The observed geologic and geochemical characteristics of the gold-silver-lead-zinc deposit at Camino Rojo are consistent with those of a distal oxidized gold skarn deposit. Characteristics of these deposits (Meinert, L.D., Dipple, G.M., and Nicolescu, S., 2005) are summarized as:
- Typically found in lithologies containing some limestone, but deposits not restricted to limestones
- Formed by regional or contact metamorphic processes by metasomatic fluids, often of magmatic origin.
- Typically zoned deposits with a general pattern of garnet and pyroxene minerals proximal to the mineralizing heat and fluid source, and distal zones of bleaching.
- Low total sulphide content.
- Sulphide mineralogy comprised of pyrite, pyrrhotite, chalcopyrite, sphalerite, and galena.
- Highest gold grades are associated with late relatively lower temperature mineralizing events, often with potassium feldspar and quartz gangue.
- May be transitional to epithermal deposits.

The near surface portion of the Camino Rojo deposit has characteristics consistent with those of the distal skarn zone, transitional to epithermal mineralization, and overlies garnet bearing skarn mineralization encountered in the deeper portions of the system.

Skarn deposits often exhibit predictable patterns of mineral zoning and metal zoning. Application of skarn zoning models to exploration allows for inferences about the possible lateral and depth extents of the mineralized system at the Camino Rojo deposit and can be used to guide further exploration drill programs.

The mineralization is polymetallic, comprised of Au, Ag, As, Zn, and Pb. For purposes of evaluation of the oxide resource potential, only Au is of potential significance. During Dr. Gray’s site visit, the only megascopically observed ore and gangue metallic minerals were pyrite, marmatite (Fe-rich sphalerite), sphalerite, and arsenopyrite.

Mineralization was observed to be multi-phase, comprising as many as 4 separate but related mineralizing pulses (inferred from observations of drill core). At hand specimen scale, mineralization is controlled by bedding and fractures. The sandy and silty beds of the turbidite sequences of the Caracol Formation are preferentially mineralized, with pyrite disseminations and semi-massive stringers hosted within them, presumably due to higher porosity and permeability relative to the enclosing shale beds. Basal layers of the turbiditic sandstone beds are often preferentially mineralized. Bedding discordant open space filling fractures and structurally controlled breccia zones host banded sulphide veins and sulphide matrix breccias. Some higher grade vein and breccia zones are localized along the margins of dikes of intermediate composition.

Dr. Gray observed mineralization in drill core over vertical intervals greater than 400 meters, with mineralization occurring in a broad NE-SW trending elongate zone as much as 300m wide and 700m long.

Oxidation was observed to range from complete oxidation in the uppermost portions of the deposit, generally underlain or surrounded by a zone of mixed oxide and sulphide mineralization where oxidation is complete along fracture zones and within permeable strata, but lacking in the remainder of the rock, which then is generally underlain by a sulphide zone in which no oxidation is observed.

Oxidation of the deposit is ~100%, extending from surface to depths of 100 to 150 meters. The underlying transitional zone of mixed oxide/sulphide extends over a vertical interval in excess of 100 meters, and is characterized by partial oxidation controlled by bedding and structures.

The sandy layers of the turbiditic sequence are preferentially oxidized, creating a stratigraphically interlayered sequence of oxide and sulphide material at the cm scale, with oxidation along structures affecting all strata. The partial oxidation of the Caracol Formation preferentially oxidizes the mineralized strata thus incomplete oxidation in the transition zone may result in nearly complete oxidation of the gold bearing portion of the rock, thus the metallurgical characteristics of mixed oxide/sulphide may vary greatly, with some material exhibiting characteristics similar to oxide material.

The distribution of mineralization at Camino Rojo is controlled by both primary bedding and discordant structures. Near surface oxidation extends to depths in excess of 100m, and extends to greater depths along structurally controlled zones of fracturing and permeability.

Mine operations will consist of drilling medium diameter blast holes (approximately 17 cm), blasting with explosive emulsions or ANFO (ammonium nitrate/fuel oil) depending on water conditions, and loading into large off-road trucks with hydraulic shovels and wheel loaders. Resource will be delivered to the primary crusher and waste to the waste storage facility southeast of the pit. There will also be a low-grade stockpile facility to store marginally economic Mineral Reserves for processing at the end of commercial pit operations. There will be a fleet of track dozers, rubber-tired dozers, motor graders and water trucks to maintain the working areas of the pit, waste storage areas, and haul roads.

A mine plan was developed to supply Mineral Reserves to a conventional crushing and heap leach plant with the capacity to process 18,000 tpd (6,570 ktpy). The mine is scheduled to operate two 10-hour shifts per day for 365 days per year.

Eventually, mining will be conducted below the water table, probably during Year 4 of commercial operation. Estimates of pit dewatering requirements have been prepared for cost estimation purposes. These are based on the median expected water in-flows. Additional hydrogeological studies underway will allow a better estimate of the pit dewatering requirements.

The recommended slope design is based on a 38° IR angle for the post mineral rocks on the east side of the pit. The south wall is designed at a 53° IR angle based on double benching 10m benches. Lithology is dipping into the wall on the south side so it is expected to be relatively stable. It is assumed the controlled blasting, such as pre- splitting, will be required to maintain the bench face angles and catch benches.

The north and west walls are based on single benching (10m) at a 43° IR angle for the upper 50m of the wall and double benching below that at a 53° IR angle. This design is based on significant support for much of the north and west walls, consisting of drilling holes near the pit edge, insertion of rebar, and grouting with cement. The hole diameter is about 100mm and recommended spacing between holes is 1.7m for the 10m single benches and 0.6m for the 20m double benching. Number 10 rebar is assumed for the support.

Ore will be mined using standard open pit mining methods and delivered to the crushing circuit using haul trucks which will direct-dump into a dump hopper; front-end loaders will feed material to the dump hopper as needed from a ROM stockpile located near the primary crusher. Ore will be crushed at a rate of 18,000 tonnes per day to a final product size of 80% passing 28mm (100% passing 38mm) using a two-stage closed crushing circuit. The crushing circuit will operate 7 days/week, 24 hours/day with an overall estimated availability of 75%.

The crushed product will be stockpiled using a fixed stacker, reclaimed by belt feeders to a reclaim conveyor, and conveyed to the heap stacking system by an overland conveyor system. Pebble lime will be added to the reclaim conveyor belt for pH control; agglomeration with cement is not needed.

Stacked ore will be leached using a drip irrigation system for solution application; sprinkler irrigation will be used beginning in Year 4 of operations to increase evaporation rates and reduce water treatment requirements from pit dewatering. After percolating through the ore, the gold and silver bearing pregnant leach solution drains by gravity to a pregnant solution pond where it will be collected and pumped to a Merrill-Crowe recovery plant. Pregnant solution will then be pumped through clarification filter presses to remove any suspended solids before being deaerated in a vacuum tower to remove oxygen. Ultra-fine zinc will be added to the deaerated pregnant solution to precipitate gold and silver values, which will be collected by precipitate filter presses. Barren leach solution leaving the precipitate filter presses will flow to a barren solution tank and will then be pumped to the heap for further leaching. High strength cyanide solution will be injected into the barren solution to maintain the cyanide concentration in the leach solutions at the desired levels.

The precipitate from the Merrill-Crowe recovery plant will be processed in the refinery. Precipitate will be treated by an electric mercury retort with a fume collection system for drying and removal of mercury before being mixed with fluxes and smelted using an induction smelting furnace to produce the final doré product.