VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 16, 2013) -
Editors Note: There are three (3) images associated with this press release.
Rio Alto Mining Limited (TSX:RIO)(NYSE:RIOM)(LMA:RIO)(DBFrankfurt:MS2) ("Rio Alto" or the "Company") is pleased to announce that it has received updated mineral resource and reserve estimates for its 100% owned La Arena Project. The updated oxide mineral resource estimate is limited to the Calaorco and Ethel deposits and a zone of approximately 4.8 million tonnes grading 0.53 gpt Au of oxide material containing 300ppm - 1000ppm copper to the east of Calaorco.
MINERAL RESOURCES
| Mineral Resource - Oxide Total (In Situ as at January 1, 2013) Within Optimised Pit Shell, cut-off grade 0.1g/t Au | |||||
| Resource Classification | Tonnes (Mt) | Au (g/t) | Cu (%) | Ag (ppm) | Au ('000 Oz) |
| Measured | 6.0 | 0.45 | 0.01 | 0.5 | 87 |
| Indicated | 116.0 | 0.42 | 0.01 | 0.5 | 1,571 |
| Measured and Indicated | 122.0 | 0.42 | 0.01 | 0.5 | 1,658 |
| Inferred | 5.4 | 0.37 | 0.01 | 0.3 | 65 |
| Mineral Resource - Sulphide Total (In Situ as at January 1, 2013) Within Optimised Pit Shell, cut-off grade 0.13%CuEq | ||||||||
| Resource Classification | Tonnes (Mt) | Au (g/t) | Cu (%) | CuEq (%) | Ag (ppm) | Mo (ppm) | Au ('000 Oz) | Cu ('000 lbs) |
| Measured | 0 | |||||||
| Indicated | 561.7 | 0.21 | 0.30 | 0.39 | 0.4 | 42.9 | 3,829 | 3,745,545 |
| Measured and Indicated | 561.7 | 0.21 | 0.30 | 0.39 | 0.4 | 42.9 | 3,829 | 3,745,545 |
| Inferred | 32.5 | 0.11 | 0.19 | 0.24 | 0.4 | 50.2 | 116 | 137,446 |
The previous resource estimates for oxide and sulphide mineralization were published in the La Arena Project Technical Report with an effective date of September 30, 2011 prepared on behalf of the Company by Kirk Mining Consultants Pty Ltd (the "September 2011 Report"). Comparisons between resource estimates at January 1, 2013 and the September Report are set out below. The Company's previous reserve estimates were included in the La Arena Project, Peru Technical Report prepared by Coffey Mining Pty Ltd on behalf of the Company with an effective date of 31 July 2010 (the "July 2010 Report"). Comparisons between reserve estimates at January 1, 2013 and the July 2010 Report are set out below. Each of the September 2011 and the July 2010 Reports may be found within the Company's SEDAR profile at www.sedar.com .
The updated oxide resource incorporates an additional 46,428 meters of reverse circulation ("RC") drilling when compared to the September 30, 2011 resource estimate which, even after mining depletion, has resulted in a significant increase in oxide resources and in the confidence of resource estimates relative to the September 2011 Report estimates.
The updated mineral resource estimate for the La Arena sulphide project incorporates an additional 63,020 meters of diamond drilling ("DD") and 5,892 meters of RC drilling when compared to the September 30, 2011 resource estimate resulting in a significant increase in estimated resources and in the confidence of the resource estimate.
The oxide and sulphide resource is confined within an optimized undiscounted pit shell based on metal prices of US$ 1,800/oz gold, US$ 3.50/lb copper. The resource estimates in the September Report were based upon metal prices of US$ 1,600/oz gold, US$ 3.00/lb copper. The major effect of the change in metal prices results in a lower cut-off grade for the sulphide mineralisation from 0.18% CuEq in 2011 to 0.13% CuEq in 2012. The gold oxide cut-off grade has remained constant at 0.1 g/t Au despite an increase in metal prices due to higher operating cost estimates.
Oxide Mineral Resource (0.1 g/t gold cut-off)
The updated oxide mineral resource estimate was based on 131 DD holes totalling 19,733 meters and 445 RC holes totalling 70,112 meters.
The updated oxide mineral resource estimate is:
- 122.0 million tonnes grading 0.42 g/t gold in the measured and indicated categories containing 1,658,000 ounces of gold, which after mining 295,018 ounces during the September 30, 2011 to December 31, 2012 period represents an increase of 174,000 gold ounces (12%) from the oxide mineral resource estimate in the September 2011 Report.
- 5.4 million tonnes grading 0.37 g/t gold in the inferred category containing 65,000 ounces of gold representing a decrease of 25,000 gold ounces from the oxide mineral resource estimate in the September 2011.
The updated oxide mineral resource estimate, see Figure 1, was generated from drill hole sample assay results and the interpretation of a geological model that relates to the spatial distribution of gold, copper and silver within the deposit. Rio Alto believes there is potential to either blend or separately leach the Oxide - High Copper (300ppm Cu -1000ppm Cu) material with Oxide - Low Copper resource material (<300ppm Cu). The metallurgical laboratory at the La Arena mine site is testing the economics of leaching the Oxide - 300ppm - 1000ppm Copper material. Mineralized oxide material within the current Calaorco and Ethel final pit designs containing copper amounts in excess of 1000 ppm per tonne was considered to be waste material.
Grade estimates for the oxide mineral resource were made using Uniform Conditioning with parent block sizes measuring 10 meters long, 5 meters wide and 6 meters in height. The change in the interpolation method, from Ordinary Kriging in 2011 to Uniform Conditioning in 2012, is due to a detailed review of the drill hole data, grade control data, and reconciliation trends.
The oxide and sulphide resource is confined within an optimized undiscounted pit shell based on US$ 1,800/oz gold, US$ 3.50/lb copper and anticipated metallurgical recovery, costs to mine, produce and sell potential metal production as well as estimated leach pad and tailings disposal facility expansion costs.
The key parameters used to constrain the total oxide and sulphide resource within the pit shell were:
| Gold price per ounce | $1,800 |
| Payable proportion of gold produced | 99.9% |
| Copper price per pound | $3.50 |
| Payable proportion of copper produced | 96.5 % |
| Minimum government royalty | 1% of revenue |
| Discount rate | 8% |
| Mining recovery of ore | 98% |
| Ore processing rate (for each of oxides and sulphides) | 13.1Mtpa |
| Gold processing recovery (dump leach) | 85% |
| Gold processing recovery (sulphide plant to concentrate) | 40% |
| Copper grade-recovery formula | Ave. 88% |
| Mining cost per tonne of oxide ore (plus depth increment) | $2.38 |
| Mining cost per tonne of sulphide ore (plus depth increment) | $2.44 |
| Mining cost per tonne of waste (plus depth increment) | $2.50 |
| Processing cost per tonne of oxide ore (including pad expansion) | $2.06 |
| Processing cost per tonne of sulphide ore (including tails dam lifts) | $3.99 |
| Concentrate shipping and selling cost per tonne | $160 |
| General and administration costs per tonne of ore | $2.45 |
| Sustaining capital per year, oxides | $250,000 |
| Sustaining capital per year, sulphides | $3M |
The change in estimated gold contained in the updated resource estimate, excluding the 295,018 ounces mined up to December 31, 2012, are due to changes in estimates for tonnes and grade as set out below:
| Gold Ounces (000's) | |||||
| January 2013 | September 2011 | Increase (Decrease) | |||
| Measured & Indicated | 1,658 | 1,484 | 174 | ||
| Increase due to change: | |||||
| Increase in tonnes | 290 | ||||
| Decrease in average grade | (116 | ) | |||
| 174 | |||||
| Inferred | 65 | 90 | (25 | ) | |
| Decrease due to change: | |||||
| Decrease in tonnes | (43 | ) | |||
| Increase in average grade | 18 | ||||
| (25 | ) | ||||
Sulphide Mineral Resource (0. 13% copper equivalent cut-off)
The updated mineral sulphide resource estimate was based on 298 DD holes totalling 103,073 meters and 90 RC holes totalling 28,878 meters.
The updated sulphide mineral resource estimate is:
- 561.7 million tonnes grading 0.30% copper per tonne and 0.21 g/t gold in the indicated category containing 3,746 million pounds of copper and 3.83 million ounces of gold representing an increase of 1,739 million pounds of copper (87%) and 1,407,000 gold ounces (58%) from the indicated sulphide mineral resource estimate in the September 2011 Report.
- 32.5 million tonnes grading 0.19% copper per tonne and 0.11 g/t gold in the inferred category containing 137 million pounds of copper and 0.116 million ounces of gold representing a decrease of 1,997 million pounds of copper and 1,959,000 gold ounces from the inferred sulphide mineral resource estimate in the September 2011 Report.
The sulphide mineral resource estimate, see Figure 2, was generated from drill hole sample assay results and the interpretation of a geological model relating to the spatial distribution of copper and gold mineralization within the deposit. Grade estimates were made using ordinary kriging with a parent block size of 20 m long, 10 m wide and 6 m in height.
The major change in the sulphide resource is the increase in confidence of the estimate through the addition of significant extra data in 2012, predominantly from diamond drilling. The vast majority of the previous Inferred resource has been upgraded to Indicated resource by a drilling campaign in 2012 and associated review and improvement of geologic interpretations.
The overall Cu and Au in-situ grade remains similar to the September 2011 Resource estimate, despite lowering the CuEq cut-off from 0.18% CuEq to 0.13% CuEq. This clearly shows that additional drilling into this deposit within the sulphide mineralisation has identified higher grade zones.
Metallurgical recovery factors were applied to Cu and Au in this estimate to determine the CuEq head grade. The effect was to lower the CuEq head grade as these metallurgical factors were not taken into account in the September 2011 Report.
Changes in the metal contained within sulphide resource estimate since the September 2011 Report were due to changes in estimated tonnes and grade as illustrated below.
| Copper lbs (millions) | |||||
| January 2013 | September 2011 | Increase (Decrease) | |||
| Measured & Indicated | 3,746 | 2,007 | 1,739 | ||
| Increase due to change: | |||||
| Increase in tonnes | 1,646 | ||||
| Increase in average grade | 93 | ||||
| 1,739 | |||||
| Inferred | 137 | 2,134 | (1,997 | ) | |
| Decrease due to change: | |||||
| Decrease in tonnes | (1,203 | ) | |||
| Decrease in average grade | (795 | ) | |||
| (1,997 | ) | ||||
| Gold Ounces (000's) | |||||
| January 2013 | September 2011 | Increase (Decrease | ) | ||
| Measured & Indicated | 3,829 | 2,422 | 1,407 | ||
| Increase due to change: | |||||
| Increase in tonnes | 1,688 | ||||
| Decrease in average grade | (281 | ) | |||
| 1,407 | |||||
| Inferred | 116 | 2,075 | (1,959 | ) | |
| Decrease due to change: | |||||
| Decrease in tonnes | (1,015 | ) | |||
| Decrease in average grade | (943 | ) | |||
| (1,959 | ) | ||||
MINERAL RESERVES
The previous mineral reserve estimates for the La Arena Project were included in the July 2010 Report. Differences in estimated tonnes, grades and metal content between the July 2010 Report and the updated reserve estimates are described below.
Oxide and sulphide mineral reserves have been based on pit optimisation, using Whittle software, of the new total oxide plus sulphide measured and indicated mineral resources. The pit optimisation input parameters are as for the mineral resources above except that:
- Only Measured and Indicated Resources are included
- A Copper price of $3.00/lb was assumed
- A Gold price of $1,400/oz was assumed
- Gold recovered to copper concentrate was assumed to be 35%
A preliminary pit design, see Figure 3, based on the average discounted cash flow resulted in a Whittle pit shell equivalent to a revenue factor of 0.9. The following mineral reserves are reported from within this pit design.
| Mineral Reserve - Oxide and Sulphide (In Situ as at January 1, 2013) Within Pit Design, block cut-off NSR calculation | |||||||||||
| Oxide Ore | Sulphide Ore | Metal Mined | |||||||||
| Material | Classification | Tonnes (Mt) | Au (g/t) | Tonnes (Mt) | Au (g/t) | Cu (%) | Au ('000 Oz) | Cu ('000 lbs) | |||
| Likely oxide pit | Sediments | Proved | 5.6 | 0.47 | 84 | ||||||
| Probable | 47.9 | 0.52 | 803 | ||||||||
