and Sections Prepared by Mawson Resources Ltd
And Buenaventura Ingenieros S.A. 71
Appendix III. Geophysical Images 78
Certificate of Author 83
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1.0 Summary
Mawson Resources Ltd. (the “Issuer”) entered into an option agreement with Altynor Peru SAC
(“Altynor”) early in 2010 whereby the Issuer could earn 100% interest in the Alto Quemado property
by acquiring 100% of the stock of Altynor. Altynor has an underlying purchase agreement with Alto
Quemado Mining Company (AQMC). The 100% acquisition terms from arms length parties are based
on making staged payments of US$50,000 on signing, US$550,000 on receipt of permits to drill and
US$900,000 should the option with AQMC be triggered. Renegotiated terms between AQMC and
Altynor state that Altynor must make a payment of €5.12M in 48 months to acquire 100% of the mining
rights from AQMC. AQMC retains a net smelter return (NSR) payable at a rate between 1% and 3%
dependent on the price of gold. Altynor holds the first right of refusal to purchase the NSR from AQMC.
The property is located in southern Peru in the Province of Caylloma within the Department of
Arequipa, about 98 km northwest of the city of Arequipa. The property comprises seven mineral
concessions totalling 3,800 hectares.
Gold mineralization was discovered fairly recently, during the mid-1990s, and the property has been
exploited by informal, artisanal miners since that time. No modern, systematic exploration methods were
employed prior to Altynor's involvement. Their exploration work included mapping and sampling the
high grade, mesothermal Au-Cu veins and the nearby Santa Maria porphyry Cu-Mo target. An induced
polarization survey was performed by the property vendor over the Santa Maria area in 1998. This data
was later reprocessed by the vendor using 3-D inversion methods, and this data was rechecked by the
Issuer, again using 3-D inversion techniques. The Issuer performed detailed mapping and extensive
surficial and underground sampling in 2010.
The property consists of two main components: high grade, mesothermal veins along the western flank,
and a partially buried porphyry Cu-Mo+/-Au target further east. The host rock is mostly an intrusive that
has undergone tectonic deformation, resulting in a gneissic metamorphic texture.
There are several veins on the property, but the most significant ones exploited so far are the Ximena and
La Banda veins which appear to be hosted by the same structure. This vein system has a combined
length over 4 km with widths ranging from 0.3 m to 1.7 m, on average, but individual shoots can
reach up to 5.4 m. There exists a conceptual target on this vein system that could average from 10 g/t
to 15 g/t Au and 1.5% to 4% Cu over an average thickness of 1 m. This would equate to a minimum of
300,000 tonnes at the average grade cited above, or an in-situ potential of 200,000 gold-equivalent
ounces. This estimated tonnage could likely be doubled to 600,000 tonnes.
The mapping, sampling and geophysical surveys performed over the Santa Maria zone have defined a
zone of strong phyllic alteration and quartz stringers over an area roughly 800 m E-W by 450 m N-S.
This area exhibits signs of strong leaching: limonite after pyrite and hematite after chalcocite. Pyrite,
chalcopyrite and molybdenite were found in creeks at lower elevations largely below the level of surface
weathering. Santa Maria is the most significant exploration target on the property and will be the main
focus of exploration by Issuer in 2011. Alto Quemado sits along a belt containing several world-class
porphyry copper-molybdenum deposits.
An exploration program, including at least 1,850 m of diamond drilling, is planned for 2011. This
program is estimated to cost, including contingencies, US$762,300.
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2.0 Introduction
Mawson Resources Ltd. (the “Issuer” or “Mawson”) acquired the Alto Quemado property (the
“property”), located in southern Peru, from Altynor Peru SAC (“Altynor”) early in 2010. The Issuer
comissioned the author to inspect the property and to compile all pre-existing data and current data
generated by the Issuer's personnel.
Sources used in this report include: an in-house report and accompanying maps, sections and tables
prepared by Mawson's Peruvian staff; a due diligence report by Buenaventura Ingenieros SA; a
framework report written by Altynor for a pending 43-101 report that was not completed, including
maps, drawings and appendices that accompanied said report; presentations and memoranda
prepared by INGEMMET pertaining to the geology of southern Peru and the Zafranal porphyry
copper-molybdenum deposit located west of the property; and various sources of maps, press
releases and references found on the Internet.
The author visited the property on October 25th and 26th, 2010, sampling portions of the Ximena vein
underground, the Fiorella vein, Union Vetas, la Lomada vein and the Santa Maria porphyry target
areas on surface.
3.0 Reliance on Other Experts
No parts of the report were compiled by individuals not deemed to be qualified persons or
equivalent. Altynor had a legal firm conduct a due diligence report in 2008 on the mineral
concessions that comprise this property. Their findings indicated no liens, encumberances or debts
were attached to said mineral concessions. The legal firm cautions that their research, drawn from the
INGEMMET database of 2008, is only summary in nature. The author has not validated the findings
of the legal firm.
4.0 Property Description and Location
The property is located in southern Peru in the Province of Caylloma within the Department of Arequipa.
Access is via a good gravel road 56 km north of the the town of Pedregal which is situated along the Pan-
American highway 98 km northwest of the city of Arequipa.
Alto Quemado consists of seven individual concessions totalling 3,800 hectares (ha); Table 1 lists some
basic statistics.
Table 1. Claim Statistics
Concession Area (ha) Status Claim No. Date Granted Expiry Date
Alto Quemado 1 1000 Titled 10636195 02/01/95 *
Relleno 1 1000 “ “ 10332996 14/10/96 *
Soltero 1 1000 “ “ 10333496 14/10/96 *
Relleno 4 100 “ “ 10128103 04/04/03 *
Relleno 3 100 “ “ 10128003 04/04/03 *
Alto Quemado 2004 100 “ “ 10297404 17/09/04 *
* tenure is perpetual as long as the required annual fees are maintained (see below).
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The concessions are centered roughly at UTM coordinates 813000E, 8225000N (PSAD56/18S) in the
district of Lluta, province of Callyoma, department and region of Arequipa.
Due diligence prepared for Altynor by its Peruvian legal team indicated that a section of two concessions
(Alto Quemado 1 & Alto Quemado 2004) have overlapping priority mineral rights owned by a separate
owner who is not a party to the underlying option agreement with Alto Quemado Mining Company
(AQMC). Fig. 3 shows the relative positions of these claims.
The General Mining Law of Perú is administered by the Ministry of Energy and Mines (Ministerio de
Energia y Minas, “MEM” or “Ministry”). The law was changed in the mid-1990s to encourage the
development of the country’s considerable mineral resources. The law defines and regulates different
categories of mining activity, according to the stage of a project’s development.
Details of the law were consolidated in the ‘Single Revised Text of the General Mining Law’ of 1992
(Government document D.S. No. 014-92-EM, 19926). In summary, ownership of mineral claims is
controlled by mining concessions that are established using UTM co-ordinates to define areas of interest
that are measured in hectares. New concessions have to be orientated in a north-south direction; pre-
existing concessions are based on the ‘punto de partido’ system and can be of any orientation. Mining
titles are irrevocable and perpetual, as long as the required annual maintenance fees (derecho vigencia)
are up-to-date and fully paid to MEM, by 30 June each year following granting of a concession. The fees
are paid in advance. The annual fee for metallic mineral concessions is US$3/ha for each concession that
is either actually acquired or pending (petitorio).
The concession holder must sustain a minimum level of annual commercial production greater than
US$100/ha in gross sales before the end of the sixth year following the granting of the concession. If the
concession has been put into production within the six year period, the annual rental fee remains the
same, up to the beginning of year 9, when it increases to US$4/ha for years 9 to 14. The annual rental
rises to US$10/ha for each year thereafter. If the concession has not been put into production within a six
year period, the annual rental increases from the first semester of the seventh year to US$9 (US$3 for
derecho vigencia, plus a US$6 penalty), until the minimum production level is met. If, by the start of the
twelfth year from granting a concession, the minimum production level is not been achieved, the annual
rental increases to US$23/ha (US$3 for derecho vigencia, plus a US$20 penalty). A concession holder
can, however, be exonerated from paying penalties if he/she can demonstrate that at least ten times the
penalty for the total concession was invested during the previous year. The investment must be
documented and it must be accompanied by a copy of the relevant annual tax statement (‘declaración
jurada de impuesto a la renta’) and payment of the annual fees. A concession will terminate if the annual
rental is not paid either for three years in total over the period that the concession is held, or for two
consecutive years over the period the concession is held.
To be enforceable, any and all transactions and contracts pertaining to a mining concession must be
entered into a public deed and registered with the Public Mining Registry (Registro Publico de Mineria).
The holder of a mining concession must also develop and operate his/her concession in a progressive
manner, in compliance with applicable safety and environmental regulations, and in so doing take all
necessary steps to avoid damage to third parties. The concession holder must also, at all times, allow free
access to his/her concessions by those authorities responsible for assessing whether the concession holder
is meeting all his/her obligations in law. (www.goldminerpulse.com).
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The issue of land tenure continues to be of significance in Perú, not least because the national cadastral
system for agricultural land ownership is not always accurate. Nevertheless, the Government requires any
property developer to either purchase the surface rights or make an appropriate agreement with the
surface rights owner for access to a property. In the case of the holders of mining concessions, they are
protected under the Perúvian Constitution and Civil Code. Their concession rights do not, however,
confer ownership of the land - the owner of a mining concession must deal with the registered land owner
to obtain the right of access to fulfill the production obligations inherent in the concession grant. All
transactions and contracts pertaining to a mining concession must duly be registered with the Public
Mining Registry in the event of subsequent disputes in law.
The Issuer does not control the surface rights on any of the concessions. All surface rights in Alto
Quemado are held by the Proyecto Majes, Department of Arequipa (regional government). The Issuer is
required to obtain the necessary permits to undertake exploration and exploitation activities; this has been
done.
Environmental issues related to industrial activities in Peru are governed by the Consejo Nacional del
Ambiente (CONAM). The Dirección General de Asuntos Ambientales of the Ministerio de Energía y
Minas is the enforcing agency for mining. The Environmental and Natural Resources Law no. 613 of
1990 is in force, with regulations in Article 15 of Decreto Supremo 014-1992 and subsequent decrees.
Environmental assessment reports are required for exploitation and mining. Effluent limits for mines are
then published.
Further to the mineral tenure description above, claims are staked by a map/digital system—no ground
location is required.
The reader is referred to Fig. 8 which shows the locations of the veins that are being worked by
“Informales” (non-title holding miners). There are no tailings ponds or significant mine dumps as these
workings are on narrow quartz veins (~ 1 metre wide on average) that are not generally exploited below
40 m depth. Similarly, there exist no known mineral resources or reserves on the property.
The Issuer signed a Letter of Understanding with arms length parties in March 2010 to acquire 100% of
the stock of the optionor Altynor Peru SAC ("Altynor"); these terms were finalized in September 2010.
Altynor holds an option to purchase 100% of the Alto Quemado gold-copper project from Alto Quemado
Mining Company SAC ("AQMC"). The 100% acquisition terms from arms length parties are based on
making staged payments of US$50,000 on signing, US$550,000 on receipt of permits to drill and
US$900,000 should the option with AQMC be triggered.
The Issuer announced on April 27, 2011, renegotiated terms between AQMC and Altynor that state that
Altynor must make a payment of €5.12M in 48 months to acquire 100% of the mining rights from
AQMC. AQMC retains a net smelter return (NSR) payable at a rate between 1% and 3% dependent on
the price of gold. Altynor holds the first right of refusal to purchase the NSR from AQMC.
5.0 Accessibility, Climate, Local Resources, Infrastructure and Physiography
The property is accessible via the Panamerican highway from Arequipa, a distance of 98 km to the
northwest to the town of Pedregal, a driving time of up to two hours, depending on traffic. From the
main oval entering Pedregal a good quality gravel road heads northerly to the town of Huambo and
beyond. Alto Quemado is accessed by this road to about the 53 km mark where a cairn of white-
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