The Project is located in the Central Andes in Peru. The Central Andes developed as a typical Andean-type orogen through subduction of oceanic crust and volcanic arc activity. The Central Andes includes an ensialic crust and can be subdivided into three main sections which reveal different subduction geometry as well as different uplift mechanisms. The Northern Sector of the Central Andes, which hosts the Project, developed through extensional tectonics and subduction during early Mesozoic times. The sector was uplifted due to compression and deformation towards the foreland. In the last 5 Ma, a flat-slab subduction developed (Peruvian Flat Slab Segment).

The mineralization at Hilarión–El Padrino occurs along the contacts of dikes but also as discrete tabular vertical zones. The zones are elongated parallel to the main northwestsoutheast structures, which is also the direction of most of the dikes. The Hilarión deposit consists of multiple zones that vary from 3 m to 65 m in thickness and from 100 m to 1,500 m along strike.

The alteration and mineralization assemblage at Hilarión–El Padrino show overlapping phases of hydrothermal mineral formation, confirming the typical multi-pulse style of this type of mineralization (skarn). The most distal parts of the system are composed of an alteration assemblage of garnet (andradite more distal and grossularite more proximal) and pyroxene (diopside and hedenbergite). Closer to the heat source, this assemblage is overprinted by the minerals of economic interest: sphalerite-marmatite, galena, argentiferous galena and argentite, associated with pyrite and pyrrhotite. This ore has semi-massive to massive texture. Pyrrhotite is more abundant in the zones adjacent to the intrusive bodies, and at depth it can be found where chalcopyrite occurs.

The mineralization in the Project area consists of sulphides containing potentially economic concentrations of Zn-Ag-Pb-(Cu-Au) that have formed during the interaction between magmatic hydrothermal fluids and the country limestone (skarn).

Lithology, structure, and proximity to the intrusive are the main controls for Hilarión–El Padrino mineralization. The host rock for the mineralization is the upper member of Pariatambo Formation, which consists of tens of centimetre-scale nodular limestone beds interlayered with bituminous black marl. This combination of rocks is an outstanding chemical trap to cause sulphide precipitation as the acid hydrothermal fluid was neutralized by limestone and reduced by contact with bitumen.

The Project contemplates the underground exploitation of the polymetallic Mineral Resources of the Hilarión and El Padrino deposits. This PEA report considers only the mining of the Hilarion deposit, and the El Padrino deposit would be considered in future studies.

Proposed mining methods include Sub-level Longhole Stoping (SLS) with backfill and Transverse Longhole Stoping (TLS), which are suitable for the ground conditions and geological setting of the Hilarión deposit.

The LOM indicates an average overall production rate of 7,800 tpd over the full 16 years of the LOM with a production rate in excess of 10,000 tpd for a ten-year period from year two to year eleven of the LOM. Over the ten-year period at the higher production rate the backfill is split almost 50/50 between the paste fill and loose rock fill. Make-up rock fill will be required as waste rock from mine development will account for approximately 50% of that required. Additional operating costs were included to allow for waste rock from a surface source nearby.

Production ore will be made up of 37% from transverse primary and secondary stopes, 54% from sub-level longhole stopes and 8% from development headings in ore.

The Hilarión Project will be accessed using multiple ramp entry points, a 3 km conveyor tunnel, and a system of internal ramps.

Mineralized material would pass through a primary gyratory crusher located underground prior to being transported to surface via a conveyor system. A system of ventilation raises would provide the required volume of ventilation to the various mining areas with entry and exhaust systems to reduce recirculation as much as possible. Conventional underground heavy mobile equipment consisting of load haul dump (LHD) equipment and underground haul trucks will be used to deliver mineralized material to the ore pass systems developed in each area of the mine. The location of the crusher will enable most of the stope mucking to be done using the LHDs with relatively short haulage to strategically located raises.

STOPING METHOD
The stoping methods proposed to be applied for the Hilarion resources will include two bulk mining methods. The main zone makes up approximately 35% of the Mineral Resources and averages 16 m in width and over one kilometre in strike length. The main zone is proposed to be mined using the TLS method with primary and secondary stopes spaced equally at 20 m spacings along strike. The stope heights are planned at 30 m, however, in RPA’s opinion, this could be increased on further analysis in follow-up studies. Production drill holes will be 75 mm in diameter, drilled in a fan pattern and loaded with ammonium nitrate fuel oil (ANFO) blasting agent or an emulsion product and timed with nonelectric detonators. The primary stopes will be backfilled with paste fill consisting of tailings and a cement portion while the secondary stopes can be backfilled using paste fill of a lower strength as the fill will be contained within rib pillars on each side of the secondary stopes. Blasting of all stopes will take place at the end of each shift with allowance to clear all the blasting fumes prior to re-entry to the workplaces underground. RPA recommends that in future studies, a trade-off study on the TLS method of stoping be assessed using rib pillars and sill pillars for support, thereby reducing the amount of paste fill required and the impact on operating costs and mine productivity versus loss of resource in the pillars.

The other veins of the Hilarion deposit are narrower and average approximately 6 m in width and will be mined using the SLS with loose rock fill (LRF). Stopes will be accessed from the ramps and drifts driven on the mineralized structure. Stope heights will be 30 m and a stoping block consisting of three stopes high. A horizontal sill pillar will be left at 90 m vertical intervals. Mining will take place from the end of the stope back towards the access point. Then LRF will be placed to backfill the stope to create a mucking floor for the next lift. Production drilling will utilize 63 mm to 76 mm diameter holes with a two metre burden and 2.5 m spacing. Production drilling will be essentially vertical and drill hole breakthroughs will be able to be located to permit confirmation of drilling precision. Loading will use the same products as the TLS stopes.

MINE EQUIPMENT
The mine equipment will consist for the most part of diesel mobile equipment in order to complete ground support, mine services (pipe, electrical, communications), waste and ore handling, secondary breakage, and mine maintenance services. Nexa will provide its own production equipment, while mine development will be carried out by a mining contractor who will provide their equipment for the development.

Mine contractors will use twin-boom jumbo type development drills, load-haul-dump (LHD) loaders or scooptrams, and mine haul trucks to remove both waste and mineralized blasted material.

The processing plant conceptual design is based on Hilarión pilot plant test work conducted at Certimin in 2015, in addition to earlier bench scale test work, typical processing methods for polymetallic deposits of this sort, and design criteria provided by RPA and Nexa. The processing of ore from the El Padrino deposit was not considered in the design of the processing plant due to the complex nature of the mineralization and the early stage of test work on El Padrino material.

The plant will process approximately 3.65 Mtpa (10,000 tpd) through conventional comminution and flotation circuits to produce saleable bulk (lead-silver) and zinc concentrates. The potential to produce a copper concentrate if processing ore from El Padrino will be evaluated in future test work. In addition, future test work will be aimed at optimizing the process flow sheet and reagent scheme to maximize the recovery of valuable metals while minimizing costs of consumables and reagents.

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