2009-01-20_TechReport

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TECHNICAL REPORT

DECEMBER 8, 2008

MINERAL RESOURCE ESTIMATE

ANGOSTURA GOLD PROJECT

SANTANDER, COLOMBIA

FOR

GREYSTAR RESOURCES LTD

January 21, 2009 Marco Alfaro Sironvalle

Santiago, Chile Metálica Consultores S.A.

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Table of Contents

1. SUMMARY .......................................................................................................... - 1 -

1.1 BACKGROUND ..............................................................................................................................- 1 -

1.2 PROPERTY LOCATION AND DESCRIPTION ..............................................................................- 2 -

1.1 PROJECT HISTORY ......................................................................................................................- 3 -

1.2 ANGOSTURA GEOLOGY AND MINERALIZATION ......................................................................- 3 -

1.3 DATABASE .....................................................................................................................................- 5 -

1.4 RESOURCE ESTIMATION .............................................................................................................- 6 -

1.5 FUTURE PROGRAM ......................................................................................................................- 8 -

2. INTRODUCTION .................................................................................................. - 9 -

2.1 GENERAL AND TERMS OF REFERENCE ...................................................................................- 9 -

2.2 CONTRIBUTORS TO REPORT .................................................................................................. - 11 -

3. RELIANCE ON OTHER EXPERTS ...................................................................... - 12 -

4. PROPERTY DESCRIPTION AND LOCATION ..................................................... - 13 -

4.1 LOCATION ................................................................................................................................... - 13 -

4.2 PROPERTY AND TITLE IN COLOMBIA ..................................................................................... - 15 -

4.3 LAND TENURE ............................................................................................................................ - 19 -

4.4 ENVIRONMENTAL REGULATIONS ........................................................................................... - 19 -

4.5 OBSERVATIONS AND CONCLUSIONS .................................................................................... - 22 -

5. ACCESSIBILITY, PHYSIOGRAPHY, CLIMATE, LOCAL RESOURCES AND

INFRASTRUCTURE ........................................................................................... - 22 -

6. PROJECT HISTORY .......................................................................................... - 23 -

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6.1 GENERAL REMARKS ................................................................................................................. - 23 -

6.2 EXPLORATION HISTORY .......................................................................................................... - 24 -

6.3 PRIOR MINERAL RESOURCE ESTIMATES .............................................................................. - 26 -

6.4 HISTORICAL PRODUCTION ...................................................................................................... - 29 -

7. GEOLOGICAL SETTING .................................................................................... - 30 -

8. DEPOSIT TYPE ..................................................................................................... 33

9. MINERALIZATION AND ALTERATION .................................................................. 33

9.1 GENERAL REMARKS ...................................................................................................................... 33

9.2 HIGH-GRADE ACCUMULATIONS .............................................................................................. - 40 -

9.3 BULK MINERALIZATION ............................................................................................................ - 42 -

9.4 “DISSEMINATED” MINERALIZATION ........................................................................................ - 42 -

9.5 ALTERATION AND ORE MINERALOGY .................................................................................... - 42 -

9.6 OXIDATION ................................................................................................................................. - 44 -


10. EXPLORATION .................................................................................................. - 46 -

11. DRILLING .......................................................................................................... - 46 -

12. SAMPLING METHODS AND APPROACH ........................................................... - 47 -

12.1 GENERAL REMARKS ................................................................................................................. - 47 -

12.2 DIAMOND DRILLING .................................................................................................................. - 47 -

12.3 SURFACE SAMPLING ................................................................................................................ - 49 -

12.4 UNDERGROUND SAMPLING..................................................................................................... - 49 -


13. SAMPLE PREPARATION, ANALYSIS AND SECURITY ...................................... - 51 -

13.1 EARLIER FIELD PROGRAMS (1995 TO 2000) .......................................................................... - 51 -

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13.2 2003 TO 2008 PROGRAMS ........................................................................................................ - 53 -


14. DATA VERIFICATION ....................................................................................... - 56 -

14.1 DATABASE .................................................................................................................................. - 56 -

14.2 ASSAYS – 1995 TO 1999 ............................................................................................................ - 56 -

14.3 ASSAYS – 2003 TO 2008 ............................................................................................................ - 57 -

14.4 BULK DENSITY ........................................................................................................................... - 60 -


15. ADJACENT PROPERTIES ................................................................................. - 63 -

16. MINERAL PROCESSING AND METALLURGICAL TESTING .............................. - 64 -

16.1 GENERAL REMARKS ................................................................................................................. - 64 -

16.2 HISTORICAL TESTWORK .......................................................................................................... - 65 -

16.3 CURRENT TESTWORK .............................................................................................................. - 66 -

16.4 PROCESS SELECTION .............................................................................................................. - 68 -

16.5 COMMINUTION PARAMETERS ................................................................................................. - 69 -

16.6 HEAP LEACH PARAMETERS .................................................................................................... - 69 -

16.7 FLOTATION AND OXIDATION CIRCUIT .................................................................................... - 72 -

17. MINERAL RESOURCE ESTIMATION ................................................................. - 73 -

17.1 INTRODUCTION ......................................................................................................................... - 73 -

17.2 GEOLOGICAL MODEL ................................................................................................................ - 73 -

17.3 LOW-GRADE AND HIGH-GRADE POPULATIONS AND THEIR STATISTICS ......................... - 74 -

17.4 HIGH-GRADE PROBABILITY INTERPOLATION ....................................................................... - 79 -

17.5 GOLD-GRADE VARIOGRAPHY ................................................................................................. - 81 -

17.6 GRADE INTERPOLATION .......................................................................................................... - 84 -

17.7 RESOURCE CLASSIFICATION .................................................................................................. - 87 -

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17.8 DECEMBER 2008 UNCONSTRAINED ANGOSTURA MINERAL RESOURCE

ESTIMATE ................................................................................................................................... - 88 -

17.9 RE-BLOCKING ............................................................................................................................ - 94 -

17.10 DECEMBER 2008 CONSTRAINED ANGOSTURA MINERAL RESOURCE ESTIMATE .......... - 97 -

17.11 DISCUSSION OF CHOICE OF CUT-OFF GRADES .................................................................. - 99 -

17.12 RESOURCE MODEL VALIDATION, 6.25 M. X 6.25 M. X 6.25 M. ........................................... - 102 -

17.12.1 GOLD GRADE REVIEW ............................................................................................ - 102 -

17.12.2 CLASSIFICATIONS REVIEW .................................................................................... - 105 -

17.12.3 ORE RESOURCES TONNAGE ................................................................................. - 107 -

17.13 RESOURCE MODEL VALIDATION, 8.75 M X 8.75 M. X 8.75 M. ............................................ - 107 -

17.13.1 GOLD GRADE REVIEW ............................................................................................ - 107 -

17.13.2 CLASSIFICATION REVIEW ....................................................................................... - 109 -

17.13.3 ORE RESOURCES TONNAGE ................................................................................. - 111 -

17.14 OBSERVATIONS AND CONCLUSIONS .................................................................................. - 112 -

18. OTHER RELEVANT DATA AND INFORMATION .............................................. - 114 -

19. INTERPRETATION AND CONCLUSIONS ........................................................ - 114 -

19.1 GEOLOGY AND RESOURCES................................................................................................. - 114 -

20. RECOMMENDATIONS FOR FURTHER WORK ................................................. - 116 -

20.1 RESOURCES ............................................................................................................................ - 116 -

20.2 MINING AND PIT DESIGN ........................................................................................................ - 116 -

20.3 MINERAL PROCESSING AND METALLURGICAL TESTING ................................................. - 117 -

20.4 METALURGICAL PROCESING AND INFRASTRUCTURE ..................................................... - 118 -

20.5 HYDROLOGY , HYDROGEOLOGY AND ENVIRONMENTAL BASE LINE ............................. - 118 -

20.6 OTHER STUDIES ...................................................................................................................... - 119 -

20.7 COST ESTIMATE ...................................................................................................................... - 120 -

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REFERENCES .............................................................................................................. - 121 -

DATE AND SIGNATURE PAGE .................................................................................... - 127 -

CERTIFICATE OF QUALIFICATION ............................................................................. - 128 -

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LIST OF FIGURES

Figure Page

Figure 1. Location Map ………………………………………………………………….. 14

Figure 2. Mineral Tenure ………………………………………………………………… 17

Figure 3. Angostura Site and Property Plan …………………………………………... 21

Figure 4 Measured Plus Indicated and Inferred Contained Gold Ounces

in the Mineral Resource Estimate Studies………………..………………. 27

Figure 5. Regional Geology …………………………………………………………….. 31

Figure 6. Property Geology and Alteration…………………………………………….. 36

Figure 7. 2850 Level – Interpreted Economic Geology ……………………………… 37

Figure 8. 3150 Level – Interpreted Economic Geology …………………………….. 38

Figure 9. Cross Section 1 130 900 E – Interpreted Economic Geology…………… 39

Figure 10 Image of Block Model (6.25 m). Distribution of the Gold Grades

in a Vein in the Diamante Zone. View Looking to Northwest……….. … 41

Figure 11 Drill-Core Density Observations and Assigned Bulk Densities……….. 61

Figure 12. Structural Domains and Structural Trend Surfaces, 2 850 Level …… 76

Figure 13 Example of High-Grade Probability Interpolation……………………. 81

Figure 14. 2 850 Level – Block Model ………………………………………………… 89

Figure 15. 3 150 Level – Block Model…………………………………………………. 90

Figure 16. Cross Section 1 130 900 E – Block Model……………………………… 91

Figure 17 Re-blocking Results. Gold Grade Comparison between

6.25 and 8.75 m Blocks…………………………………………………….. 95

Figure 18 Re-blocking Results. Resource Classification Comparison

between 6.25 and 8.75 m Blocks………………………………………… 96

Figure 19 Histogram of Gold Grade of the Oxidized Blocks

within Metalica Pit, Paying Heap Leach Process……………………….. 100

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Figure 20 Histogram of Gold Grade of the Blocks of Sulphides within

Metalica Pit, Paying Heap Leach Process………………………………. 100

Figure 21 Histogram of Gold Grade of the Waste Blocks of Sulphides

within Metalica Pit…………………………………………………………. 101

Figure 22 Example, Bench 2 634, model and composites………………………. 103

Figure 23 Classification Example, Bench 2 634……………………………………. 105

Figure 24 Classification Example, Bench 2 834…………………………………… 106

Figure 25 Classification Example, Section North-South; East 130 784…………. 106

Figure 26 Example, Bench 3 034, model 8.75 m…………………………………. 108

Figure 27 Classification Example, Bench 2634, 8.75 m blocks……………….. 110

Figure 28 Classification Example, Bench 2734, 8.75 m blocks……………….. 110

Figure 29 Classification Example, Section North-South;

East 130,684, 8.75 m blocks…………………………………………… 111

Figure 30. Gold Grade Comparison, block model versus composites…………… 113

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LIST OF TABLES

Table Page

Table 1. Mineral Holdings, Angostura Project ………………………………………….. 15

Table 2. Angostura Field Work by Period and Timing of Historical Resource Estimates 25

Table 3. Angostura Mineral Resource Estimates since 2004 …………………………. 29

Table 4. Summary of Standards Performances for Gold ……………………………… 59

Table 5. Supporting Reports for Flowsheet Selection ………………………………….. 65

Table 6. Summary Gold Recovery Results, Angostura Ore Samples.………………… 71

Table 7. Gold Assay Statistics of 1.25-metre Composites …………………………….. 77

Table 8. Silver and Copper Assay Statistics of 1.25-metre Composites …………..… 79

Table 9. Variography Results, High-Grade Probability Indicator ………………….…. 80

Table 10. Gold Grade Variography ……………………………………………………… 82

Table 11 Test Box Resource Estimates at Different Drill-Hole Spacing……………… 83

Table 12 Grade Interpolation Search Distances …………………………………….… 85

Table 13. Composite Utilization during Grade Interpolation ………………………….. 85

Table 14. Estimate of Unconstrained Mineral Resources ……………………………… 92

Table 15. Comparison with the Unconstrained December 2007 Estimate……………. 93

Table 16. Effect of Re-Blocking, Measured & Indicated Resources …………………. 97

Table 17. Angostura Mineral Resource Estimate, December 8,

2008, 6.25 m Blocks and Constrained by preliminary Metalica Pit ……….. 99

Table 18. Gold Grade Review, Model 6.25 m …………………………………..… 104

Table 19. Tonnage, Oxides, 6.25 m Blocks …………………….…………………..… 107

Table 20. Tonnage, Sulphides, 6.25 m Blocks Blocks …………….……………..…. 107

Table 21 Gold grade review, model 8.75m vs 6.25 composites……………………… 109

Table 22. Tonnage, Oxides, 8.75 m Blocks …………………………………………… 111

Table 23. Tonnage, Sulphides, 8.75 m Blocks ……………………………………….. 112

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Table 24. Angostura Evaluation and Exploration Program Budget for 2009…… 120

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1. SUMMARY

1.1 BACKGROUND

The Angostura gold-silver project has been explored by Greystar Resources Ltd.

(Greystar) since 1995, with a notable interruption due to security and economicissues from

2000 to 2003. A number of mineral resource estimates for the project have been

completed and reported in the past, reflecting the increasing amount of exploration

information. All of those resource estimates were without the benefit of a constraining open

pit.

Based on an estimate of the Angostura mineral resources undertaken in December 2006,

Hatch Ltd. (Hatch) completed a scoping study in July 2007 (The 2007 Scoping Study) on

the technical parameters and economic potential of the project. Items covered included pit

optimization and pit design leading to an estimate of “potentially mineable mineral

resources”, site investigations, flowsheet development based on the available metallurgical

testwork, and cash-flow projections. The study used a gold price of $550 per ounce in the

first production year, decreasing to $515 per ounce in later years, and resulted in a pre-tax

cash flow (excluding royalties, finance charges, working capital and closure costs) to yield

an internal rate of return of 14.2% for the base case. Greystar has finished the exploration

program and the additional infill drilling.

Since the 2007 Scoping Study until may 2008, Greystar has developed a intensive

exploration program that comprised 297 drillholes with 90 000 metres drilled, 486 metres

of exploration tunneling.

The first phase of the Feasibility Study will provide technical evaluations, conceptual

designs, capital and operating costs for the mine, mills, process plant and site

infrastructure, as well as the financial analysis of the project. The second phase will start

immediately following completion of the first phase and will include the basic engineering

of the project. Upon completion, expected by the third quarter of 2009, the study will be

bankable.

the company has requested Metalica Consultores S.A. to review and report (in accordance

with the requirements of National Instrument 43-101) on an updated estimate of the

Angostura mineral resources that takes into account the results of the additional

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exploration. As in previous cases, Greystar staff have prepared the resource estimate

using the procedures used in the study of 2007, and it has been reviewed by Metalica.

The resource estimation from this study will be used by Metalica in the mine design an

planning, as part of the feasibility study phase 1. Once the phase 1 is completed, a

Technical Report will be published with the results of that study.

1.2 PROPERTY LOCATION AND DESCRIPTION

The Angostura gold-silver project is located in northeastern Colombia near the border with

Venezuela, some 370 kilometres to the north of the capital city of Bogotá and

approximately 40 kilometres northeast of the city of Bucaramanga. The site is accessible

from Bucaramanga on mostly unpaved roads, with the trip taking approximately two and a

half hours. A number of drill roads and footpaths provide access in the area. The property

is located in steep, mountainous and relatively rugged terrain at elevations ranging from

2600 to 3500 metres above sea level. The average annual temperature is 9 to 11° C, with

little seasonal change. Average annual precipitation is 740 millimetres.

Vegetation in the area of the Angostura project is light “alpine scrub” on the slopes, while

there is significant growth of oak and eucalyptus trees along watercourses at lower

elevations. The local vegetation supports only a limited amount of agriculture and

livestock. The principal economic activity in the area is the small-scale exploitation of gold

from veins that are part of the overall Angostura mineralized system. The area is served by

the national electric power grid, which is described by Greystar as efficient and reliable.

The Angostura property consists of 13 individual licences wholly-owned by Greystar that

cover a very large area of more than 30 000 hectares and extends well beyond the

immediate deposit and resource area. According to information provided by Greystar, two

would expire in 2010, and the others are valid until at least 2026. The licences include the

new “Angostura Block” that integrated several small claims previously owned by Greystar.

Greystar have also acquired surface rights over parts of those areas that will be required

for mining and processing infrastructure for a mining operation, and the process of

acquiring the necessary additional surface rights is ongoing.

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1.1 PROJECT HISTORY

Early gold mining activities are reported to have occurred in the general area of the

Angostura deposit since pre-colonial times and continued during Spanish rule with the

mining of high-grade veins and placers in the area. After independence and throughout the

last century, precious metals were mined on a small scale in the districts of Vetas and

California, until present.

Greystar became involved in the project in 1994 and conducted exploration until1999

consisting of surface mapping, sampling and diamond drilling. The drill hole database at

the end of 1999 consisted of 181 diamond drill holes totalling nearly 52 000 metres.

Because of security and economic considerations, little fieldwork was accomplished from

2000 until 2003, when Greystar re-commenced their surface and underground exploration

program. Since 2003, 518 surface and 157 underground drill holes and 2,915.4 metres of

drifting have been completed. Until May 2008 a total of 277 000 metres were completed

for this study.

Each of the historical resource estimates showed Angostura to be a large but relatively

low-grade deposit with potential economic merit and provided the justification for Greystar

to continue the exploration of the project, which has resulted in a gradual improvement of

the data density covering the deposit, and has also succeeded in expanding its overall

known size. .

1.2 ANGOSTURA GEOLOGY AND MINERALIZATION

The Angostura property is situated within the western branch of the Eastern Cordillera in

northeastern Colombia, and more specifically within the Santander Massif that consists of

Precambrian gneisses and schists of the Guyana Shield. Intermediate intrusives of the

Santander Plutonic Group were emplaced during a period of uplift in the Triassic/Jurassic.

Younger porphyries of Tertiary age are common in the immediate area and are likely

related to the mineralization. Regional faulting parallels the topographic fabric. On a more

local scale, northeasterly faulting is considered to have guided the intrusive rocks and the

subsequent alteration and mineralization.

Angostura is part of the Angostura-California gold province, a belt of epithermal gold

occurrences of the high sulphidation type and characterized by the association of gold with

silver, copper, arsenic, bismuth, molybdenum and tellurium. The existence of a breccia

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body hosting copper and molybdenum mineralization four kilometres from Angostura

indicates a connection with a (buried) porphyry system. Most of the gold is contained

within several sets of anastomosing veins and tabular breccia zones. Alteration within the

vein-like structures is dominated by silica, both in the form of free quartz and as

silicification, and sericite, and minor allunite while the host rocks are strongly argillized.

Several hydrothermal pulses are discernable and show a decrease of temperature with

time, from >300° C to about 250° C, based on fluid inclusion studies.

The Angostura gold-silver mineralization occurs in a swarm of veins and mineralized

structures that strike east-west, northeast-southwest and northwest-southeast and

generally dip steeply to the north. Recent structural studies have identified five stages of

mostly brittle deformation, four of which are mineralized. It is the continued history of

deformation and intrusive activity that provided the thermal impetus and structural

pathways for this large precious-metal deposit.

The mineralized structures may be single veins, but are more often made up of several,

closely spaced composite veins. Almost two hundred individual veins and composite

structures have been correlated to date on the basis of surface and underground mapping

and the interpretation of drill hole data. Vein widths vary from less than two metres for

individual veins to over 40 metres for composite structures. The overall deposit has now

been sub-divided into six structural domains, each reasonably homogenous, and many of

the resource estimation procedures were completed according to the distinctive geological

and structural features of each domain.

Mineralogical information indicates gold in the primary, non-oxidized mineralization at

Angostura is contained in the mineral calaverite, a gold telluride, often of exceedingly small

grain size as well as in the form of free gold associated with pyrite, forming rims on pyrite

and within fracturies in pyrite (See Vancouver Petrografics report on approximately 180

thin section studies, as well as the G&T 2 006 study on concentrates). While the small

grain size results in excellent repeatability (precision) during sample preparation and

assaying, it renders the primary mineralization partly refractory with respect to the recovery

of the gold.

The gold mineralization has two grade populations. The majority of values (92%) are less

than two grams per tonne (g/t) and show good continuity within the veins. A small, high-

grade population represents high-grade shoots and vein segments located in structurally

favourable locations such as at the junction of two veins of different direction. Mapping and

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sampling of underground openings has confirmed the general grade character of the

broader, low-grade veins and of a few of the high-grade shoots. The current drill hole

density, however, is generally not capable of providing reliable data on the size and shape

of the shoots, which have an influence on the overall resource grade much larger than

their small volume. The realistic modelling of the volume and of the grade of the shoots is

thus a prerequisite for any reliable resource estimate. (The over 60,000 metre of in-fill

drilling information from 2 007 and 2 008 provides significant amount of information to that

end, as mentioned in the following section)

Surface oxidation has affected the rocks at Angostura to depths of up to 170 metres along

specific structures, but is more generally in the range of 10 to 30 metres at the edge of the

deposit, and attains depths that vary from 40 to 100 metres in the central parts. The

oxidation is irregular in shape and is of partial character, i.e., fine-grained sulphides in

dense quartz often remain fresh even near surface, while the coarser sulphides are often

completely oxidized.

1.3 DATABASE

The project database now includes 710 surface drill holes with an aggregate length of

243,039 metres, 1464 muck samples from 2400 metres of underground drifting and

crosscutting on the 2850 level, and 160 underground drill holes with an aggregate length

of 33,962 metres. For much of the resource volume, the drill density is now on a nominal

50-metre spacing, with in-fill drilling on a 25-metre pattern completed in the area of the

underground drilling on the 2850-metre level. From surface a in-fill drilling program on a

25 metres spacing between the 50 metres pattern were completed in areas with presence

of high grade shoots, in late 2 007 and 2 008. The total assay information from all sources

used for the current resource estimate comprises about 225,434 1.25-metre composite

samples.

The past and ongoing sampling and assaying protocols employed by Greystar were and

are comparable with industry standards. A detailed review of the assay database and the

results of the quality control measures undertaken since 2003 confirms the assay

database to be reliable, with individual assays having a high degree of precision due to the

fine-grained nature of the gold mineralization in the Angostura deposit. The project

exploration database was set up and is being maintained by Greystar personnel and is in

good order, after a number of earlier clerical errors and shortcomings had been corrected.

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For the unoxidized mineralization, the large number of drill-core density determinations

now available show a general increase of the density with the pyrite content which in turn

is positively correlated with the gold grade. Due to the partial weathering of the pyrite, the

correlation between density and gold grade is subdued in the oxide zone.

1.4 RESOURCE ESTIMATION

As in the past, Greystar geological staff has undertaken a detailed interpretation of the

veins system at Angostura which has provided the geological framework for the current

resource estimate. However, in the 2 007 resource estimation the concept of wireframing

the veins was discontinued, allowing the grade interpolation to “see” low-grade assays

outside of the interpreted veins. The function of the five metre minimum mining width

applied previously to the vein wireframes has been assumed by the regular five-metre size

of the blocks in the block model of 2 007 resource estimation study; now for this study, a

block size of 6.25 x 6.25 x 6.25 metres was used . The size of 6.25 metres was selected

as the block size to get the selectivity required for the Angostura deposit type, and

because is an acceptable equipment size to move huge tonnages. A Re-blocking to 8.75

meters was done as the second option, to evaluate the impact in the selectivity. Metalica

will use this two block models to make a Trade Off between the two block sizes.

The assay database was again divided into low-grade and high-grade populations which

were evaluated and treated separately. A distinction was also made between the six

structural domains, each of them reasonably homogenous structurally, but different from

adjacent domains. The assay data was evaluated separately for each domain, and

separately for the two grade populations. Very little capping of outlier values was required

for the low-grade assay populations, while two of the three high-grade populations

required capping, most severely for the Veta de Barro East area. After capping, the

coefficients of variation for nearly all of the different gold grade populations are now at or

below 1.3, a reasonable level for gold deposits.

The current estimate continues the approach of estimating the probability of each block in

the block model to contain high-grade mineralization. A number of trial runs were

undertaken until a set of interpolation parameters was found that produced realistic

probability indicator results. This is a critical issue since the high-grade assay population of

the deposit constitutes only about 2% of the total assay population used for resource

estimation, but contributes 26% of the gold to the overall mineral resource at a cut-off

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grade of 3 g/t gold (the 2 007 Scoping Study reflects this to some extent by projecting that

five percent of the tonnage mined is of sufficiently high grade to be processed in the plant).

The interpolated probabilities were used to calculate high-grade and low-grade tonnages

for each block.

The available drill-hole density has given reasonable variography results for both assay

populations in the six structural domains, and this information was used to determine

search distances for the grade interpolation. The influence of the high-grade assay

intervals was further restricted by limiting their projection distances.

The grade interpolation was completed in two passes. The initial pass used a shorter set

of search radii, approximating one-half of the variography ranges. The blocks estimated

during this pass were placed in the measured or indicated category. If a block was

informed during the first pass from three (high-grade) or four (low-grade) different drill

holes, it was placed in the measured class, otherwise in the indicated class. Doubling of

the original search distances resulted in blocks being assigned to the inferred category.

Those blocks of the block model that did not receive a grade estimate during the second

pass were not assigned any grade, or mineral resource status. From this resulted an

estimate of unconstrained mineral resources that is summarized below.

Estimate of Unconstrained Mineral Resources

Measured Mineral Resources Indicated Mineral Resources Measured & Indicated Mineral

Resources

Cut off

grade (g/t)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000)

Ag

(g/t)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000)

Ag

(g/t)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000)

Ag

(g/t)

Oxides 0.3 49,620 0.63 1,007 5 37,246 1.05 1,258 7 86,867 0.81 2,265 6

Sulfides 0.45 99,280 0.86 2,729 4 144,760 1.41 6,555 7 244,040 1.18 9,284 6

TOTAL 148,900 0.78 3,736 4 182,006 1.34 7,813 7 330,907 1.09 11,549 6

Inferred Mineral Resources

Cut off

grade (g/t)

Tonnes

(1,000) Au (g/t)

Au

(oz,1000)

Ag

(g/t)

Oxides 0.3 6,241 1.33 266 9

Sulfides 0.45 84,539 1.18 3,205 6

TOTAL 90,779 1.19 3,472 6

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The gold cut-off grades applied were 0.3 g/t for the oxidized and 0.45 g/t for the fresh

mineralization, different to those used in the previous studies. The choice of cut-off grades

is explained in Section 17.11.

The resources were also constrained by the open-pit generated by Metalica during the first

phase of the feasibility study to get an idea of the resources inside the pit that has been

constructed with some basic mining engineering parameters. Different cut-off grades are

used to report the constrained resources. The following table summarizes the December

09, 2008, constrained mineral resource estimate for the Angostura deposit.

Angostura Mineral Resource Estimate, December 1, 2008, Constrained by Metalica

Pit.

– thousands of tonnes and ounces –

Cut off grades Au

(g/t)

Sulfides Oxides Total

Tonnes (1000)

Au (g/t)

Ag (g/t)

Tonnes (1000)

Tonnes (1000)

Au (g/t)

Ag (g/t)

Au (oz, 1000)

Tonnes (1000)

Au (g/t)

Ag (g/t)

Au (oz, 1000)

Oxides 0.4

Sulfides 0.5 133,863 1.48 7.41 6,365 61,391 1.09 6.88 2,160 195,254 1.36 7.24 8,525

Oxides 0.3

Sulfides 0.45 156,984 1.33 6.79 6,717 88,263 0.87 5.87 2,460 245,247 1.16 6.46 9,177

Oxides 0.2

Sulfides 0.4 185,005 1.19 6.20 7,100 127,070 0.68 4.94 2,768 312,075 0.98 5.69 9,868

The mineral resources estimated for the Angostura deposit disclosed in this

technical report are not mineral reserve.

Silver values at Angostura are low and average 6 g/t for the measured, indicated and

inferred tonnage.

1.5 FUTURE PROGRAM

Greystar is embarking on the phase 1 of the feasibility study. This study will develop

some of the following activities until get a bankeable feasibility study.

• Other mining-related studies include the continuation of geotechnical and hydro-

geological investigations with respect to pit design and pit slopes.

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• Program of metallurgical testwork on course.

• Site investigations will include geotechnical, hydro-geological and hydrological

investigations of the Angostura site in general, and of the specific sites chosen for waste

disposal, heap leaching and other mining-related infrastructure, including condemnation

drilling to disprove the existence of potentially mineable mineralization.

• Environmental studies will be conducted in preparation for the application for the permits

and licenses necessary to start project construction.

• The program of surface rights acquisition over the Angostura site will be continued.

Greystar has another mining titles that have to be explored, and a exploration program will

be developed to evaluate new targets close to the project.

2. INTRODUCTION

2.1 GENERAL AND TERMS OF REFERENCE

Metalica Consultores S.A.(Metalica) has been retained by Greystar Resources Ltd.

(Greystar), to prepare an independent technical report compliant with the requirements of

National Instrument 43-101 (NI 43-101) on the newest estimate of the mineral resources of

the Angostura gold-silver project situated in northeastern Colombia. The resource

estimate being reported here is based on information that was available in May, 2 008. An

updated resource estimate, which will form the basis for the ongoing feasibility study

phase 2 of the Angostura project and which will take into account additional information

that has become available after May 2 008, is expected to be completed during the second

quarter of 2 009. The current estimate has been prepared in-house by Greystar personnel

between June and November 2,008, with the methodology used in the last Technical

Report authored by Strathcona Mineral Services Limited of Toronto (Strathcona 2 008).

Greystar has explored the property since 1995, with a hiatus forced by security and

economic considerations from 2000 to 2003.

As part of the documentation required for funding by private placement in May of 2002,

Greystar asked Strathcona to update an original unpublished report of June 2000 to make

it compliant with the reporting requirements of NI 43-101 that had come into effect in the

interim. Following that request, Strathcona produced a report in May 2002 (Strathcona

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2002) that was substantively similar to the earlier version but included information on some

of the project aspects notinitially covered. The May 2002 report was subsequently updated

to deal with certain shortcomings in September 2003 (Strathcona, 2003).

Since mid-2003, Greystar has undertaken a continuing program of surface diamond

drilling, underground development and underground drilling at Angostura. During this time,

five resource update reports have been prepared documenting the progress with respect

to the mineral resources of the project, the first one was made by Strathcona in 2004, two

others by Snowden Mining Industry Consultants in 2005 (Snowden, 2005a, Snowden

2005b), another by Strathcona in 2006 and the last one by Strathcona in 2008.

Greystar has also engaged Hatch Ltd. of Vancouver (Hatch) to undertake a scoping-level

study on the Angostura project from a technical, practical and economical point of view,

and the Hatch report was issued in July 2007 (Hatch 2007). Hatch used an updated

resource estimate that was undertaken by Greystar in December 2006 with the same

estimation procedures as those described for the estimate of one-half year earlier, but that

took into account additional exploration information that had been accumulated in the

subsequent period. Henrik Thalenhorst of Strathcona was a co-author of the Hatch 2007

report with respect to the resource estimate.

As part of the feasibility study, Mr. Marco Alfaro from Metalica Consultores, visited the

Angostura site and the Greystar field office in Bucaramanga from August 25 to 28, 2008 to

review the procedures of the total exploration activities carried on the Angostura project.

Mr. Giovanny Ortiz from Greystar visited the offices of Metalica in Santiago, Chile, from

September 1 to 17, to review the process of resources estimation developed by Greystar

with the specialists of Metalica.

The present report will utilize, or quote from the earlier technical reports on Angostura

project made by Strathcona where appropriate. In particular, sections of this report have

been copied completely or nearly completely from the latest Strathcona report (Strathcona,

2008).

The coordinate system used for the project is based upon the Universal Transverse

Mercator (UTM) projection (datum Bogota – Zone: 18N). All units used in the resource

estimate are metric (except for contained ounces), and all references in this report to

currency are to the United States dollar, unless otherwise indicated.

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2.2 CONTRIBUTORS TO REPORT

The resource estimate reported herein relies on a very large project database assembled

by Greystar since 1998, as described in more detail in Section 6.2 below. A listing of more

general references and earlier reports is provided at the end of this report.

Greystar has been and continues to be the operator of the Angostura project, and

company personnel have collected all data for the current and previous mineral resource

estimates. From 1995 to 1998, the exploration conducted at Angostura was directed and

supervised by Attilio Spat, P. Eng. Mr. Spat has an MSc degree in mineral exploration from

McGill University (1959), has practised as a consulting geologist since 1957 and was a

director of Greystar from 1997 to 2006. Since April 1999 the field programs at Angostura

have been directed and supervised by Frederick Felder, P. Geo. (MSc geology, University

of New Brunswick 1972), a practising geologist since 1967 and executive vice-president of

Greystar, with considerable international experience. Under the supervision and guidance

of initially Attilio Spat and later Frederick Felder, the actual fieldwork in Colombia was

conducted by a group of local geologists all of whom have from two to thirteen years of

professional experience, most if not all of it at Angostura.

The project database is similarly maintained by Greystar personnel in Bucaramanga. The

geological interpretation was undertaken by Mr. Giovanny Ortiz under the supervision and

guidance of Mr. Felder, and in consultation with the author of this report. Mr. Ortiz is the

Superintendent of Geology and Exploration, having worked for the company since 1997.

Mr. Ortiz obtained a geology degree from the Universidad Industrial de Santander,

Bucaramanga in 1994 and is a resource and Datamine specialist having received

geostatistical training with the University of Alberta of Canada, in Viña del Mar, Chile 2007,

and Datamine training in Lima, Peru, in 2004, 2005 and 2006.

The author has relied on the available data to prepare this report. While we have visited

the project site in august 2008, we have not conducted independent sampling, or sample

analysis, or surveys to verify the validity of the assay data, the location of drill holes and

underground openings, or the location or the validity of mining claims. Based on the

observations during our field visits, and on subsequent data review, it is our opinion,

however, that the staff and supervising geologists of Greystar have taken a sufficient

amount of care in the collection and documentation of the data that forms the basis for the

current mineral resource estimate. During our visit and from the information provided by

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Greystar, we reviewed the primary and derived data of the Angostura project. Based on

our review, we believe that the data used are reasonable and reliable, so that the results of

the December 09, 2008 resource estimate, within the resource classification assigned, are

similarly reasonable.

The Hatch (2007) report was issued in July 2007 and is in the public domain. It has

examined and reported upon, at a scoping study level, mining, metallurgical and other

technical and economic aspects of the Angostura project. The Hatch report is still relevant

for many of the items discussed, and we have consulted with the Hatch study in

preparation for this report.

3. RELIANCE ON OTHER EXPERTS

In the past outside technical specialists involved in the process of mineral resource

estimation for the Angostura project included Elmer Ildefonso of Lima, Peru who has been

retained by Greystar repeatedly since 2004 to assist with the resource modelling process

with the Datamine software. Mr. Ildefonso is a consulting mining engineer who attended

the Centre Geostatistique de l’Ecole de Mines de Paris at Fontainebleau, France in

1989/90 and specializes in computer applications relating to resource and reserve

estimation, mine design and mine planning using the Datamine software. Mr. Ildefonso has

not been involved in this study, but his inputs have been maintained. The mineral

resource estimate that is the subject of this report has been undertaken and completed by

Greystar staff.

We have relied on the representations made by Greystar with respect to the Angostura

mineral tenure described in Section 4.2, since we are not in a position to verify the

information supplied on the mineral tenements held by Greystar in Colombia.

Strathcona Mineral Services from Toronto provides continued advice and assistance to the

project team on various aspects of resource and regulatory matters.

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4. PROPERTY DESCRIPTION AND LOCATION

4.1 LOCATION

The Angostura project is located in northeastern Colombia near the border with

Venezuela, some 370 kilometres to the north of the capital city of Bogotá, and

approximately 40 kilometres northeast of the city of Bucaramanga (population 700 000), at

7º 23’ North and 72º 54’ West (Figure 1). The property is located near the boundary

between two political entities referred to as “departamentos”, Santander and Norte de

Santander, and thus has to deal with two district administrations. For the Angostura

project, the mining would take place in Santander, a province that is familiar with the

existing small mining operations in the area, while a heap-leach facility would be in Norte

de Santander, whose administration has had little exposure to such activities.

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4.2 PROPERTY AND TITLE IN COLOMBIA

Over the course of their involvement in the project, Greystar have acquired, by purchase

and by application to the governmental agencies, a total of 13 concessions covering 30

000 hectares in the Angostura area, as shown in Figure 2 and summarized in Table 1.

Table 1 Mineral Holdings, Angostura Project

Licence Designation Area (hectares) Expiry Date Notes

CC 3452 Concession 5,244.9 August 8, 2027 1, 2

L 101-68 Mining Licence 5.7 April 19, 2010

L 127-68 Mining Licence 3.5 April 19, 2010

CC 6979 Concession 40.0 July 09, 2026

L 300-68 Exploration Licence 9.2 October 13, 2008 3

L 22346 Mining Licence 1,184.1 June 17, 2026

CC AJ5-142 Concession 4,061.1 Novem ber 14, 2034 4

CC AJ5-143 Concession 3,890.5 June 21, 2037

CC AJ5-144 Concession 4,336.0 February 11, 2037

CC EJ1-159 Concession 814.9 March 8, 2037

CC EJ1-163 Concession 8,424.7 March 15, 2037

CC EJ1-164 Concession 1,439.3 May 23, 2037

CC 343 Concession 600.0 February 9, 2037

Totals 30,053.9

Notes: (1) Angostura Block. (2) Two of the original claim s incorporated into the Angostura Block are subject to a net profits royalty (NPI). These are the original Permit 3452 (7.5% NPI on 230 hectares) and concession 47-68 (10% NPI on 53.9 hectares). (3) Change to concession contract in process. (4) Application for reduction of area and the addition of limestone as new mineral for exploration, in process.

Mineral property rights are governed by the Colombian Mining Code, which has been

subject to changes and amendments. The oldest version relevant to the Angostura

property is Law 20 promulgated in 1969. Law 20 was superseded by decree 2685 in 1998,

which in turn was amended by Law 685 in 2001, which continues in effect to the present

time.

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Until 1998, the Colombian Ministry of Mines and Energy was directly responsible for the

administration of the mining law as it relates to mining title. In 1998, these duties were

devolved to a separate agency Minercol. On January 27, 2004, with resolution 180074,

these responsibilities were transferred to the mining department of INGEOMINAS (the

Colombian Geological Survey Instituto Colombiano de Geología y Minería).

An exploration licence (Licencia de Exploracion) as defined by the 1988 Mining Code and

continued unchanged in the 2001 revision, grants the holder the exclusive right to conduct

exploration activities. The exploration licences formerly held by Greystar at the Angostura

site have now been consolidated and incorporated into the Angostura Block (Concession

3452).

An exploration licence can be converted into a mining licence (Licencia de Explotacion –

designated “L” in Table 1 and Figures 2) with a term of 10 years under the 1998 rules, or

into a Concession Contract (Contrato de Concesion – “CC”) with a term of 30 years,

renewable for a further 30 years under the 2001 law. The concept of mining licences has

been abandoned as part of the 2001 Mining Code revision, but the three Greystar mining

licences continue under this designation until their expiry date.

Prior to their expiry as exploration licences and in order to qualify for the designation as a

Concession Contract, a production plan and an environmental impact study must be

submitted. In order to comply with this requirement, Greystar has advised that it has

presented production proposals under the 1988 law so as not to be in default of this

particular provision. It is the practice in Colombia to submit a minimum mining proposal to

comply with the law. Since the requirement is minimal, such production objectives can be

met by a small-scale operation and have more recently been met by the tunnelling

activities described in Section 6.2.

On December 11, 2002, Greystar filed a petition with the Colombian authorities to

integrate (”group”) the central, key part of their claim holdings that had consisted of a

number of individual concessions, including several interspersed fractions not owned by

Greystar, into one concession contract in accordance with provisions of Articles 101 and

349 of the 2001 Mining Code. This process was delayed because of the existence of the

fractions. On April 17, 2006 Greystar submitted an application to INGEOMINAS to

combine the titles in the original group application into a new concession, including the

claim fractions.

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This new, larger concession known as the “Angostura Block” (Concession 3452) was

granted in February 2007. It encompasses an area of some 5245 hectares, with most of

the fractions now incorporated. Excluded from the block, but enclosed within it, are two of

the original Greystar Mining Licences L101-68 and L127-68. The new Angostura Block

expires in 2027 and gives Greystar a total of five years for further exploration (three years)

and the construction of a mine (two years, extendable by a further two years) from the date

of registry on August 9, 2007. This means that the exploration phase of the Angostura

Block has to be completed by August 2010.

The basic annual renewal fee is $7.70 per hectare for concessions with an area of less

than 2000 hectares, and is twice that amount for licences with an area from 2000 to 5000

hectares. The annual fees are payable in advance within 30 days of the anniversary date

for each licence. Greystar have advised that they are in full compliance with the

corresponding payment schedule for the claims on which the Angostura mineral resources

are located.

Greystar has acquired, through purchase and direct acquisition, a 100% interest in all of

the mineral licenses and permits itemized in Table 1, subject to a the NPI royalty interests

noted above. Upon production, there is a government royalty of 4% on the gross value of

gold production on all mineral holdings, calculated on 80% of the London gold price fixing,

or an effective rate of 3.2%.

The L. 300-68 title that had an expiry date in October 13 2008, is now in process to obtain

a new Concession Contract with a minimum of 20 years of validity.

Ventana Minerals Corp. (Ventana) holds two small parcels of concession 328-68 which are

located immediately to the east of the Angostura deposit, and one of these partly underlies

one of the waste dump areas selected as an option by the feasibility study phase 1. Parts

of other concessions as 73-68, 3451, 145-68 and 13625 will be affected by the planned

mining infrastructure, mainly by the internal roads.

The actual mining code provides the needed legal framework that promotes mining, with

such legal tools as mining servitude for the use of the land and/or mining titles of others to

enable development of a mineral deposit or for building the required mining infrastructure.

Greystar may also take the approach of initiate a process of negotiation with the land or

mining titles owners to obtain right of ways or to purchase the properties outright.

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A number of modifications to the 2001 Mining Code are currently under discussion in the

Colombian Congress, and it can be expected that some regulations are going to change.

4.3 LAND TENURE

Over the past ten years, Greystar has acquired outright certain surface rights in the area of

the Angostura project in anticipation of a decision to build a mine and related

infrastructure. The surface rights, together with the mineral rights and the mine

infrastructure proposed by Hatch (2007) are shown in Figure 3. The surface parcels are

irregular-shaped since they were mainly held for agricultural use.

4.4 ENVIRONMENTAL REGULATIONS

For the area in which the Angostura project is located, the Colombian Ministry of the

Environment has delegated the environmental oversight for projects such as Angostura to

the autonomous Corporacion de Defensa de la Meseta de Bucaramanga (CDMB –

corporation for the protection of the Bucaramanga plateau) for the Department of

Santander. Field exploration activities including trenching, road building, and diamond

drilling can proceed subject to the prescribed Environmental Mining Guidelines under an

Environmental Management Plan or plano de manejo amiental (PMA) according to Article

199 of Law 685/2001. The PMA is set up for the duration of the planned exploration

activities with CDMB and has been updated for the expanded mineral holdings.

Under the guidelines of conduct prescribed by the PMA, existing surface disturbances

caused mainly by the previous drill programs have largely been remedied by replanting,

and drill moves since 1999, 2003 and 2004 have used smaller equipment, or moves have

been done manually. To further minimize ground disturbances, Greystar is now using

wooden scaffolding to reduce the size of the drill set-up excavations. The environmental

liabilities with respect to the surface disturbances on the property constitute an

environmental liability for Greystar currently estimated to be $163 000 until December 31

2008.

Greystar has submitted the required environmental action plans to the CDMB. This

includes an environmental plan on January 20, 2004 for the underground development on

the 2850 level at Perezosa, and an environmental plan on November 2, 2007 for the new

adit in the Veta de Barro area. Greystar has been granted all necessary permits for the

field activities to proceed.

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For exploration work in the adjacent department of Norte de Santander, Greystar have

advised that they will submit a separate management plan to CORPONOR , the equivalent

of the CDMB. As work in the department of Norte de Santander is still early-stage

prospecting work, a PMA is currently not required.

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4.5 OBSERVATIONS AND CONCLUSIONS

The consolidation of the various Greystar mining claims, and fractions not originally owned

by Greystar, into the Angostura Block has now simplified and clarified the mineral tenure

status in the immediate Angostura deposit area. However, several small parcels of claims

held by others would be affected by any future mining infrastructure, and Greystar will

have to address this question as part of the feasibility study. The exploration phase for the

block, on which all of the current mineral resources are located, expires in 2010, and this

should give enough time to complete the additional work and the necessary studies

planned as described in Section 19.

Given the as yet partial coverage of the future mining infrastructure areas by surface

rights, ownership of all surface rights required for the future mine infrastructure is

mandatory given the limited choice for such infrastructure in the mountainous area of

Angostura.

5. ACCESSIBILITY, PHYSIOGRAPHY, CLIMATE, LOCAL RESOURCES

AND INFRASTRUCTURE

There are several jet or turboprop flights per day from Bogotá and from Medellin to

Bucaramanga, and a new daily flight from Panama City. The Angostura site is accessible

from Bucaramanga on partially-paved roads via the small towns of Mantanza, Suratá and

California, a road distance of 50 kilometres, and from there on a secondary road, an

additional 11 kilometres (Figure 4). The entire trip from Bucaramanga takes from two to

three hours for the relatively short distance, depending on the weather. Alternatively, the

property is a 15-minute helicopter ride from the Bucaramanga airport. A number of drill

roads provide access in the area of the concessions being worked by Greystar. Local

traffic uses foot paths and horse trails that provide access throughout the area.

The property is located in steep, mountainous and relatively rugged terrain at elevations

ranging from 2600 to 3400 metres. Based on data from a number of nearby weather

stations at comparable altitudes, the average annual temperature is 9 to 11° C, with little

seasonal change. The average annual precipitation is 740 millimetres (mm), while the

average annual evaporation is approximately 1300 mm, which identifies the site as a net

evaporation area. Without significant changes in temperature, the seasons are defined by

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variations in precipitation. In the two wet seasons, from April to June and from September

to November, about two-thirds of the annual precipitation is recorded.

The Angostura project is situated at the upper end of the Quebrada La Baja drainage

basin, a catchment area of approximately 124 square kilometres above the town of

California. The local catchment area of the Quebrada Angostura drains and area of

approximately ten square kilometres.

Vegetation in the area of the Angostura Project can be described as light “alpine scrub”

consisting of grasses and shrubs such as "Fraillejon" (espeletia humbolt), typical for the

high elevations of the northern Andes mountains of Venezuela, Colombia and Ecuador.

There is significant growth of oak and eucalyptus trees along the watercourses in the lower

elevations on the property. The local vegetation supports only a limited level of agriculture

and livestock pasture. The principal economic activity in the area is the small-scale

exploitation of gold, while agriculture, cattle raising and basic commercial activities are of

lesser significance. Agriculture is carried out using traditional methods with low yields and

soil deterioration over time. Cattle are raised primarily for meat production.

The area is served by the national electric power grid, which is described by Greystar staff

as efficient and in a good state of repair. Land telephone service is essentially restricted to

the municipality of California, but cellular telephone service is now available throughout the

area. The exploration camp communicates via a microwave system directly with the

Bucaramanga office, providing voice and data communication with a band width of two

megabytes.

6. PROJECT HISTORY

6.1 GENERAL REMARKS

Early gold mining activities exploiting placer deposits and high-grade veins in the general

area of the Angostura deposit are reported to have occurred around the present village of

Suratá, located some ten kilometres to the west (Figure 2), where mining was conducted

from Pre-Columbian times until 1644. In 1824, the Colombian Mining Association

Company became involved in gold mining in the California district in which Angostura is

located and continued until 1900. Starting in 1906, a French mining company conducted

mining and produced a matte (gold-silver-copper) that was sent to Europe for processing

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until the beginning of World War I. More modern activities included an investigation by the

Anaconda Company in the 1940's and a study of the gold potential of the area by Placer

Development in the 1970's. In the 1980's, INGEOMINAS carried out geochemical surveys

for the occurrence of copper mineralization and a Japanese entity investigated the La Baja

area for possible uranium occurrences.

Greystar first became involved in the Angostura area in 1994 and has continued to acquire

additional concessions, as indicated in Table 1. A small underground operation of perhaps

25 or 30 tonnes per day (tpd) is conducted on the neighbouring Bodega concession.

Downstream, a number of operators and cooperatives recover gold from small, high-grade

veins.

6.2 EXPLORATION HISTORY

The considerable exploratory work completed by Greystar is summarized in Table 2 by

period, with the period-ends coinciding with historical resource estimates as detailed in the

next section. The estimate of the Angostura mineral resources described in this report is

based on the sampling and drilling summarized in the “Total” line in Table 2.

From 1994 to 1999, exploration of the Angostura property by Greystar had consisted

mainly of surface work which included geologic mapping, surficial rock sampling, and

diamond drilling aggregating 52 000 metres in 181 diamond drill holes. A small part of the

underground openings created by artisan miners was also mapped and sampled. The

database based on these activities underlies the 1999 KTS resource estimate described in

the next section.

Because of the security situation in the area, and the general economic problems faced by

junior mining companies, no substantive field work was conducted by Greystar at

Angostura from late 1999 until mid-2003 except for the sampling and mapping of the

existing and accessible underground openings that took place in late 1999 and early 2000.

In June 2003, after the improvement of the security situation, a surface drilling program

commenced that has since added 687 diamond drill holes with a total length of more than

224 909 metres to the project database. Much of this additional drilling was designed as

in-fill drilling in the main areas of mineralization.

.

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Table 2 Angostura Field Work by Period and Timing of Historical Resource Estimates

Period

Surface Sampling Surface Diamond Drilling Tunnelling Underground Diamond Drilling

Metres Sampled Assays Holes Metres Drilled Assays Metres Muck Samples Channel Samples Holes Metres Drilled Assays

1995 to late 1998 398 131 139 38 836 27 399 198 116

Mineral Resource Estimate MDA 1999 (KD Engineering Company, Inc., et al, 1999)

Late 1998 and 1999 7 336 2 014 44 15 255 11 809 432

KTS Mineral Resource Estimate 1999 (Strathcona 2003 and predecessor reports)

2000 to June 2003 756 275 343

June 2003 to May 2004 61 19 032 12 495 32 145

Greystar/Strathcona Mineral Resource Estimate May 2004 (Strathcona 2004)

June 2004 to March 2005 1 272 738 61 23 041 13 763 476 322 356 12 2 463 1 556

Greystar/Snowden Mineral Resource Estimate March 2005 (Snowden 2005a)

April to September 2005 38 13 353 7 000 369 214 169 14 2 817 1 681

Greystar/Snowden Mineral Resource Estimate November 2005 (Snowden 2005b)

Sept. 2005 to June 2006 100 39 616 21 969 923 439 374 42 11 497 7 059

Greystar/Strathcona Mineral Resource Estimate June 2006 (Strathcona 2006)

June 2006 to Dec. 2006 38 16 334 9 833 274 140 348 24 5 658 3 249

Hatch Scoping Study (Hatch Ltd., 2007)

Dec. 2006 to Dec. 2007 87 42 121 50 423 27 353 228 295 718 23 6 118 3498

Greystar/Strathcona Mineral Resource Estimate Dec 2007 (Strathcona 2007)

Dec. 2007 to May. 2008 167 76 111 27 148 15 015 458 54 150 42 5 409 3 014

Greystar/Metalica Mineral Resource Estimate Dec 2008 (This report)

Totals 10 016 3 276 713 243 038 146 636 2 958 1 464 3 151 157 33 962 20 057

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An underground development program was started in early April 2004 on the 2850-metre

elevation consisting of two parallel east-west drives some 350 metres apart, with a

connecting cross-cut in the Perezosa Area. These excavations serve as a base for

detailed underground diamond drilling. The openings have also provided access to some

of the known mineralized structures for detailed underground drifting and sampling. A new

adit 415.3 metres long has recently been completed in the Veta de Barro area on elevation

3 095 metres.

In the past three years, at program of geochemical soil sampling has been undertaken in

the project area and in some of the nearby exploration concessions. More than 4,000

samples have been taken on a grid with an initial spacing at 100 or 200 metres with later

infill sampling. Samples were taken at an average depth of 0.8 m. The samples were

analysed for 37 elements using ICP mass spectroscopy analysis of 15-gram aliquots after

agua regia digestion. As a result of this work, gold anomalies were identified in such areas

as Cristo Rey, La Alta Este, Los Laches (shown on Figure 5) and Violetal and Animas

(outside of Figure 5). Subsequent diamond drilling has found extensions to the Angostura

gold deposit in all of these cases. A new drilling program in the Animas, Mongora and

Violetal areas, is investigating strong soil and rock geochemical anomalies.

Condemnation sampling and drilling is ongoing to confirm the absence of economically

interesting mineralization in areas such as Angostura, Paez, Mongora, Romeral and

Crucecitas creeks. These areas have been identified as alternatives for mining

infrastructure.

6.3 PRIOR MINERAL RESOURCE ESTIMATES

As indicated in Table 2, eight mineral resource estimates have been conducted at

Angostura during the tenure of Greystar prior to the current estimate. Two of these

estimates were concluded prior to NI 43-101 and would today be referred to as

“preliminary economic assessments” as defined by NI 43-101 because they were

essentially based on inferred or unclassified mineral resources. They were done to aid

management to gauge the advisability of further exploration efforts to put the resource

base on a more complete footing. The Figure 4 indicate the evolution of the Angostura

resources since 1999 until December 2008.

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Figure 4 Measured Plus Indicated and Inferred Contained Gold Ounces in the

Mineral Resource Estimate Studies.

On the basis of information available at the end of 1998 (137 diamond drill holes with a

total length of nearly 37 000 metres), KD Engineering Company of Tucson, Arizona

undertook a “preliminary feasibility” study in early 1999. Mine Development Associates of

Reno, Nevada (MDA), provided an estimate of the total mineral resources in all classes

which amounted to 254 million tonnes with average grades of 0.84 g/t gold and 3.8 g/t

silver at a cut-off grade of 0.3 g/t gold. Only 19% of this tonnage was in the indicated

category, the remainder being in the inferred category, reflecting the preliminary nature of

the data base at that time. Assuming a combination of heap leaching and milling, a gold

price of $300 per ounce, and preliminary but reasonable (for the time) operating cost and

metallurgical recovery expectations, a pit optimization process based on the MDA

resource estimate arrived at a seven-year production schedule which mined a total of 27

million tonnes at a gold grade of 2.0 g/t and with a strip ratio of 4.4. The option of a heap-

leach only operation for both oxides and sulphides was also investigated in a preliminary

way.

Based on an expanded data set, Kinross prepared a new resource estimate in the autumn

of 1999 that investigated the deposit for both underground and open-pit mining. While this

estimate predated NI 43-101 and is therefore a “Historical Estimate” in the context of NI

43-101, it was prepared to satisfy the standards of the Australian JORC code promulgated

earlier in 1999 (Australasian Institute of Mining and Metallurgy, Australian Institute of

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Geoscientists and Mineral Council of Australia (JORC), 1999). The 1999 resources by

KTS are now completely out of date, and the concept of underground mining is no longer

considered valid for Angostura.

The generally positive findings of the KTS studies provided the justification for Greystar to

continue the exploration of the project starting in mid-2003, after the security situation had

normalized. In line with the increase in information as shown in Table 2, additional

resource estimates were prepared in the following years, culminating in the “potentially

mineable mineral resource” estimate of the Hatch (2007) report that for the first time

constrained the resources within an open pit. The resource estimates from 2007, 2008

and the potentially mineable mineral resource are summarized in Table 3.

There is a general increase over time in the total (unconstrained) deposit resource (mostly

in the sulphide zone), as well as of the ratio between indicated and inferred resources,

reflecting the success of the ongoing exploration activities.

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Table 3 Angostura Mineral Resource Estimates since 2007

– millions of tonnes and contained ounces of gold –

Indicated Mineral Resources Inferred Mineral Resources

Tonnes Au

(g/t)

Au

(ounces)

Ag

(g/t) Tonnes

Au

(g/t)

Au

(ounces)

Ag

(g/t)

Greystar/Strathcona Dec 2007 (1)

Measured + Indicated Inferred

Oxide 57.9 1.07 2.0 6 6.7 1.6 0.3 10

Sulfide 176.4 1.44 8.2 7 71.0 1.4 3.1 7

Total 234.3 1.4 10.2 7 77.7 1.4 3.4 7

Greystar/Metalica Dec 2008 (2)

Measured + Indicated Inferred

Oxide 86.9 0.81 2.3 6 6.2 1.3 0.3 9

Sulfide 244.0 1.18 9.3 6 84.5 1.18 3.2 6

Total 330.9 1.09 11.6 6 90.7 1.19 3.5 6

Hatch “Potentially Mineable Mineral Resource”, July 2007 (3)

Tonnes Au (g/t) Au (oz) Ag (g/t) Waste tonnes Strip Ratio

Oxide 46.6 1.2 1.8 7

Sulfide 120.4 1.3 5.0 5

Total 167.0 1.3 6.8 6 740.3 4.4

Notes: (1) Cut offs: Oxides 0.4 g/t Au; Sulfides: 0.55 g/t Au (2) Cut offs: Oxides 0.3 g/t Au; Sulfides: 0.45 g/t Au (3) Cut offs: Oxides and Sulfides: 0.5 g/t Au

The original notion of two different assay populations contributing to the overall Angostura

deposit grade, initially reflected in the KTS 1999 estimate by the use of two different cut-off

grades respecting two different mining approaches, has not lost its validity. However, the

concept of perhaps mining only the small, higher-grade part of the deposit by underground

methods has not endured, given the large, low-grade tonnage that requires high capacity

open-pit mining.

6.4 HISTORICAL PRODUCTION

Small-scale operators have driven a number of adits on the Greystar concessions, but

those (illegal) activities, which carried out intermittently until early 2003, have now ceased.

No systematic underground mining has been carried out, but the local miners have

followed and exploited high-grade veins and shoots, generally by raising and short-

distance sub-drifting, using haphazard and unsafe mining methods. The tonnage removed

by drifting is estimated to amount to some 8700 tonnes with an average grade of 4.6 g/t

gold, based on the Greystar surveys and sample results of the various drifts and tunnels

on the Angostura property. High-grading above and below the tunnels is estimated to have

removed one-half as much again, with a gold grade of perhaps 15 g/t, an estimate that is

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not supported by any data because these openings are off-limit because of safety reasons,

but is not unreasonable. The total removed would then amount to perhaps 13 000 tonnes

with an average gold grade of 8 g/t. Given the size of the overall resource, subtraction of

this tonnage from the resource estimate is not relevant.

7. GEOLOGICAL SETTING

The plate-tectonic setting of the northern part of South America is characterized by the

interaction of several plates. The Caribbean plate to the north is currently moving to the

ESE, the Cocos and Nazca plates to the west are moving to the NE and E, respectively,

and the South American plate itself moves to the S and SE. The interaction of the tectonic

plates has caused docking of some of the plates, subduction with associated magmatism,

thrusting and local extension with the formation of intra-continental basins (Horner, 2005).

Similar plate-tectonic movements in the geological past are responsible for the

structural/tectonic setting of the Angostura area.

The Angostura Property is situated within the Eastern Cordillera in Northeastern Colombia.

The Eastern Cordillera bifurcates at a point south of the Maracaibo Basin. The western

branch swings to the northwest, while the eastern branch maintains the northeast trend

and continues as the Sierra de Merida in Venezuela, to the east of the Maracaibo Basin

(Figure 4).

The western splay of the Cordillera includes the Santander Massif within which the

Angostura deposit is located. “The oldest rocks within the Santander Massif consist of

Precambrian gneisses and schists that were part of the Guyana Shield. These rocks were

regionally metamorphosed to upper amphibolite grade during dynamo-thermal

metamorphism. Younger rocks of Paleozoic age occur in the region, but not in the

immediate area of the deposit. Diorite to granite composition intrusive rocks in the district

belong to the Triassic-Jurassic Santander Plutonic group. Emplacement of these intrusives

occurred during a period of uplift in the Triassic-Jurassic. Younger porphyries are very

common in the immediate area of mineralization, and these may be as young as Tertiary”1 1

.(Felder et al., 2000).

The structural/intrusive history of the area is summarized by Horner (2005). The

Precambrian rocks were deformed sometime in the Paleozoic. During the Mesozoic,

granitic to dioritic rocks intruded into the deformed Precambrian basement, and felsic to

andesitic volcanic rocks were extruded. At that time, part of the Eastern Cordillera wasin a

back-arc setting, andlocal basins formed and filled with marine-transgressive sediments.

During Late Cretaceous to Paleocene/Eocene, folding and thrusting of the Eastern

Cordillera resulted in basin inversion and uplift. The porphyry stock hosting part of the

Angostura mineralization was intruded at this time. Uplift and erosion of the Eastern

Cordillera, in particular the Santander Massif, occurred during Late Eocene to Early

Oligocene time, with reactivation of older structures and continued uplift during the Middle

to Late Miocene.

Finally, starting in the Late Miocene and continuing to the present, a major Andean

deformation event is taking place with increased strike-slip faulting, extrusion and escape

of the triangle-shaped Maracaibo block to the North along the left-lateral Bucaramanga

Fault(to its west) and the Boconó Fault system (to its south and southwest). Basin

inversion and rapid uplift are continuing.

1 This supposition was subsequently confirmed by dating of such a rock from the Angostura area

that yielded an age of 59 million years.

8. DEPOSIT TYPE

The Angostura gold-silver project is part of the Angostura-California gold province of the

Eastern Cordillera in northeastern Colombia, a belt of epithermal gold occurrences

developed along the Rio La Baja regional fault that trends in a northeasterly direction from

the town of California (Felder et al., 2000). The fault transects pre-Devonian granitoid

bodies, high-rank metamorphic rocks and overlying Lower Cretaceous sediments –

quartzite, limestone and argillite. Intense hydrothermal activity related to Cretaceous and

early Tertiary quartz porphyry intrusions gives rise to the goldsilver mineralization.

The Angostura mineralization is of the high sulphidation type and is characterized by the

association of gold with silver, copper, arsenic, bismuth, molybdenum and tellurium, a

classic porphyry-related epithermal metal association. Most of the gold is contained within

several sets of anastomosing veins and tabular breccia zones as described in more detail

in Section 9. Alteration within the vein-like structures is dominated by sericite and silica,

the latter occurring both in the form of free quartz and as silicification, while the host rocks

are strongly argillized. Several hydrothermal pulses are discernable and show a decrease

of temperature of formation with time, from >300° C to about 250° C, according to fluid

inclusion studies reported in Felder et al., 2000. Locally, disseminated gold in the altered

host rocks gives rise to low-grade mineralization in the strongly altered host rocks,

particularly in the southern, deeper part of the project area.

The discovery of copper-molybdenum mineralization in an intrusive breccia some four

kilometres to the south of Angostura suggests that the gold mineralization at Angostura

may be associated with a porphyry system at depth. The exploratory works in this area

have showed evidence of hydrothermal alteration, and contents of pyrite that suggest a

potential that have to be properly investigated.

9. MINERALIZATION AND ALTERATION

9.1 GENERAL REMARKS

The gold-silver mineralization at Angostura is contained in a deposit that is nearly two

kilometres long in a north-easterly direction and up to one kilometre wide (Figure 5). The

drill results indicate that the deposit is delimited to the northwest by the Angostura Fault

and to the southeast by the Mongora Fault. Mineralization continues southward across the

Paez Fault, but the very steep topography across the creek presents a limit for a pit

extending in this direction. To the north, the deposit appears to terminate fairly abruptly

against an unnamed fault in the Cristo Rey area, beyond which only narrow, isolated veins

have been encountered.

Mineralization within the deposit is largely controlled by a swarm of generally east-

northeast trending, steeply north-dipping structures. The structures cut a suite of

porphyritic diorite to quartz monzonite bodies and dike swarms of Triassic age that are

intruded into the amphibolite facies Bucaramanga Gneiss, a series of meta-sediments of

Proterozoic age. In the upper parts of the mineralized system, alteration and mineralization

are stronger in the intrusive host rocks, and the meta-sediments appear to make a poorer

host for the gold-silver mineralization. However, within the main part of the mineralized

system in which the vast majority of the current mineral resources reside, metamorphic

rock inclusions not only become rather less frequent, but do not exert any noticeable

control on the strength and distribution of the mineralization.

The overall Angostura deposit is sub-divided geographically into a number of areas or

sections that, from south to north, are referred to such as El Vivito, El Silencio, Nueva Alta,

La Perezosa, El Diamante, La Alta and its eastern neighbour La Alta Este, El Pozo, Veta

de Barro, Veta de Barro Este, and the recently-identified Cristo Rey, as shown in Figure 6.

The mineralized structures have been correlated either as single veins or as composites,

the latter consisting of a number of closely-spaced veins. More than one hundred and

ninety individual veins and composite veins have been identified to date by means of

surface mapping, mapping of underground workings and interpretation of drill hole data.

Widths vary from less than two metres for individual veins to over 40 metres for composite

structures, and identified strike lengths range from less than 100 metres to over one

kilometre. Figures 7 and 8 depict the interpreted economic geology of the deposit on the

2850 and 3150-metre levels, respectively.

The distance between veins or composite veins varies from nil (where two veins of

different direction cross) to 50 metres. The vein system has generally been tested by

diamond drilling to a depth of 200 to 300 metres below surface, with scattered intercepts

obtained to depths of up to 400 metres. Figure 9 is a typical cross section through the

deposit.

Underground observations indicate that the gold mineralization within the veins is to a

large extent contained in a set of fractures that have a porphyry-style distribution, rather

than following the vein direction.

The structural history of the veins and faults at Angostura has been studied by Horner

(2005), who has identified five stages of mostly brittle deformation. As in many similar

cases, it is this continued history of deformation and intrusive activity that provided the

thermal impetus and structural pathways for a major precious-metal deposit. Specifically:

Stage 1 NE-SW striking faults with steep to moderate dips to the northwest and southeast

are generally unmineralized or only weakly mineralized, and occasionally show

alteration.

Stage 2 NW-SE striking mineralized veins, veinlets and breccia structures are created, partly

developed as faults, with dips that range from sub-vertical to about 60/ to the

northeast and southwest.

Stage 3 This stage is represented by E-W to ENE-WSW striking mineralized veins, veinlets

and breccia structures. Dips range from steep to moderate (85/ - 65/) to the north

and south.

Stage 4 Approximately north-south and east-west striking veins, veinlets, and faults and low

angle (20/ - 50/) structures that dip to the west and north or south.

Stage 5 NW-SE, N-S and NE-SW striking veins, veinlets and faults, predominantly dipping

steeply to moderately to the W. E-W striking veinlets dipping steeply to the north

and south. These structures display minor mineralization, and alteration is common.

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“Cross cutting relationships indicate that most of the brittle structures formed in a short

period of time almost contemporaneously. This is supported by the fact that the majority of

brittle structures exhibit hydrothermal alteration and/or mineralization (sulphides, oxides). “

(Horner 2005, page 16).

As a result of the multiple stages of structural ground preparation, alteration and

mineralization, the different vein families have a different geochemical character, with the

northeasterly trending veins being relatively enriched in copper and partly also in

molybdenum. Moreover, there is silver enrichment in two wide northwesterly trending

“bands”, not necessarily attributable to any individual vein. The silver enrichment is

accompanied by increased values in bismuth (Bi), arsenic (As), antimony (Sb),

molybdenum (Mo), zinc (Zn) and lead (Pb). In contrast, the areas with a high gold to silver

ratio are largely devoid of these more ”volatile” metals. The gold-rich structures frequently

also have elevated phosphorus (P) levels, probably in the form of alumino phosphates.

The geochemical character of each vein is important in the context of the overall

geological understanding of the Angostura deposit, and with respect to the presence or

absence of potential cyanicides. The successful geochemical characterization of each vein

requires thirty-element geochemical data that are now available for the majority of the

Angostura database. This data has guided the interpretation and correlation of the various

veins and provided direction for the selection of representative samples for metallurgical

testwork.

Following the events of mineralization and vein formation there was a phase of formation

of open faults and fractures. These often contain rubble fill and are the conduits for

oxidizing ground water in the zone of oxidation.

9.2 HIGH-GRADE ACCUMULATIONS

Local and generally narrow accumulations of higher-grade mineralization make an

important contribution to the economic prospects of the Angostura deposit. They were in

previous reports referred to as “shoots”, reflecting their interpreted shape. The difficulty

has been, and continues to be, to model the high-grade accumulations in such a way that

they do not over-contribute (nor under-contribute) to the overall resource grade of the

deposit.

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Detailed mapping by Greystar personnel of the existing underground openings, developed

by informal operators on high-grade mineralization, has documented the internal

complexity of these occurrences. As a general rule, high-grade gold mineralization has

been preferentially deposited in more than one directions, of which one is usually

dominant. For the 2004 and 2005 resource estimates, separate shoots had therefore been

modelled by Greystar staff around high-grade drill intersections creating, as best as

possible, “shoot” outlines for separate resource estimation. The primary purpose was to

geometrically constrain the influence of high-grade intersections.

For the more recent resource estimates, this approach has been abandoned as being

impractical, since drilling alone cannot possibly determine the structural setting and the

geometry of a high-grade intersection that would allow a realistic body to be created, and

its volume to be estimated with some accuracy. Instead, with the additional drill data

available, a probability approach has been chosen to create a non-geometrical constraint

to the high-grade assay population as described in Section 17.4. Figure 10 shows the

image of a longitudinal section of one vein in the Diamante area (Western area), and the

distribution of the gold grades along the structure.

Figure 10 Image of Block Model (6.25 m). Distribution of the Gold Grades in a Vein

in the Diamante Zone. View Looking to Northwest.

Gold Legend (g/t)

Page - 42 -

9.3 BULK MINERALIZATION

The bulk zone concept was introduced for the 2006 resource estimate to account for

relatively continuous mineralization that is difficult to resolve into individual veins. These

large bulk structures are typically 100 to 200 metres across and are elongated in plan and

in section along structurally preferred directions. In keeping with their nature, the modelling

of these zones has incorporated a reasonable amount of internal dilution. There are now

three such bulk zones in the Veta de Barro, Veta de Barre Este and in the Nueva Alta-Alta

Este area, two of which are shown in Figure 8.

9.4 “DISSEMINATED” MINERALIZATION

For previous resource estimates, the term “disseminated” mineralization had been used for

areas within the Angostura deposit where elevated gold values occur between identified

veins and was carried as a separate line item in previous resource estimates. The

character of these intersections indicated them to be vein segments not large and

continuous enough to be traceable to neighboring drill holes.

With the abolition of the vein wireframes for resource estimation, the disseminated material

is now taken into account during grade interpolation of the veins, and mineral resources for

this material are no longer separately reported.

9.5 ALTERATION AND ORE MINERALOGY

Petrographic work (Harris, 1998 and more recently Thompson, 2004, Thompson 2005a, b,

c & d) has demonstrated the details of the alteration sequence at Angostura. The entire

rock mass in which the various veins and mineralized structures occur has been affected

by argillization. In the process, the plagioclase and minor mafic components of the original

quartz diorite or gneiss have been replaced by sericite and kaolinite, with the primary

quartz unaffected and surviving as remnants. The alteration within the main part of the

Angostura deposit is so strong and pervasive that the determination of the original host

rock (gneiss or felsic intrusive) is difficult and often impossible.

The process of vein formation is associated with partial silicification that is superimposed

on the original argillized rocks with patches of microgranular quartz forming in the

sericitized matrix between the remnants of primary quartz. As the intensity of silicification

increases, the original sericitized matrix is almost totally converted to fine-grained, cherty

Page - 43 -

quartz, in which the primary quartz remnants survive as "islands". The most intense stage

shows complete silicification of the rock, assimilating the primary quartz remnants. The

final product of this process is granular, sometimes vuggy, crustified quartz.

More specialized alteration types on a more local scale “...include opalization of feldspars

(instead of, or superimposed upon, sericitization); alunitization (partially, though not

exclusively associated with advanced silicification); and development of an Al phosphate

mineral of uncertain identity. In addition, minor tourmaline occurs in a couple of samples.”

(Harris, 1998, pp. 2/3). However, tourmaline was an important constituent in two of the

three samples investigated by Thompson (2005c).

At least two stages of pyrite formation have been recognized. The older is represented by

relatively large crystals and does not appear to be associated with gold, or is so only

moderately, while a younger, fine-grained pyrite/marcasite phase is intimately correlated

with the intense stages of silicification and with gold deposition. Accessory sulphide

minerals include chalcopyrite (CuFeS2) and tetrahedrite ((Cu,Fe) 12Sb4 S13 ), commonly

replaced by digenite (Cu9 S5 ), covellite (Cu2S) or chalcocite (Cu2S) as well as arsenopyrite

(FeAsS) and bismuthinite (Bi2S3). The distribution of the chalcopyrite replacement

throughout the deposit is of obvious interest for the metallurgical behaviour of the

Angostura mineralization since its replacement minerals are cyanicides. In addition, small

amounts of sphalerite (ZnS), enargite (Cu3 AsS4) and tellurides have been noted, among

them bismuth telluride, gold-silver telluride, and native tellurium. It has already been

remarked on the distinct geochemical character of some of the different vein directions in

Section 9.2 above.

Very fine-grained electrum and gold-silver tellurides occluded in pyrite are described by

Thompson (2005b). Similarly SGS Lakefield Research Africa Pty (Lakefield Africa) have

reported on the deportment of gold in the flotation concentrate from a composite sample of

wide distribution within the Angostura deposit. Gold was only found as gold-telluride

(probably calaverite – AuTe2) and as gold-silver telluride (probably petzite – Ag3 AuTe2).

“No native gold or electrum was seen” (SGS Lakefield Africa 2007, page 6). Silver

minerals identified included hessite (Ag2Te) and pearceite, a complex silver-copper-

arsenic sulphosalt. At a grind of 80% passing 106 microns, about 30% of the observed

gold-silver tellurides were still completely locked in sulphides (mainly pyrite). The fine-

grained character, and the frequent occurrence of gold in tellurides together explain the

partly refractory nature of the primary mineralization at Angostura.

Page - 44 -

The metallics screen assay data of nearly 1000 samples averaged 9.6 g/t gold, a part of

the high-grade gold population described in Section 17.4 and substantially higher than the

average deposit grade. Seventy-seven percent of these assays have less than 5% of the

total gold in the plus 150-mesh fraction (no coarse-gold problem), three percent have

between 25 and 50% (a moderate problem with coarse gold) in the coarse fraction, and

only one percent of the samples have more than 50% (a serious problem) of the total in

the oversize fraction. Overall, there is not a large problem with coarse gold or with the

nugget effect in the Angostura deposit.

Alunite (a hydrous sodium sulphate) replacing original feldspar occurs in some parts of the

deposit, and significant gold values are at least locally associated with relatively broad

areas of alunitization. Non-systematic petrographic investigations (Thompson, 2004)

indicate that much of the alunite may be supergene in nature. However, one sample

contains thin-tabular alunite (B133660), leaving the possibility of advanced argillic

alteration overprint on potassic to sericitic alteration. (Thompson 2004, page 1). New field

observations has shown that the alunite is usually related to the hydrothermal alteration

and not only to supergene processes, as Thompson concluded..

9.6 OXIDATION

Surface oxidation has affected the rocks at Angostura to a depth of 10 to 30 metres at the

edge of the deposit, and attains depths that vary from 40 to 100 metres in its central parts.

The oxidation is irregular in shape, following the increased permeability along the

mineralized structures and later faults and fractures sometimes exceeding 170 metres in

depth along specific structures.

It is important to note that the term ”oxidized zone”, at Angostura, does not imply complete

oxidation. Rather, even immediately below the surface as can be observed in the tunnels,

the oxidation is partial and patch, affecting more the coarse rather than the fine pyrite, and

is governed by local permeability changes. Thus it is possible to observe completely

oxidized sulphides in close proximity to entirely fresh sulphides, together with areas in

which oxidation is incomplete where sulphides are mantled by limonite. This mixed zone is

referred to as the transition zone, and typically has sulphide sulphur values from 1 to 2%,

compared to sulphide sulphur values in the range of 0.5% in the actual oxidation zone.

The results of metallurgical test work indicate that the process of oxidation has improved

the metallurgical response of the mineralization in comparison with its hypogene

Page - 45 -

precursor, and gold has obviously been liberated from the tellurides during oxidation.

There is also a reduction of the bulk density in the oxide zone as described in Section

14.4. Finally, silver is enriched at the redox boundary between oxides and sulphides, and

continues enriched for up to several tens of metres below. There is thus a zone of

supergene enrichment for the silver, with a concomitant zone of silver depletion above.


The understanding of the Angostura mineralized system has continued to improve since

2003. The deposit shows three different modes of grade continuity:

• The volumetrically most prominent domain consists of the veins and composite

veins that form the framework of the deposit and host the low-grade gold assay

population described in Section 17.3. The grade distribution within these is

moderately erratic, owing to a high-grade component of lesser continuity. The

current drill pattern of 50 metres is generally adequate to give a reasonable

impression of the vein shape, size and precious metal grades. Tighter drilling of the

high-grade component of the deposit (next point) provided additional information,

specially for the high grade areas.

• The high-grade accumulations (formerly referred to as “shoots”) are thought to

have developed in structurally favorable locations such as at the intersection of two

veins of differing strike direction. The exact size and shape of this type of

mineralization is uncertain in most cases, and is not resolved by the current drill

density. At a cut-off grade of 3 g/t gold, the high-grade assay population amounts

to about two percent of the total assay population used for mineral resource

estimation but contributes 26% of the contained gold in the overall Angostura

mineral resource. The effect of the high-grade assay population was to elevate the

gold grade of about 5% of the total resource by volume in the Hatch (2007) scoping

study to a level that allowed it to be considered for selective mining and processing

by flotation in a sulphide flotation plant, with subsequent bio-oxidation, to maximize

gold recovery.

Page - 46 -

10. EXPLORATION

The exploratory work completed by Greystar is summarized in Table 2 by periods.

Starting in 1994 the exploration had consisted of surface work which included geologic

mapping, surficial rock sampling, soil sampling, stream sediment sampling and diamond

drilling completing until May of 2008, of 277,000 metres in 870 diamond drill holes. More

than 3,140 m of drifting have been constructed in the tunnels Perezosa 2, Veta de Barro

and Fuego Verde. All the underground openings created by artisan miners in the

Greystar’s claims were also mapped and sampled.

An underground development program was started in early 1997 with 198 metres in the

the Fuego Verde tunnel on 3056 metre elevation in the Silencio Area. In April 2004 on the

2850-metre elevation consisting of two parallel east-west drives some 350 metres apart,

with two connecting cross-cut in the Perezosa 2 tunnel. Recently 415.3 metres and one

cross cut has been completed in the Veta de Barro tunnel located in the northern part of

the deposit on 3 095 metre elevation.

In the past, the program of geochemical soil sampling has been undertaken in the project

and some surrounding areas, and more than 4,000 samples have been taken on a grid

with an initial spacing at 100 or 200 metres with later infill sampling. Samples were taken

at an average depth of 0.8 m. The samples were analysed for 37 elements using ICP

mass spectroscopy analysis of 15-gram aliquots after agua regia digestion. As a result of

this work, gold anomalies were identified in such areas as Cristo Rey, La Alta Este, Los

Laches (shown on Figure 6) and Violetal and Animas (outside of Figure 6). Subsequent

diamond drilling has found extensions to the Angostura gold deposit in all of these cases.

11. DRILLING

The great majority of data used for the current resource estimate for the Angostura project

is from diamond core drilling and was completed in May 2008. Diamond drilling was

performed by the following contractors: 1995 -Norbert Reinhart; 1996 to 1998 -

Terramundo Drilling; 1999 -Major Drilling Inc; since June 2003 -Concorcio Geominas S.A.

- Perfotec Ltda. (a Colombian contractor from Medellin), all using a variety of drill rigs.

Core size varied from BQ (36.5 mm diameter) to NQ (47.6 mm) to HQ (63.5 mm). By far

the majority has been NQ (78% of the total), with HQ and BQ core making up 19%and 3%

Page - 47 -

of the total, respectively. Since November 2007, 1547 metres of PQ-size (85 mm) core has

been drilled to collect material for metallurgical testwork, mainly in the oxide zone. Table 2

shows the summary of drilling completed from 1994 by period.

12. SAMPLING METHODS AND APPROACH

12.1 GENERAL REMARKS

Greystar has created a manual summarizing the prescribed sampling and activity

protocols for the various geological and sampling activities at the Angostura site. These

have been updated from time to time to reflect the increasing care required as the project

developed. The Strathcona observations during the visits in 2004, 2006 and 2007, and in

our visit in august 2008 have indicated that Greystar technical personnel take pride in their

work, which is being performed in a diligent and conscientious manner. The permanence

of many of the Colombian geologists on the project is of definite benefit in this respect.

12.2 DIAMOND DRILLING

Drill-hole collars in the field are clearly marked by wooden stakes bearing the information

of hole number, azimuth, inclination, and coordinates, and the collar locations have been

verified by survey.

The drill hole deviation was measured using the Tropari instrumentation through 1997,

with the Sperry Sun system introduced in 1997, and with the Swedish Reflex Easyshot

system since 2003. The original deviation measurement spacing of 50 metres starting at a

depth of 150 metres downhole has been tightened since 2003 to 25 metres down-hole

starting with an initial reading immediately below the casing, to give better control. In the

absence of magnetite in the rocks, these methods work well. The experience with the 25-

metre readings indicates a systematic steepening of the holes by about 1.5° in the first

hundred metres, and azimuth deviations are of a similar order of magnitude, but they can

be in either direction, right or left. The degree of steepening and change of azimuth at

greater depths is somewhat smaller, reducing to 1° for the dip and 0.3° for the azimuth per

hundred metres. These changes in drill hole attitude are small and reasonably predictable,

so that, despite the absence of deviation determinations above a depth of 150 metres in

the earlier drill holes, the actual location of these holes will not be far from where they are

plotted.

Page - 48 -

The average core recovery for the entire drill-hole database is nearly 94%, with 81% of the

intervals above a 90% recovery, and these figures include the initial, poorer near-surface

recoveries to a depth of typically eight to ten metres. The core recovery below a depth of

35 metres increases to 95%.

The scattergrams plotting core recovery vs. gold and sulphur (a proxy for pyrite) grades

are contradictory. No obvious relationship is observed for the high-grade assay population

for either gold or sulphur. For the low-grade assay population, the sulphur grades increase

with increasing recovery, indicating that sulphides are preferentially lost in poor-recovery

intervals. The gold grade vs. recovery plot shows the opposite behaviour, statistically

decreasing with increasing core recovery. The rate of increase of the sulphur values and

the rate of decrease for the gold values is similar. However, gold and sulphur are positively

correlated at Angostura, as shown by the bulk density data discussed in Section 14.4. The

data for the low-grade population is thus conflicting, and at this time no unequivocal

evidence that a gold grade bias has been introduced as a result of core loss.

All drill core has been photographed starting in 1997, on film until 1999, digitally since

June 2003. After photography, the Greystar geologists log the core in detail. Data recorded

include the major and minor lithologies, the type and intensity of alteration, the rock colour,

grain size, structural information such as brecciation and faulting, rock quality designation

(RQD) since November 1997, and the degree of oxidation and weathering. The data was

initially entered into paper log sheets and later into a computerized relational database. As

a result of unsatisfactory logging procedures in the earlier years, a major program of re-

logging to the improved standards was undertaken in early 1999.

With the exception of the initial, near-surface few metres of each hole in which core

recovery was poor, nearly all the drill core produced was sampled and submitted for

assay, resulting in a very large assay database of almost 167 000 assays from drilling

alone. Core sampling was, and continues to be by sawing. In 1995 to 1999, one-half core

for BQ and NQ and one-quarter core for HQ was collected as a sample, to make the

samples similar in mass. The samples are bagged and shipped for assay (in the past) or

transported to the site preparation facility (since March of 2004, see Section 13.2), while

the remainder is returned to the core box for reference.

Page - 49 -

The average sampled core length was 1.3 metres in the earlier drilling, and has increased

to the 1.7-metre range since 2003. The sample interval in the higher-grade sections was

noticeably shorter in the 1995 to 1999 drill holes, but has evened out starting in 2003. In all

cases, however, the longer samples were taken in areas believed to be of low-grade

character. Few samples are less than 0.5 metres long. Sampling observes obvious

lithologic, alteration, and mineralization breaks. All The drill core is stored in two

permanent facilities near the village of California. The older drill holes that were stored in

Bucaramanga were moved to the facilities in California in late 2 008.

12.3 SURFACE SAMPLING

Surface and trench sampling was conducted by channel sampling where the lithology did

not change in an outcrop. Discernable vein structures were sampled by panel sampling,

with individual panels measuring one to four square metres. Chip samples were collected

over pre-defined sections of outcrop showing no discernable difference in lithology or

alteration. The sample locations were determined by tape and compass, tying into

surveyed drill hole collars.

In 2004, many of the channel samples were still easily recognized. However, following the

recommendations of Strathcona, from 2 005 rock re-sampling using an electrical saw was

implemented to give a more representative sampling of the veins themselves. The surface

channel samples are used during resource estimation for geometrical purposes, but the

grade information is not included in the estimate.

12.4 UNDERGROUND SAMPLING

Samples in the near-surface tunnels and drifts created by artisan miners were taken by

Greystar personnel as continuous chips along the back of a drift, and along one of the

cross cut walls. In some cases, wall samples were also taken in drifts, but being along

strike, these were not considered during resource modelling. The sample length varied

from 0.5 to 1.5 metres, observing obvious lithologic and mineralization changes. The

distance between back samples was a nominal two metres.

The 2850-level development has been sampled in three ways.

• Continuous chip sampling was originally done along the walls of the drifts and

cross-cuts, but is incomplete. Individual fractures with obvious mineralization were

Page - 50 -

sampled separately to pinpoint the location of the gold. The results of these

samples were not used for the current resource estimate.

• The broken material of the majority of the rounds on the 2850 level in Perezosa II

tunnel and on the 3100 level in Veta de Barro tunnel, taken was systematically

sampled by shovel from each mine car, creating 1464 samples of typically 150 to

160 kilograms per round, a sample ratio of nearly one percent (a round was

generally 2.3 by 2.3 by 1.3 metres). For the first 1100 such samples, grab samples

were removed from the muck sample and submitted for assay, a less than

satisfactory method. In 2006t, re-sampling of the muck samples was instituted. The

entire sample was dried if necessary, then crushed to minus 2.5 cm and

homogenized in a cement mixer. A sub-sample of 5 to 10 kilograms was split out

using a fourtiered arrangement of riffle splitters and subjected to the normal

Greystar sample preparation and assaying protocols used for core from the surface

drill holes as described in Section 13.2.

Overall, there was no difference in the average gold values between the original

and the resampled 1100 assay results. However, there was a fair amount of scatter

between initial and duplicate samples for both gold and silver. Since the duplicate

assays represent a more accurate estimate of the grades of the individual samples

and are thus more reliable for local grade estimation, they have replaced the initial

assay data in the project database. For the resource estimate, “dummy” drill holes

were created along the drifts and cross-cuts with the muck sample assay

information and used in the same manner as all of the other drill holes.

• A program of systematic channel sampling along both walls of the 2850 drifts and

cross-cuts was undertaken from 2007. Analysis of the comparative data (nearly

350 metres of drift length) for channel and muck sampling showed the muck

samples to be systematically higher for gold as well as other elements such as Ag,

S, and As, on average by 10 to 20%, indicating a systematic sampling bias

between the two types of samples. This information was not utilized for the

completion of the current resource estimate. Strathcona 2008 has suggested using

the channel samples rather than the muck samples for grade interpolation where

available, but in May 2008 that information was not completed. The overall effect of

this possible bias is limited, since the muck samples represent only 1.4% of the

overall sample length used for the current resource estimate. However, for the

Page - 51 -

resource estimate that will form the basis for the feasibility study, the channel

sample assays need to be used instead of the muck sample assays.

It should be clarified that the sawn channel samples were higher in grade than the chip

channel samples, and the mucks were even higher. Thus as the sample size increased, so

did the gold grade. This is may be due to the fact that as the volume of material increases

so does the actual degree of systematic sampling of the microfractures containing the

mineralization. Thus the smaller samples including drill core tend to under estimate grade.


While there are a few areas in which the sampling methods employed in the Angostura

project in the past and present may bear improvement, the past and ongoing sampling

approach by Greystar is judged to be on par with industry standards, and any existing

shortcomings are of an extent and magnitude that they do not represent an impediment to

the reliability of the current mineral resource estimate for the project.

13. SAMPLE PREPARATION, ANALYSIS AND SECURITY

13.1 EARLIER FIELD PROGRAMS (1995 TO 2000)

The samples collected in the field, from surface or from drill holes, were initially placed in

heavy plastic bags, large enough to contain one individual sample, and marked on the

outside with the sample number, and a sample tag with the same information placed

inside. Several of the plastic bags containing individual samples were combined into larger

heavy plastic bags, and three of these in turn were packed into plastic fibre bags for

shipping.

After bagging, there was no more access to individual samples. The shipping bags were

sealed with lock and seal and brought by company truck to the DHL office in

Bucaramanga, who then shipped the samples by air freight directly to the analytical

laboratory.

Rossbacher Laboratories Ltd. of Vancouver was the principal laboratory used. All samples

were dried at 50 to 60° C and then crushed to minus 10 mesh (1.7 mm). A sub-sample of

250 to 350 grams was obtained from the crushed sample by Jones splitter and pulverized

to 90% passing 150 mesh (106 microns) in a ring pulverizer.

Page - 52 -

All samples were initially assayed for gold using a 10-gram aliquot, dissolution in aqua

regia, gold extraction by methyl isobutyl ketone organic solvent (MIBK) and gold

determination by atomic absorption spectroscopy (AAS). This is essentially a geochemical

method, suitable for low gold concentrations. Samples with gold values between 0.5 and

1.5 g/t as determined by the geochemical method were subjected to routine fire assaying

using a one assay-ton aliquot (one half assay ton until the end of 1996). The remainder of

the pulp of those samples yielding above 1.5 g/t gold from the initial geochemical method

was re-assayed using the pulp-and-metallics method, screening at 150 mesh.

For the incorporation of the Rossbacher gold assays into the database, an assay hierarchy

by quality of the result was established. If only a geochemical value was available, then

that value was used. If a geochemical and a fire assay were available, then the fire assay

result was used. If in addition to a fire assay, a metallics assay was also available, then

that figure was incorporated. There was no averaging of the results of different sample

variance.

Silver and copper were originally determined by AAS based on a 0.5-gram aliquot, with an

aqua regia digestion. Silver values equal to or greater than 15 g/t were later re-assayed

using the fire assay method.

A large number of samples from early drilling at Angostura (1996 to 1998) were also

assayed using the cyanide-leach method, for the purpose of comparing total gold (as

determined by fire assay or metallics assay) to cyanide-soluble gold. A 30-gram sample

that was shaken for three hours in 60 millilitres of a 0.5% NaCN solution, and the dissolved

gold determined by AAS. The gold content of the residue was not determined, and neither

was the cyanide concentration at the end of the dissolution time. For those samples from

the sulphide zone with significant copper values (>1000 ppm), there is an indication that

the amount of cyanide-soluble gold reported was negatively affected by increasing copper

grades.

The available 998 Rossbacher metallics screen assays demonstrate that for the large

majority of the samples tested, only a relatively small portion of the gold resides in the

coarse fraction retained on the 150-mesh screen. Below an assay of 50 g/t for the full

sample, there is virtually no difference between the gold grades of the plus 150-mesh and

the minus 150-mesh fractions. Only 34 of the 979 samples below 50 g/t contained more

than 25% of their total gold in the coarse fraction, and this proportion did not change with

the gold grade. Even among the 19 samples with assays >50 g/t, a high proportion of gold

Page - 53 -

in the plus 150-mesh fraction was found in just three samples, with the other 16 being no

different than the samples with assays below 50 g/t. These results characterize the

Angostura gold mineralization as generally “well-behaved” from a sampling and assaying

point of view.

13.2 2003 TO 2008 PROGRAMS

After resumption of field activities in June of 2003, a number of changes with respect to

sample preparation and analysis were implemented. The most important was the

construction of a preparation laboratory on site, to speed up the process and to reduce the

sample mass to be shipped for assay. The crusher components were sourced in the fall of

2003, and the laboratory was put in production in March of 2004. Design and construction

were under the supervision of a former laboratory manager at a commercial assay facility

in Canada.

Prior to the site sample preparation laboratory being operational, a local independent

sample preparation laboratory in Bucaramanga was employed in 2003 and early 2004 but

could not keep up with the volume. This resulted in those samples judged to be

mineralized being air freighted to ALS Chemex Laboratories in Vancouver (Chemex)

without crushing and splitting, and only the anticipated low grade samples being crushed

in Bucaramanga and shipped overseas. ALS Chemex is an accredited chemical laboratory

and registered with Quality Management Institute (QMI) under ISO 9001:2000 as well as

being accredited by the Standards Council of Canada.

The sample preparation in Colombia, at both the site since April 2004 and the

Bucaramanga facility before, is single-stage crushing to nominally 80% passing 1.7

millimetres (ten mesh). The site facility now employs one Rhino and one Terminator jaw

crusher manufactured by TM Engineering Ltd. of Burnaby, British Columbia. A charge of

barren limestone or granite is passed between samples. After crushing, the sample, of an

original mass of typically 1.5 to 3 kilograms, is blended and a sub-sample of nominally 250

grams obtained by riffle splitting. Quality control measures include the weighing and

screen analysis of one in ten samples. Actual crusher output is usually close to 95%

passing 1.7 millimetres. The capacity is now around 150 samples per shift, employing six

personnel.

All crushed and split samples are weighed before being sent for assay. Weighing at the

assay lab is repeated, and this provides a valuable tool for detecting and tracing any case

Page - 54 -

of sample misidentification. The crushed rejects are stored under cover at the site for

future reference.

Samples derived from what appear to be weakly mineralized drill hole intervals were sent

to ACME Analytical Laboratories Ltd. in Vancouver (ACME) for assay until March 2007. A

15-gram aliquot was assayed using a thirty-element geochemical ICP – gold method after

aqua regia digestion2. Since March 2007, ALS Chemex is being used for anticipated low-

grade samples instead of ACME who did not provide sulphur assays.

Any samples returning more than 0.4 g/t gold are re-assayed at ALS Chemex, together

with the stream of samples submitted directly from Colombia, for gold determination by fire

assay with an atomic absorption spectrometer (FA/AAS) finish using a one assay-ton (29.2

grams) aliquot. Gold assays above 10 grams per tonne (g/t) and silver assays above 100

g/t are re-assayed by one assay-ton FA with a gravimetric finish.

Separate splits of these samples are subjected to a multi-element ICP assay including

silver and sulphur following a four-acid digestion. Sulphur assays >10%, the limit of the

reported as >10%. Given the importance of the sulphur assays for the metallurgical

characterization of the sample intervals at Angostura as discussed in Section 16, all the

samples with results “>10%” were and are been re-assayed using the Leco method with

an upper limit of 50% S.

The site preparation laboratory does not operate independently of Greystar and thus offers

the potential for sample tampering and “salting”, the process of adding gold-bearing,

extraneous materials to a sample to enhance its gold grade. There is no indication that

such tampering is taking place. Certain precautions are in place, such that only one of the

Greystar geologists has access to the facility, which is also kept locked when not in use.

Roughly four percent are duplicate samples dispatched with new sample numbers from

the site as part of the sample batch. This would make tampering difficult to commit, and

would aid in its discovery, if present.

2 From the ACME website glossary: ICP - Inductively Coupled Plasm a - Atomic Emission Spectrom eter: An

instrum ent capable of determining the concentrations of 40 to 70+ elem ents sim ultaneously by m easuring

the intensity of light given off by samples aspirated into an argon gas plasm a heated to >10,000/K. Capable of

very low detection limits (ppm to ppb) with wide linear ranges (5 orders of m agnitude).

Page - 55 -

In 2004, an initial set of 40 drill core intervals had been re-sampled and sent directly to an

assaying facility, without using the Greystar preparation facility. The mean gold and silver

grades were essentially identical to those reported originally. The recommendation of

Strathcona to resume the practice of re-splitting core were implemented starting in October

2007. These consisted of quarter HQ core, not at random, but with mainly mineralized

intervals (higher than 0.2 g/t Au). On average, the original core is 9% higher than the

duplicate core, the sampling of quarter core may contribute to this bias. The precision is

poor and indicates that the core does not represent the grade of mineralization within 50%

at 5 g/t. A good portion of this error can be alleviated with unbiased sampling and large

half core HQ duplicates.

Barry Smee (Smee Consultant) is the independent auditor of the preparation laboratory,

and has made two inspection visits from 2004


All of the sample preparation procedures are industry standard and should, with

satisfactory performance by the camp preparation facility and the chemical laboratory, give

reliable results subject only to sample errors. Security measures have been and are in

place to avoid sample tampering. While it is difficult to prevent a determined effort, the

procedures adopted by Greystar make such an act difficult to commit and relatively easy to

detect.

With respect to silver, the Angostura database contains the results of different digestion

methods. For the years 1995 to 1999, the initial Rossbacher dissolution was by aqua

regia, and for the high silver repeat samples it was by fire assay. For the low-grade

samples in 2003 to 2007 submitted to ACME, the silver was extracted from the sample by

aqua regia. Silver values below 100 g/t at Chemex in 2003/04 were obtained by ICP after

a four-acid digestion, while those higher than that value were repeated (and the results

accepted into the Angostura database) by fire assay. This means that the silver values in

the database are not strictly comparable. However, the Acme and Chemex silver values

compare well, and silver is not an element of great economic importance for the Angostura

project.

Page - 56 -

14. DATA VERIFICATION

14.1 DATABASE

The Angostura database existing at the end of 1998, i.e. before the 1999 drilling, was

maintained and audited by Todd Lavens of Greystar in early 1999, with the results of the

audit being reported to MDA as part of the “pre-feasibility” study undertaken at the time

(Lavens 1999). This audit detected a number of clerical errors and shortcomings, and

addressed remnants of a problem that had been recognized earlier, namely the duplication

of sample numbers by Rossbacher, a problem that was subsequently resolved.

Greystar are currently using the Postgre SQL software, produced by the Bucaramanga

firm of Systemas Integrados de Informacion y Digitalizacion (SIID), to manage the

Angostura database. The system is installed in the Greystar Bucaramanga office and is

fully integrated with the data acquisition activities in the field that are entered into a Palm

daily and downloaded via the microwave communication system to Bucaramanga. A

strict, controlled and structured set of fields and columns is used to manage the data flow,

and the software thus controls the integrity of the data and will alert the database manager

to any structural problems. As an example, the existence of duplicate sample numbers has

now become impossible. Similarly, assay results are posted by the laboratory on the

Internet and can be directly downloaded into the database, avoiding clerical errors during

data entry. The exchange of the Greystar database with the Datamine program did not

create any problems.

14.2 ASSAYS – 1995 TO 1999

There was no Greystar-sponsored quality assurance/quality control (QA/QC) program in

place for the drilling campaigns from 1995 to 1999. However, a substantial program of

check assaying of pulp duplicates was undertaken at Bondar Clegg Laboratories during

those years, and in 2003/04 a number of high-grade core intervals originally assayed in

that earlier period were re-sampled and rejects submitted for check assaying at Chemex.

The results were summarized in Table 7 of the 2004 report (Strathcona, 2004), showing

that there was a tendency of the Rossbacher results for gold to be high by around 10% as

compared to Bondar Clegg and Chemex.

Greystar undertook a detailed analysis of the Rossbacher bias in 2004. This showed that

the differences between Rossbacher and Bondar Clegg were restricted to assays above

Page - 57 -

about 2 g/t and appeared to be traceable to certain groups of contiguous samples where

the Rossbacher results were consistently and obviously high (the “bad” set), while other

batches did not show this bias. The bad set, representing about 28% of the total, showed a

large difference with Rossbacher being 44% higher than Bondar Clegg. Subsequently, the

original sample batches corresponding to the bad set were identified, a total of 891

samples. From these, 344 of the original rejects could not be found, and another 20

mismatched samples and 7 samples with very high gold grades were eliminated from

further consideration.

The remaining 520 samples with a Rossbacher mean gold value of 6.6 g/t were re-

assayed at Chemex who reported a mean of 6.2 g/t. The lower Chemex values were

substituted into the project database, and the KTS 1999 mineral resource estimate

described in Section 6.3 was reestimated with the Chemex data. The effect on the

estimated resource grade was very small, the relatively largest consequence being a 1%

reduction of the gold grade of the indicated resources at the 3.0 g/t cut-off grade (Snider,

2004).

14.3 ASSAYS – 2003 TO 2008

For the more recent drill programs that started in June of 2003, a QA/QC program external

to the assay laboratory was instituted. In August 2005, Smee and Associates Consulting

Ltd. of Sooke, British Columbia (Smee) were engaged by Greystar to guide and audit the

QA/QC procedures and results. Smee has produced several reports since then, the latest

in October 2008 covering the period November 2007 to August 2008.

From September 2003 to March 2004, a total of 117 drill-core blanks were inserted into the

sample stream from drill core that had previously been shown to be barren. Only one of

the samples was slightly high with a value 0.05 g/t gold, a very good outcome.

This practice was changed to using field blanks consisting of limestone or barren gneiss

which were inserted into the sample stream at the rate of one in 25 to 30 by the project

geologists. These field blanks are invisible to the assay laboratory. To the end of June

2006, the results of 431 such blanks are available (344 gneiss and 87 limestone), with a

failure rate (defined as >0.05 g/t) of 7%, which is above the acceptable level of 5%.

However, nearly one-half of the failures is attributable to one shipment when a laboratory

operator made an error in the aliquot preparation. The sample batches in question have

been reassayed and the corrected values entered into the database. Other blanks that

Page - 58 -

returned high values were re-assayed individually, with the initial values being confirmed. It

appears that the gneiss material used was slightly mineralized, leading to artificial

“failures”.

There were no blanks inserted by Greystar from July 2006 to August 2007, so that a

significant number of samples cannot be assessed with respect to any contamination that

may have occurred. The practice of adding core blanks was resumed in September of

2007, and 303 such samples had been added, with only three returning a high value of

0.05 g/t gold.

The insertion of reference materials (standards) into the sample stream did not start until

March 2004, when the site sample preparation facility became operational. Since then, a

total of 4568 samples from twelve different standards have been assayed. All of the

standards were prepared and certified by CDN Resource Laboratories Ltd. of Vancouver,

British Columbia. The standards fall into two gold grade ranges, 0.8 to 1.0 g/t and 4.7 to

5.2 g/t, and at least one standard of each range was being used at any given time since

March 2004. Following a recommendation by Smee (2007), Greystar have acquired

samples representing two high-grade standards, one of 14.8 g/t and another of 35.25 g/t.

Triggers for an individual standard to have failed were generally set at reference value plus

or minus three standard deviations (SD). If two adjacent standards were both more than

two SD values above or below the reference value, then both standards were failures as

well. The SD values were determined during the certification process. The results are

tabulated below:

Page - 59 -

Table 4 Summary of Standards Performances for Gold

Limits Low Results High Results

Standard N Reference

Value (Au - g/t)

Achieved Value

(Au - g/t)

Upper (Au - g/t)

Lower (Au - g/t)

N Au

(g/t) N

Au (g/t)

CDN-GS 1A 218 0.78 0.77 0.9 0.66 4 0.65 1 0.91

CDN-GS-1B 898 1.02 1.00 1.11 0.91 20 0.86 18 1.13

CDN-GS-1C 489 0.99 1.00 1.11 0.87 2 0.83 9 1.14

CDN-GS-5A 686 5.1 4.96 5.62 4.48 38 4.23 3 5.92

CDN-GS-5B 666 4.83 4.75 5.4 4.26 6 4.08 1 5.44

CDN-GS-5C 574 4.74 4.62 5.16 4.32 21 3.64 1 5.63

CDN-GS-7 190 5.15 4.95 5.84 4.46 21 4.07 0

CDN-GS-7PA 521 0.77 0.77 0.86 0.68 13 0.47 23 0.89

CDN-GS-10 199 0.82 0.8 0.96 0.69 4 0.62 3 1.01

CDN-GS-5D 15 5.06 5.15 5.43 4.68 0 1 5.43

CDN-GS-30A 52 35.25 33.95 37.06 33.43 2 32.9 0

CDN-GS-15A 60 14.75 14.66 15.74 13.91 7 13.05 3 16.22

TOTAL 4568 3.36 3.28 138 3% 63 1.4%

N = number of assays

The mean gold grades of all standard samples assayed by the laboratory before the

correction of failures tend to be slightly below the reference values, indicating that the

laboratory may have a slight overall low bias for gold. This is also expressed by the

number of low results that exceeds the number of high results. The overall failure rate at

4.4% (low plus high) is acceptable. Among the failures was one run of 14 assays on

standard 5A that were consistently low in early June 2005, indicating a systematic

laboratory calibration problem. Greystar data indicate that samples impacting the resource

estimate were re-assayed from batches where a standard had failed, and the re-assay

value subsequently accepted into the database.

For the period June 2003 to December 2006, there are 433 samples that, having originally

been assayed at ACME, returned gold values above 0.4 g/t. These were re-assayed at

Chemex, using a new pulp sample split from the rejects. The mean grades of 1.52 g/t

(ACME) and 1.58 g/t (Chemex) with a mean pair variance of 14% confirm each other,

keeping in mind the different assay protocols used (see Section 13.2).

Page - 60 -

Starting in April 2004 and extending (with a three-month interruption at the end of 2005) to

March 2007, a total of 1829 sample pulps were re-assayed at a second accredited

laboratory (Assayers Canada Limited) as a program of checking assaying selecting at the

rate of one in 25 to 30 by batch, which represents 5% of all samples >0.4 g/t Au. The

results of this check assaying program available in May 2007 (1670 assay pairs) have

been evaluated by Smee (2007) who observed that “The scatter chart does not show any

bias between the two laboratories when all the data is regressed. The Q-Q plot may exhibit

a bias in the grade range of 50 to 100 g/t favouring Assayers, but his is only made up of

three points. The overall Q-Q plot does not show a grade-based bias.” (Smee 2007, page

13). It is demonstrated also since the mean grades of the 1829 achieved by ALS Chemex

(3.89 g/t gold) and by Assayers (3.85 g/t gold) are very close.

This program of checking assaying was continued with Acme Vancouver replacing

Assayers as the secondary laboratory. A total of 1479 samples have been assayed for the

period from April 2007 to June 2008. This group of samples had mean gold values of 4.66

g/t and 4.51 g/t for ALS Chemex and Acme respectively. The overall bias averages 3.4%

higher by ALS Chemex, again indicating, that the ALS Chemex laboratory may have slight

low bias. Above 40 g/t Au the bias is more pronounced, but up to 40 g/t the bias at 1.6 %.

As part of the ongoing metallurgical testwork, 30 samples were submitted to the SGS test

facility in South Africa for flotation testwork. The individual samples were re-assayed and,

together with the calculated head grade of the composite sample constituted from 29 of

the 30 individual samples, provides a further independent check on the original Greystar

assay results. The composite grades predicted by the individual drill-hole assays were 1.4

g/t Au and 6.8 g/t Ag, while the calculated head grades were 1.38 g/t Au and 8.6 g/t Ag, in

excellent agreement with the Chemex gold results.

As part of the quality control regime now installed by Greystar, duplicate samples have

been prepared at the site preparation laboratory at irregular intervals spanning the time

from early 2007 to August 2008. There are 1 111 assay pairs with mean gold values of

3.19 g/t and 3.20 g/t, which are practically equal.

14.4 BULK DENSITY

Greystar have undertaken more than 8 400 density measurements on drill core samples,

selected according the litology, alteration and mineralization. The method used is the wax

immersion method (ASTM C914-98) in most cases. The results are shown in summary

Page - 61 -

form in Figure 11, separately for data from the oxide/transition zone and from the sulphide

(fresh) zone.

Figure 11 Drill-Core Density Observations and Assigned Bulk Densities

There is still a fair degree of scatter in these density values above 7 g/t (for unweathered

rocks) and above 5 g/t (for oxidized rocks), and this explains the fairly large scatter of the

core density values in the upper gold grade range in Figure 11. However, the data permit

calculating a logarithmic trend curve for the two observed density populations. These were

subsequently adjusted downward to account for expected rock porosity that is not reflected

in the measurements, with the assigned bulk density figures (BD) being on average 3%

lower than the actual measurements.

The two formulae:

BD = 0.092 × ln (Au [g/t]) + 2.63 for fresh rocks and

BD = 0.032 × ln (Au [g/t]) + 2.45 for oxidized and transition rocks

Page - 62 -

were subsequently used in the block model to assign bulk density values to individual

blocks, based on their gold grade. The scientifically more accurate method would have

been to assign BD figures to the blocks using the sulphur assays, however, about 20% of

the drill hole data base from the years 1995 to 1999 do not have sulphur assays.

The sulphur data for the fresh rock drill core intervals, from which the observed drill-core

density data originate, show that the increase of the density values with the gold content is

a direct consequence of an increase in the pyrite content. However, the rate of increase

decreases quickly for gold values above about 4 g/t, an observation for which there is

currently no mineralogical or genetic explanation. That there is still a (much smaller) rise of

the observed density values with increasing gold grade in the oxidized rocks is due to the

only partial removal of pyrite during weathering particularly in the transition zone, as

described in Section 9.7. The lower density values for low-grade oxidized rocks compared

to the fresh rocks are attributed to additional porosity that was created during weathering

and oxidation.


The assay database underlying the current mineral resource estimate for the Angostura

deposit is probably biased high for a small part of the 1995 to 1999 Rossbacher assays.

However, this now constitutes less than one percent of the total assay database and is

therefore no longer an issue. While the QA/QC system as practiced since 2003 largely

conforms to industry standards, it could have been somewhat more systematic and

regular. The available check assay and standards assay data indicate that the assay

results for the years 2003 to 2008 collectively are reliable, that they are fairly precise

individually, and that any contamination was a short-lived problem.

The new bulk density data added since December 2007 has confirmed the analysis made

in 2007. The large data bank of core-density determinations, have allowed a positive

correlation between gold grade and bulk density to be expressed as a formula that can be

used to assign a bulk density figure to each block based on its gold assay. There is one

such formula each for the fresh and for the oxide/transition rocks. At very low gold grades,

the bulk densities of the two types of rock converge at about 2.4 t/m3 and increase to 3.0

t/m3 once a grade of 50 g/t is reached. The bulk density for the oxide mineralization

reaches only about 2.6 t/m3 for similarly high gold assays.

Page - 63 -

15. ADJACENT PROPERTIES

There are a number of small-scale mining operations in the area of the Angostura project

run by Colombian nationals and cooperatives. The largest of these, located at the south

end of the Angostura concessions, exploits the Malvinas Vein at a reported rate of 25 or

30 tonnes per day of ore from a small underground operation.

Ventana Gold Corp. (“Ventana”) has an option to acquire the La Bodega property

(Ventana Gold Corp., 2007) which immediately adjoins the Angostura property (Licence

P3451, Figure 3). Following surface and underground sampling programs and

magnetometer and induced polarization surveys programs pursuant to a Phase-1

exploration program recommended by Reeves. Ventana reported in a December 22

2008,press release to have completed 101 diamond drill holes with a total length of 25 100

metres. Two mineralized areas have been identified, La Bodega Area, as an southwest

extension of the mineralization of Angostura project, and La Mascota area, parallel to La

Baja creek.. On November 7 2008 Ventana Gold Corp. was listed in the Toronto Stock

Exchange (TSX:VEN).

Some of the mineralization at Angostura extends onto the La Bodega property, and the

vendor and artisanal miners continue to extract gold ore from narrow veins on that

property.

Ventana also holds the California-Vetas property most of which is located well to the south

of the Angostura deposit, to the west of the municipality of Vetas. However, two small

parcels of concession 328-68 are located immediately to the east of the Angostura

deposit, and one of these partly underlies one of the waste dump areas selected as an

option by the feasibility study phase 1. Some areas of the concessions as 73-68, 3451,

145-68 and 13625 would be affected by the mining infrastructure, mainly by the internal

roads.

Small-scale mines at El Silencio, Mina el Diamante, Veta de Barro and Los Laches were

located on the Angostura property. From 2000 to 2002, in the period of absence of

Greystar from the area, illegal miners invaded many of the workings. These operations

were shut down in May 2003, prior to the illegal miners being able to claim any rights of

occupancy, although some attempts have persisted of entering the workings and

extracting ore from them until Greystar secured the area with a fence.

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Several small operations are currently active along La Baja Creek draining the area to the

southwest toward the town of California.

16. MINERAL PROCESSING AND METALLURGICAL TESTING

16.1 GENERAL REMARKS

Metallurgical test work on Angostura samples has been conducted by different laboratories

in several campaigns since 2000, including a detailed metallurgical testing program in

progress at contract laboratories in the US. This very extensive work has been conducted

on drill core samples and composites. The following information summarizes the general

remarks about the testwork carried out until now:

• 2480 intervals have been used for all metallurgical testwork (including current

testwork) representing all types of the identified minerals (oxides, transitionals,

intermediate sulphides, high grade sulphides) and 26 tonnes of bulk samples

representing oxides and transitionals have been shipped to McClelland

Laboratories for ROM (Run of Mine) heap leach evaluation testwork.

• A total of 146 metallurgical composites and samples have been tested.

• 267 bottle roll tests, 145 column leach tests, 78 flotation tests, 10 mineralogy

analysis (including MLA) and 8 bio-oxidation tests have been carried out until now.

• Other test work carried out includes crusher work index, abrasion index, Bond ball

work index, gold deportment, gravity concentration and roasting testing.

Early metallurgical testing was quite varied in scope, and ranged from general amenability

testing to detailed heap leach and flotation testing.

Results from the previous metallurgical testing and a scoping study conducted by Hatch

were used to arrive at a proposed combination of processing that includes heap leaching

of oxide, transitional and low grade (or intermediate) sulphide ore types, and flotation of

higher grade sulphide ore types. The current metallurgical testing program is more

systematic, and is focused primarily on optimizing these processing alternatives, as well as

evaluation of alternative processing methods for the lower grade sulphide ore types.

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16.2 HISTORICAL TESTWORK

Metallurgical testwork has been conducted by various different contract laboratories and

has concentrated on the treatment of the ore by heap-leaching, milling/agitated leaching,

flotation and processing of flotation products.

A list of reports concerning metallurgy of the Angostura Project is presented in Table 5.

Table 5. Supporting Reports for Flowsheet Selection

Date Report Testwork

Jan-00Exploratory metallurical Study on Angostura Composites -

Progress ReportBottle Roll Test

May-05 Scoping Cyanide Column Leach TestingBottle Roll Test

Column Leach Test

Jul-06Metallurgical Study for the Gold Recovery from an Auriferous

Mineral, from California, Santander

Diagnostic Leaching

Bottle Roll Test /Column Leach TestFlotation

Dic-06 Biooxidation of Angostura Ore Samples Biooxidation testing

Ene-07 A Preliminary Assesmet of Metallurgical Response KM1836Flotation

Mineral Liberatation Analysis

Ene-07Leaching and beneficiation Characterisitics of Gold Bearing

Vein Materials

Bottle Roll Test / Column Leach TestDiagnostic Leaching

Flotation / Cyanidation of Rougher Conc

Jul-07 Angostura NI 43-101 Independent Technical Conseptual Report

Ago-07Mineralogical Characterization of a Rougher Flotation

Concentrate Sample from Angostura ColobiaXRD

Ago-07Flotation Testwork on a Gold Ore Sample from Angostura in

ColombiaFlotation

Apr-08 Angostura Direccional Study Final Report Direccional Report

Oct-08 Angostura Gold Recovery Estimates

Column & Bottle Leach Tests, Flotation,

Roasting, Biooxidation, Comminution, Recovery Model & Consulting

Nov-08 Trade Off Study Flowsheet SelectionGRD Minproc

Laboratory

G&T Metallurgical services LTD.

Little Bear Laboratories

SGS Lakefield Research Africa (Pty) Ltd

McClelland Laboratories

Tetratech and Kappes Cassidy

Hatch

Newmont Metalurgical Services

Instituto de Minerales CIMEX

METCON Research, Inc.

METCON Research, Inc.

SGS Lakefield Research Africa (Pty) Ltd

Of particular interest is the Hatch Scoping Study report, which includes a detailed

summary of metallurgical testing conducted before July 2007. Processing methods

selected in this Scoping Study for processing the Angostura ores incorporated a dual

circuit for separate processing of oxide/transitional and lower grade sulphide ore types,

and higher grade refractory sulfide ore types. A valley fill heap leaching of tertiary crushed

(nominal 19mm) ore was proposed for the oxide/transitional and lower grade sulphide ore

types. A milling/flotation circuit (nominal 106µm feed size), with stirred tank biooxidation,

Page - 66 -

followed by agitated cyanidation treatment of the flotation concentrate was proposed for

the higher grade sulfide ores. Mention was also made of the potential for whole ore heap

biooxidation treatment of the refractory lower grade sulfide/transitional ores, but that

processing alternative was not part of the economic analysis conducted in the Scoping

Study.

Metallurgical testing programs reviewed by Hatch and used for estimating process design

criteria in the Scoping Study included primarily a detailed column leach testing program

conducted at Metcon Research (Tucson, AZ) in 2005/2006, a flotation testing program

conducted by G&T Metallurgical (Kamloops, B.C.) in 2006, and a whole ore biooxidation

testing program conducted at Little Bear Laboratories (Golden, CO). Additional earlier

testing programs were reviewed by Hatch in the Scoping study, but were of limited use for

determining the process design criteria.

Metallurgical testing conducted since the Hatch study include a flotation testing program

conducted by SGS Lakefield (South Africa) reported August 2007, a cyanidation and

flotation testing program conducted by CIMEX (Columbia) reported May 2008, and an

ongoing metallurgical testing program in progress at McClelland Laboratories Inc. (USA).

16.3 CURRENT TESTWORK

A more detailed metallurgical testing program is currently in progress at multiple

metallurgical testing laboratories, including McClelland Laboratories Inc. Results from this

current testing program are not complete, and consequently are included in the discussion

here only where available. Any references to available results from the current testing

program are excerpted from updates and progress reports, as formal reports have not yet

been issued for this testing program.

The major groupings of drill core composites evaluated during the current testing program

include:

• Oxide (3 composites)

• Transitional (3 composites)

• Intermediate* Sulphide (30 composites)

• High Grade Sulphide Ore Zone (5 composites)

• High Grade Sulphide Ore Variability (36 composites)

Page - 67 -

• Low Grade (3 composites)

• Los Laches Zone (2 composites)

• Comminution Rock Type (4 composites)

• Additionally, master composites for testing are being prepared as required.

*Intermediate sulphides: low grade gold sulphides minerals.

The current testing involves detailed evaluation of the following:

• Heap Leach Cyanidation – oxide, transitional and intermediate sulfide ore types:

including optimization of processing parameters (feed size, cyanide concentration,

etc.), and further evaluation of ore variability, as well as required geotechnical and

environmental testing.

• Milling/Cyanidation – intermediate and high grade sulfide ore types: including

optimization of processing parameters (grind size) and further evaluation of ore

variability.

• Flotation and Flotation Product Processing – high grade sulfide ore type: including

optimization of processing parameters (grind size, reagents, pull weight, etc.),

evaluation of concentrate processing (biooxidation, shipping to smelter, roasting,

etc.) and tailings processing (agitated leaching or heap leaching).

• Heap Bio-oxidation/Cyanidation – intermediate sulfide ore type

• Comminution Characteristics – rock type composites

• Environmental Characterization – process residue samples generated from select

metallurgical testing.

Available testing results from the current testing program have generally been consistent

with those generated during earlier testing programs. The oxide, transitional and low grade

ore types have been confirmed to be amenable to simulated heap leaching treatment at

19mm feed size. Preliminary data indicate that the oxide ore types have shown

comparable gold recoveries when the crush size was coarsened to 38mm. Follow-up

testing currently being initiated will include evaluation of run-of-mine (ROM) heap leaching.

Other ore types have not yet been evaluated at coarser (than 19mm) feed sizes. The

intermediate sulfide ore types were varied in their response to heap leach cyanidation

Page - 68 -

treatment at the 19mm feed size, and work is in progress to obtain a better understanding

of the parameters controlling response to heap leaching of these ore types.

Milling/cyanidation treatment generally resulted in incrementally higher gold and silver

recoveries than obtained by heap leach cyanidation. Results from the GRD-Minproc trade

off study probably indicate that this processing option will not merit further consideration.

The sulfide ore types evaluated responded well to conventional flotation processing. The

flotation rougher concentrate generated from a master composite responded well to

roasting, followed by cyanidation of the roasted calcine. Combined cyanidation gold

recovery (including cyanidation of the calcine and flotation tailings) was approximately

85%. Detailed work is currently in progress to optimize roasting conditions, and determine

the possibility of improving this recovery. Stirred tank biooxidation testing is in progress on

flotation concentrate generated from the same master composite to confirm amenability to

this processing alternative.

Testing to evaluate processing of lower grade refractory sulphide ore types using heap

biooxidation pretreatment followed by heap cyanidation treatment is in progress.

Preliminary results indicate that heap bio-oxidation pretreatment has been effective for

improving gold recovery from the intermediate sulfide ore types by approximately 20%,

after 105 days of pretreatment. These tests are ongoing, so the ultimate improvement in

gold recovery has yet to be determined.

16.4 PROCESS SELECTION

Based on results from the Hatch Scoping study and GRD Minproc Trade Off studies, both

incorporating available metallurgical results at the time of the study, a two circuit process

flowsheet is currently being considered:

1. Oxide, transitional and low grade sulphide ore types would be processed

using conventional valley-fill heap leach operation with tertiary crushing

(nominal 19mm feed size) of ore. ROM leaching was also considered as

an alternative in the Minproc study. Metallurgical testing is planned to

evaluate ROM leaching, but data are not currently available to support

that alternative.

2. Higher grade sulphide ore would be treated by milling (nominal 106um

feed size)/flotation treatment. In the Hatch study, stirred tank biooxidation

Page - 69 -

treatment of the flotation concentrate, followed by cyanidation of the bio-

oxidized concentrate was considered. In the Minproc study, a number of

processing options, including POX, stirred tank biooxidation and roasting

of the flotation concentrate were considered, with cyanidation of the

oxidized residue.

The same two general processing circuits, along with the possible shipping and treatment

of flotation concentrate at a smelter are also currently being considered. Detailed

metallurgical testing currently being conducted is designed to generate data sufficient for

final selection of the optimum processing option for the Angostura flotation concentrate.

Ongoing economic evaluation of the possible processing options requires estimation of

commercial processing parameters for the various alternatives, which are described in the

following sections.

16.5 COMMINUTION PARAMETERS

Bond ball work index early determinations were made by CIMEX Colombia and the current

comminution testwork is carried out by Phillips Enterprises and reported by McClelland

Laboratories. Bond ball mill work indices ranged from 11.0 to 15.8 kW-hr/t. For design

criteria the average value 14.5 kW-hr/t was used.

Crushed work index and abrasion index were also determined by Phillips Enterprises and

reported by McClelland Laboratories. Crusher work indices ranged from 2.2 to 12.1 kW-

hr/t, and averaged 7.3 kW-hr/t. For design criteria the 85% of the maximum value, 10.3

kW-hr/t was used.

Abrasion indices ranged from 0.0478 to 0.3509, average 0.1823. For design criteria the

85% of the maximum value = 0.298 was used.

16.6 HEAP LEACH PARAMETERS

A heap leach recovery model was estimated from current and previous testwork

developments and analysed, compiled and agreed upon by McClelland Laboratories, GRD

Minproc and Greystar.

The recovery model was issued on October 22, 2008 in the report: October 2008

Angostura Gold Recovery Estimates - Angostura Project - MLI Job No. 3252. Revisions in

this model, as compared to the model used in the Hatch Scoping Study are based on the

Page - 70 -

use of total sulphur, rather than sulphide sulphur, for estimating gold recoveries, and the

inclusion of additional test results from the current McClelland Laboratories testing

program. The gold recovery model was switched from sulphide sulphur in previous

evaluations to total sulphur in order to be consistent with the sulphur analyses available in

the drill sample database (total sulphur only).

The expected metallurgical parameters for heap leaching the Angostura ore are shown

below. A detailed description of these estimates, as well as corresponding estimates for

whole ore milling cyanidation treatment are found in the Angostura Gold Recovery

Estimates Memo (McClelland – Oct 2008).

Ore Au Recovery Ag Recovery

Category % % NaCN CaO

S (Total) < 3%Au Recovery = -25.415 x [S (total)] + 109.349

with Maximun Au Recovery = 90%54% 0.7 1.3

S (Total) > 3% Au Recovery = 31% 34% 1.4 1.9

Heap Leach at 80% -19 mm Feed Size

Reagents (Kg/t)

Heap leach parameters were based on results from the available metallurgical tests on

composites evaluated by cyanidation treatment at a 19mm feed size. Those results are

presented in Table 6. Table 6 includes all available current testing, and all "standardized"

testing conducted earlier by Metcon at a 19mm feed size.

Page - 71 -

Table 6. - Summary Gold Recovery Results, Angostura Ore Samples

% S (tot) % S= CLT BRT CLT BRT

El Diamante Oxide Zone 0.77 0.43 87.7 69.2 50.2 49.1

La Alta Oxide Zone 0.81 0.55 91.0 88.4 65.2 72.5

La Perezosa Oxide 0.43 0.30 95.0 88.7 63.4 65.7

Nueva Alta Oxide 0.67 0.41 93.9 85.2 64.5 55.5

Silencio EW Oxide 0.61 0.43 85.9 74.7 57.6 44.8

Silencio NE (Oxide) 0.86 0.59 95.8 89.1 55.6 43.0

Veta de Barro Oxide 0.88 0.49 82.8 74.0 61.7 63.4

La Alta Transition 2.11 1.77 63.8 64.8 68.6 46.4

Silencio EW Transition 1.19 0.74 77.9 66.8 63.0 47.2

Veta de Barro Transition 1.86 1.79 80.7 76.2 49.3 67.7

El Diamante Sulfide 3.23 2.88 30.3 51.5

El Diamante Sulfide 200 3.74 3.38 12.3 32.7

La Alta Sulfide 1 3.80 3.49 27.6 30.6

La Alta Sulfide 200 4.18 3.93 17.5 26.9

La Perezosa Sulfide 4.20 3.74 39.2 63.4

Silencio EW (Sulfide 1) 2.44 2.14 37.8 50.8 29.0 52.5

Silencio NE (Sulfide 1) 6.90 6.77 33.9 46.2 34.6 35.5

Vein 12 5.80 5.37 30.7 43.5 15.8 26.7

Vein 354 3.25 3.14 62.2 73.1 64.5 77.3

Vein 21 & 22 5.45 5.02 44.9 42.9 33.2 45.9

Veta de Barro Sulfide 1 2.43 2.35 36.7 39.6

Zona Veta de Barro 2.82 2.68 38.9 33.3 28.3 29.1

HIS-01 2.18 1.68 28.8 32.7

HIS-02 3.11 2.60 33.6 30.8

HIS-03 3.81 3.36 28.2 32.6

HIS-04 2.11 1.46 27.2 30.4

HIS-05 3.40 2.66 44.7 43.8

HIS-06 4.42 3.72 22.7 18.9

HIS-07 5.41 4.49 17.4 28.4

HIS-08 2.86 2.33 29.8 41.4

HIS-09 2.98 2.52 29.8 35.0

HIS-10 4.46 3.58 32.0 45.5

HIS-11 6.47 5.57 27.0 32.3

HIS-12 3.12 1.61 42.5 27.0

HIS-13 4.10 1.37 69.5 19.8

HIS-14 3.06 2.37 25.6 24.8

HIS-15 2.32 1.96 35.2 25.8

HIS-16 3.06 2.37 40.5 63.1

HIS-17 3.03 2.38 27.0 24.0

HIS-18 3.10 2.55 22.1 16.7

HIS-19 4.78 3.20 28.7 25.0

HIS-20 6.26 4.57 14.4 23.1

HIS-21 4.28 2.20 41.0 35.5

HIS-22 4.33 2.65 17.9 30.5

HIS-23 6.53 3.15 14.1 31.1

HIS-24 2.02 1.61 27.6 37.6

HIS-25 2.38 1.93 20.0 20.6

HIS-26 3.06 2.37 24.4 31.0

HIS-27 4.35 3.28 24.5 30.3

HIS-28 6.25 4.44 17.6 16.7

B-01 2.47 1.89 34.9 31.5 39.1 32.6

B-02 3.84 3.22 31.3 23.6 31.9 31.6

CompositeHead Analysis

Au Recovery, % Ag Recovery, %

19mm 19mm

Page - 72 -

16.7 FLOTATION AND OXIDATION CIRCUIT

A test program was conducted at G&T Metallurgical Services Ltd. in 2006 to evaluate the

flotation response of the Angostura transition and sulphide materials. Three composite

samples (one transition and two sulphide) were evaluated that were composited according

to their response to earlier flotation testing at Metcon Research. Additional testwork was

performed in 2007 at SGS Lakefield Research Africa (Pty) Ltd. on a single refractory

sulphide composite sample, which included sample material from nine different areas at

Angostura.

Confirmatory flotation testing has been conducted at McClelland laboratories on three

sulphide ore composites to verify earlier flotation testing, and to generate concentrate

product samples for further testing. Preliminary regrind/cyanidation testing and

roast/calcine cyanidation testing has been conducted on flotation concentrates. Agitated

cyanidation testing has been conducted on flotation tailings. Bulk flotation rougher

concentrate has been generated for detailed process alternative testing (bio-oxidation and

roasting).

Conclusions drawn from this testing includes the following:

• Flotation gold recoveries approaching 90% or higher were obtained, with rougher

concentrate weight pulls of from 13% to 17%.

• Cyanidation gold recoveries obtained by flotation, roasting of the flotation rougher

concentrate, cyanidation of the resulting calcine, and cyanidation of the flotation

tailings totalled approximately 85% of gold values contained in the ore.

• Cyanidation of the flotation rougher tailings resulted in a significant incremental

improvement in gold recovery, and will be continue to be considered as a

processing option going forward. These incremental cyanidation recoveries were

equivalent to approximately 50% of gold values contained in the flotation tailings, or

5% - 7% of gold values contained in the ore.

• Detailed flotation optimization and ore variability testing is also in progress.

Detailed testing for evaluation of processing alternatives for the flotation rougher

concentrate is also in progress.

Page - 73 -

17. MINERAL RESOURCE ESTIMATION

17.1 INTRODUCTION

The current mineral resource estimate for the Angostura project was developed with the

help of a block model using the Datamine software package and was prepared by a

technical group as noted in Section 2.2. All drill-hole data available at the end of May

2008 have been included. The block model uses a regular cell size of 6.25 x 6.25 x 6.25

metres. The size of 6.25 metres was selected as the block size to get the selectivity

required for the Angostura deposit type, and because is an acceptable equipment size to

move huge tonnages. A Re-blocking to 8.75 meters was done as the second option, to

evaluate the impact in the selectivity. Metalica will use this two block models to make a

Trade Off between the two block sizes.

The Datamine software automatically creates fields in the block model file that reflect the

volume above the surface and below it, and also to define the limits of the oxidation. The

oxidation limit was created as a surface (DTM: Digital Terrain Model), from the information

of the oxidation zone in the drillholes. The DTM of the oxidation limit was created from

lines manually modeled in North – South vertical sections.

17.2 GEOLOGICAL MODEL

The geological model developed by Greystar staff builds directly on the interpreted

geology of the Angostura deposit as detailed in Section 9. Much of the interpretation

process was iterative, conducted in plan and sectional view, and in three-dimensional

space utilizing the projection capabilities of the Datamine software and continuing and

adjusting the interpretation that has been ongoing for a number of years. The process was

exhaustive and thorough and has resulted in the identification of more than 195 individual

vein structures. Given the complexity of the structural setting with veins striking in different

directions in the same area in many cases, the current model is the best that can be

expected.

In contrast to models created until 2007, where the interpreted veins or vein systems were

labeled individually and wire-framed, the January 2008 and the current models have used

the wireframes solely for the purpose of creating structural trend surfaces that follow the

interpreted veins and the bulk mineralization throughout the deposit. The trend surfaces

guide the direction of the three axes of the search ellipsoid used for grade interpolation on

Page - 74 -

a local scale and assure that the structural influence on the grade interpolation is

preserved. This more open concept of grade interpolation allows some of the grade

information surrounding the interpreted veins to be incorporated into the grade

interpolation. An example of the structural trend surfaces is in Figure 12.

As a result of this approach, the concept of ”disseminated” mineralization outside of the

wireframes used in the 2007 and earlier resource models was also abandoned. This is

reasonable, given the generally good drill hole coverage and spacing.

Based on the structural trends observed in surface and underground mapping, and

interpreted from drill-hole information, the deposit was divided into six structural domains,

also shown on Figure 12. From north to south they are identified as the Cristo Rey, the

Veta de Barro and Veta de Barro East, the Central, the Perezosa and Silencio domains.

Each of these domains was considered as a separate entity for grade statistics and grade

interpolation, but some were later treated as collectives based on their structural, statistical

or variography similarities.

17.3 LOW-GRADE AND HIGH-GRADE POPULATIONS AND THEIR STATISTICS

One of the major challenges for a realistic resource grade estimate at Angostura has been

the treatment of a high-grade assay population that clearly has a much shorter range of

predictability than the low-grade population within which it occurs. To limit the influence of

higher-grade intersections at Angostura, “shoots” had been constructed in previous

resource estimates around each such intersection, projecting the high-grade mineralization

up to a maximum distance of 20 metres along the interpreted strike direction from the point

of information and up to 60 metres down-dip, with the dimensions chosen derived from the

relatively sparse and not necessarily representative vein variography. With the continued

addition of high-grade intersections due to the increased drill-hole coverage, this approach

had become impractical, and a different method had been developed for the 2007

estimate. This has proven to be workable and was continued for the current estimate.

In an initial step, all high-grade intersections are identified individually and given a unique

code that reflects the drill hole and the status of the intersection as “high-grade”. In

general, a threshold of 5 g/t gold over 1.25 metres or equivalent grade-thickness product if

shorter was used to identify high-grade intersections, but this was adjusted, up or down, to

suit local circumstances. In the central part of the deposit, where the overall grade is

higher, the threshold grade was increased, while in areas where the low grade

Page - 75 -

mineralization rarely reaches 1.5 or 2 g/t , the threshold grade was lowered to around 3 g/t

over 1.25 metres.

The remaining assay data not identified as high-grade forms the low-grade population.

Page - 76 -

Page - 77 -

For statistical purposes, the high-grade and low-grade populations were further sub-

divided into Veta de Barro East (which includes the Cristo Rey structural domain), Veta

Barro and Main areas, the latter including the Central, Perezosa and Silencio structural

domains.

Basic statistics were established using 1.25-metre down-hole composites for each of the

assay populations, with the results tabulated in Table 7.

Table 7 Gold Assay Statistics of 1.25-metre Composites

Main Area Veta de Barro East Veta de Barro West

Low Grade Composites Number of

composites 182,727 25,157 14,149

Length (metres) 227,918 31,398 17,657

Cap (g/t) 3.8 4.1 3.7

Number of capped

(percentile) 342 (99.8%) 9 (99.9%) 23 (99.9%)

Gold Removed 0.7% 0.04% 0.3%

Mean

(g/t)

SD

(g/t) CV

Mean

(g/t)

SD

(g/t) CV

Mean

(g/t)

SD

(g/t) CV

Uncaped 0.30 0.57 1.9 0.20 0.42 2.1 0.22 0.43 2.0

Capped 0.30 0.47 1.6 0.20 0.42 2.1 0.22 0.42 1.9

High Grade Composites

Number of

composites 2,874 304 223

Length (metres) 3,275 351 253

Cap (g/t) 65 90 NO CAP

Number of capped

(percentile) 28 (99%) 7(97.9%) N/A

Gold Removed 4.1% 9.6% N/A

Mean

(g/t)

SD

(g/t) CV

Mean

(g/t)

SD

(g/t) CV

Mean

(g/t)

SD

(g/t) CV

Uncapped 10.7 13.9 1.3 14.81 23.5 1.6 12.4 24.4 2.0

Capped 10.3 9.8 1.0 13.51 15.5 1.1 N/A N/A N/A

Page - 78 -

During compositing, composites less than one-half the composite length were discarded.

To avoid the discard of a high-grade intersection, a minimum core length of 0.65 metres

was established during the high-grade interval selection process by adding adjacent low-

grade mineralization as required. Unused composite “tails” are not a problem for the much

more frequent low-grade mineralization.

Note that for the evaluation of the low-grade population, a lower cut-off grade of 0.05 g/t

was applied to exclude the very large number of waste composites from this population.

Compositing uses length-weighted grade averaging, and the changes in bulk density as a

function of gold grade (Section 14.4) are largely accounted for by the split into the two

grade populations.

To guard against any low-grade bias introduced by high core losses, core assays from

intervals with less than 70% core recovery had previously been factored by the actual core

recovery. Given the findings presented in Section 12.2, this has been discontinued

starting with the June 2006 resource estimate, but assays from sample intervals with a

core recovery of 10% or less have not been used for resource estimation (0.05% of the

total length).

Capping levels were determined for each population by evaluating frequency distribution

and logprobability diagrams, and the values chosen, and their effects, are also shown in

Table 7. The individual populations generally have a good statistical behaviour, with

reasonable to excellent CV values, and capping was limited.

In addition to the data summarized in Table 7, there are 637 muck samples that fall within

the various veins in the Main Area and were used for the resource estimate. Their mean

gold grade is 0.58 g/t with a SD of 0.78 g/t and a CV of 1.3. Capping of high-grade values

contained in this population was not required. Channel samples taken recently along both

walls of the some of the underground openings indicate that the muck samples may be

biased high, and future resource estimates should use the channel sample results as

discussed in Section 12.4. Surface channel sampling to replace the existing surface

samples is ongoing and will be incorporated into the next resource estimate.

The silver and copper values of the high-grade and low-grade composite populations were

similarly investigated, and capping levels determined as summarized in Table 8.

Page - 79 -

Table 8 Silver and Copper Assay Statistics of 1.25-metre Composites

Main Area Veta de Barro East Veta de Barro West

Ag (g/t) Cu (%) Ag (g/t) Cu (%) Ag (g/t) Cu (%)

Low Grade Composites

Cap 260 2.25 100 0.55 115 0.15

Mean Grade Uncapped 2.3 0.02 1.4 0.01 1.5 0.01

Mean Grade Capped 2.3 0.02 1.4 0.01 1.4 0.01

High Grade Composites

Cap 340 3.40 300 1.1 300 No Cap

Mean Grade Uncapped 39.2 0.19 47 0.14 50 -

Mean Grade Capped 36.9 0.19 41 0.13 41 -

The capped 1.25-metre composites were used to calculate six and twenty five metre

composites employed for the interpolation of the low-grade mineralization, while the high-

grade interpolation used the capped 1.25-metre composites to create vein composites with

a maximum length of ten metres.

17.4 HIGH-GRADE PROBABILITY INTERPOLATION

Instead of constructing physical “shoots” to model and constrain the high-grade assay

population as had been attempted in earlier resource estimate, a probability approach had

been introduced in 2006 and was continued, with some changes, for the current resource

estimate. For this purpose, each 1.25-metre composite assigned to the high-grade

population was given a value of one, i.e., the high-grade probability indicator is 100%,

while each low-grade sample interval was assigned a value of zero (0% high-grade

probability). Variography was undertaken on the probability data for each of the structural

domains described in Section 17.2. The results are summarized in Table 9.

Page - 80 -

Table 9 Variography Results, High-Grade Probability Indicator

Structural Domain

Variogram Ranges (metres) Radii Used for Indicator

Interpolation (metres)

Along-Strike Down-Dip Along-Strike

(75% range)

Down-Dip

(75% range)

Cristo Rey 65 65 45 45

Veta de Barro East 75 75 55 55

Veta de Barro West 60 60 45 45

Perezosa 80 80 60 60

Central 88 120 65 110

Silencio 70 70 50 50

All of the domains had isotropic results except for the Silencio domain. The probability to

contain high-grade mineralization was then interpolated for each block. The actual radii

used for the indicator interpolation were generally set at 75% of the variography ranges to

guard against overprojection of the high-grade indicators. The long and intermediate axes

of the search ellipsoids were forced to follow the structural trend surfaces described in

Section 17.2 (a “floating ellipsoid”). Experimentation with the interpolation technique for

the probability indicator estimate resulted in the selection of inverse distance to the twelfth

power [ID12] for the probability indicator estimate. A typical example of the results of this

interpolation is shown in Figure 13.

The high-grade probability indicator estimated for each block is directly translated into a

volume percentage of high-grade mineralization within the block, with the remainder

occupied by low-grade mineralization.

Page - 81 -

Figure 13 Example of High-Grade Probability Interpolation

Figure 13 shows a vein in the Los Laches Area approximately on section 131 900 E

(Looking southwest). Blocks with zero indicator probability are not shown. Some deviation

on a local scale of the search ellipsoid and the structural trend surface from the actual

attitude of the high-grade mineralization is apparent.

17.5 GOLD-GRADE VARIOGRAPHY

Variography of the gold grade distribution was undertaken for each of the structural

domains described in Section 17.2. The main purpose was to quantify distances for the

two types of mineralization in each structural domain. For the high-grade and low-grade

populations, five-metre composites were used to perform the variography, reducing the

investigation to two dimensions (strike and dip). An angular tolerance of 15° (up to a

maximum distance of 30 metres) was introduced to assure enough data pairs. The results

are summarized in Table 9 separately for the low-grade and for the high-grade

populations.

Page - 82 -

Table 10 Gold Grade Variography

Variogram

Structure

Variogram

Model Variogram (γ)

Strike and Dip

Range (metres)

Low – Grade Population

Cristo Rey

First Nugget 0.64

Second Spherical 0.32 37.5

Third Spherical 0.14 100

Veta de Barro

West

First Nugget 0.54

Second Spherical 0.24 35


Veta de Barro

East

First Nugget 0.07



Perezosa

First Nugget 0.07



Central

First Nugget 0.34



Silencio

First Nugget 0.07



High – Grade Population

Cristo Rey Poor and insufficient data

Veta de Barro

West First Nugget 0.32

Veta de Barro

East

First Nugget 0.19


Perezosa First Nugget 0.16


Central First Nugget 0.12


Silencio First Nugget 0.22

Page - 83 -

The high-grade probability indicator estimated for each block is directly translated into a

volume percentage of high-grade mineralization within the block, with the remainder

occupied by low-grade mineralization.

The variography analysis shows that the gold-grade distribution isotropic, or the anisotropy

is not large. While this conclusion applies to both populations, it is more robust for the low-

grade population because of the larger quantity of data.

For the low-grade population, a shorter range is in the order of 35 to 50 metres, while a

larger range is from 100 to 150 metres, with the nugget effect ranging from 50% to 60% of

the data variance. The data available for the high-grade population gives ranges of around

30 metres or a pure nugget effect, depending on the structural domain.

A test was undertaken in the Perezosa II tunnel on the 2850 level, which was designed to

measure the impact of the drill density on the tonnage and the contained gold of the high-

grade and low-grade populations. For this test, an area 315 by 230 metres was drilled on a

regular 12.5-metre pattern by 95 flat north-south totalling 13,752 metres collared from the

tunnel. The height of the test box was set at 20 metres, centred on the 2850 level.

Resources were estimated for the test box at decreasing drill spacing, and the results,

which are stated at a cut-off grade of 0.4 g/t and 0.55 g/t gold for oxides and sulphides

respectively, are shown in Table 11.

Table 11 Test Box Resource Estimates at Different Drill-Hole Spacing

Drill-Hole Spacing (metres) Tonnes Gold (g/t) Gold (ounces)

50 4,060,916 1.12 146,385

25 4,027,140 1.32 170,637

12.5 4,101,650 1.31 173,282

Going from 50 metre spacing to 25 metre spacing, there is 17.5% increase in gold grade

and a 16.6% increase in contained ounces, while the tonnage increased slightly by 0.8%.

The almost identical results between the 12.5 and 25 metre spaced programs suggest that

there appears to be no significant benefit to drilling at a tighter separation than 25 metres.

The important conclusion from this test is that the higher-grade structures require drilling at

25 metres, and this distance confirms the variography results summarized in Table 10.

Page - 84 -

17.6 GRADE INTERPOLATION

The grade interpolation used the full vein composites for the high-grade assay population,

and the 6.25 metre composites for the low-grade assay population. Gold, silver and copper

grades were interpolated for each individual block by a simple inverse-distance squared

algorithm (ID2). A control interpolation using ordinary kriging gave similar overall results,

but a higher local estimation variance when compared to the actual composite grades.

The high-grade and the low-grade assay populations were estimated separately using

different interpolation parameters and search distances along strike and down-dip as

derived from the results of the variography described in Section 17.5 above. For each of

the two grade populations, only composites from the population being interpolated could

be used.

The first-pass interpolation for the high-grade population used search distances equal to

one-half of the distances shown in the two right columns in Table 8 for the two long axes,

and 6.25 metres for the short axis. During the second pass, the strike and dip search

distances were doubled (but the width was unchanged), and some of the other constraints

were also relaxed. For the grade interpolation of the low-grade population, the first pass

used a search ellipsoid of one-half of the third-structure ranges in Table 10, and again the

strike and dip distances were doubled for the second pass.

After several trial runs with different interpolation parameters, the mineral resources for

the Angostura deposit were estimated using the search parameters summarized in Tables

12 and 13. The evaluation of the trial interpolation parameters was mainly based on the

visual inspection of the resultant block grade patterns, the degree to which local grade

information was honored, and what projection distance of the high-grade mineralization

appeared defensible in light of the known geology and grade distribution within the deposit.

Page - 85 -

Table 12 Grade Interpolation Search Distances

First – Pass Interpolation Second – Pass Interpolation

Search Radius (metres) Search Radius (metres)

Along Across Down - Along Across Down -

Strike Strike Dip Strike Strike Dip

Cristo Rey Low Grade 50 6.25 50 100 6.25 100

High Grade 22.5 6.25 22.5 45 6.25 45

Veta de Barro

West

Low Grade 62.5 6.25 52.5 125 6.25 125

High Grade 22.5 6.25 22.5 45 6.25 45

Veta de Barro

East

Low Grade 62.5 6.25 62.5 125 6.25 125

High Grade 27.5 6.25 27.5 55 6.25 55

Perezosa Low Grade 62.5 6.25 62.5 125 6.25 125

High Grade 30 6.25 30 60 6.25 60

Central Low Grade 75 6.25 75 150 6.25 150

High Grade 32.5 6.25 55 65 6.25 110

Silencio Low Grade 50 6.25 50 100 6.25 100

High Grade 25 6.25 25 50 6.25 50

Table 13 Composite Utilization during Grade Interpolation

Composite First-Pass Interpolation First-Pass Interpolation

Length

Number of Composites

(Drill holes) Used

Number of Composites

(Drill holes) Used

(metres) Minimum Maximum Minimum Maximum

Low Grade 6.25 1 (1) NR (NR) 1 (1) NR (NR)

High Grade Vein Composite

(max. 10 m) 1 (1) 5 (5) 1 (1) 5 (5)

NR = no restriction

Blocks that were not estimated after the second run remained without a grade estimate

and are thus not included in the current resource statement. The extent of the high-grade

interpolation was further constrained by the introduction of a thirty-metre limit around each

drill hole, beyond which the high-grade probability was set to one-fifth of its original value,

and to zero if the block was at the edge of the existing drill-hole coverage. This has the

Page - 86 -

purpose of restricting high-grade mineralization being extended too far beyond single high-

grade intersections.

In general, silver, sulphur and copper grades were interpolated similar to gold for the low-

grade population, except that the search ellipsoid for calcium and sulphur was enlarged to

200 by 20 by 200 metres. Where this search proved insufficient for sulphur in the oxide

zone because of the lack of sulphur data in holes drilled in 1999 and earlier years, a 200-

metre spherical search was used.

Snowden (2005b) have demonstrated that the gold grades and their distribution in the

oxide and sulphide zones are quite similar. The boundary between the two zones was thus

left transparent during gold grade interpolation, as it was for silver, calcium and copper.

For sulphur, the boundary was opaque.

As a result of the two-stage interpolation, each original 6.25 m by 6.25 m by 6.25 m block

contains the following information:

1. The location of the block in space.

2. A designation of the structural domain in which the block resides.

3. A designation of whether the block is located in the oxide or sulphide zone.

4. Azimuth and dip of the floating ellipsoid (Section 17.2).

5. The probabilities for high-grade and low-grade mineralization obtained during the

probability indicator interpolation described in Section 17.4.

6. The volumes for each of the contained low-grade and high-grade mineralization

reflecting the results of the high-grade probability interpolation.

7. A density value for each of the two volumes depending on the gold grade (Section

14.4).

8. Interpolated gold grades for each of the low-grade population and the high-grade

population.

9. Interpolated grades for silver, copper, sulphur.

10. A calculated overall tonnage as well as grades for all elements.

11. The classification of the total block in accordance with the procedures described in

Section 17. 7.

Page - 87 -

The near-surface grade information from the artisanal tunnels, biased high because the

drifts follow higher-grade mineralization, was not considered for the general grade

interpolation. The tonnage and grade supported by these tunnels was estimated

polygonally to a vertical distance of 50 metres above and below the tunnel elevation and

amounts to some 175 000 tonnes at an average grade of 5.9 g/t gold, a small proportion of

the total.

17.7 RESOURCE CLASSIFICATION

The two interpolation passes summarized in Tables 12 and 13 were used as a primary

tool to classify the individual blocks. If a block was estimated during the first pass, it was

classified as either measured or indicated, if it was estimated during the less constrained

second pass, it was classified as inferred. In addition to having been interpolated during

the first pass, the assignment to the measured class for the high-grade material required

estimation with data from three or more drill holes. For the low-grade material to be

assigned the measured class, information had to be used from four or more drill holes

during the first pass.

There are a number of instances where the low-grade tonnage of a block has a higher

classification than the high-grade tonnage in the same block. In these cases, the majority

of the contained ounces of gold in each tonnage determined the block classification

(“Majority Rule”). Since the high-grade population contributes a larger proportion of

contained gold than corresponds to its volume, and since the search distance of the high-

grade is also more restricted (i.e., the high-grade ounces tend to have a lower resource

class), application of the majority rule favours a lower classification. This is also the case

during re-blocking (described in the next section) and was particularly obvious for the

measured category, which attained an overall lower grade as a result.

Variations in structural geology and grade continuity between the newly-introduced

structural domains have been taken into account, and the interpolation distances for the

measured and indicated classes of resources are based on variography results in each

domain (Section 15.5). The classification is in accordance with the requirements of NI 43-

101 as formulated by the latest CIM Definitions and Standards on Mineral Resources and

Mineral Reserves (adopted by CIM Council December 11, 2005), that read in part as

follows:

Page - 88 -

A ‘Mineral Resource’ is a concentration or occurrence of ... base and precious metals ...

in or on the Earth’s crust in such form and quantity and of such a grade or quality that it

has reasonable prospects for economic extraction. The location, quantity, grade,

geological characteristics and continuity of a Mineral Resource are known, estimated or

interpreted from specific geological evidence and knowledge.

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity,

grade or quality, densities, shape, and physical characteristics are so well established that

they can be estimated with confidence sufficient to allow the appropriate application of

technical and economic parameters, to support production planning and evaluation of the

economic viability of the deposit.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity,

grade or quality, densities, shape, and physical characteristics can be estimated with a

level of confidence sufficient to allow the appropriate application of technical and economic

parameters, to support mine planning and evaluation of the economic viability of the

deposit.

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and

grade or quality can be estimated on the basis of geological evidence and limited sampling

and reasonably assumed, but not verified, geological and grade continuity.

The mineral resources estimated for the Angostura deposit and disclosed in this

technical report are not mineral reserves.

17.8 DECEMBER 2008 UNCONSTRAINED ANGOSTURA MINERAL RESOURCE

ESTIMATE

The results of the December 08, 2008 mineral resource estimate for the Angostura project

are shown in plan and section in Figures 14, 15 and 16 and are summarized in Table 14

for regular blocks of 6.25 m by 6.25 m by 6.25 m, and unconstrained by any pit shell. The

estimate of the mineral resources constrained by an open pit developed by Metalica as

part of the feasibility study phase 1, will be reported in Section 17.10.

Page - 89 -

Page - 90 -

Page - 92 -

Table 14 Estimate of Unconstrained Mineral Resources

Measured Mineral Resources Indicated Mineral Resources Measured & Indicated Mineral

Resources

Cut off

grade

(g/t)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000

)

Ag

(g/t)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000

)

Ag

(g/t

)

Tonnes

(1,000)

Au

(g/t)

Au

(oz,

1,000)

Ag

(g/t

)

Oxides 0.3 49,620 0.63 1,007 5 37,246 1.05 1,258 7 86,867 0.81 2,265 6

Sulfides 0.45 99,280 0.86 2,729 4 144,760 1.41 6,555 7 244,040 1.18 9,284 6

TOTAL 148,900 0.78 3,736 4 182,006 1.34 7,813 7 330,907 1.09 11,549 6

Inferred Mineral Resources

Cut off

grade (g/t)

Tonnes

(1,000) Au (g/t)

Au

(oz,1000)

Ag

(g/t)

Oxides 0.3 6,241 1.33 266 9

Sulfides 0.45 84,539 1.18 3,205 6

TOTAL 90,779 1.19 3,472 6

The cut off grades used have been changed from 0.4 g/t for oxide resources and 0.55 g/t

for sulphide resources used in previous estimates. The lower cut-off grades reflect a

higher gold price of $ 650 per ounce than the $ 500 per ounce used previously, and a

more detailed discussion of the choice of cut-off grades is in Section 17.11.

Greystar published the last unconstrained mineral resource estimate for the Angostura

project one year ago in December 2007 (Greystar, 2007). This estimate constituted an

update of the resource estimate used for the Hatch 2007 Scoping Study and is described

in detail in a Technical Report of January 2008 (Strathcona 2008).

Page - 93 -

Table 15 Comparison with the Unconstrained December 2007 Estimate

-millions of tones and contained ounces of gold-

Tonnes Au Au Ag Tonnes Au Au Ag

(g/t) (oz) (g/t) (g/t) (oz) (g/t)

December 2007 Estimate

(block size: 5 m, and minimum subcell size 1.25m)

Measured & Indicated Mineral Resources Inferred Mineral Resources

Oxide 57.9 1.1 2.0 7 8.7 1.6 0.3 10

Sulphide 176.4 1.4 8.2 5 71.0 1.4 3.1 7

Total 234.3 1.4 10.2 6 77.7 1.4 3.4 7

December 2008 Estimate

(block size: Regular, 6.25 m)

Measured & Indicated Mineral Resources Inferred Mineral Resources

Oxide 60.0 1.0 2.0 6 4.7 1.6 0.2 11

Sulphide 177.9 1.4 8.2 7 62.7 1.4 2.9 7

Total 237.9 1.3 10.2 7 67.4 1.4 3.1 7

Note: Cut off grades of 0.4 g/t and 0.55 g/t gold for oxides and sulphides respectively

However, the current estimate uses a somewhat different approach as discussed in detail

in the preceding sections. The main differences are the change of the block size from 5

metres (minimum cells of 1.25 m) to regular 6.25 metre in the three dimensions. The

Table 15 compares the estimations of December 2007 and December 2008. The effect of

the new 6.25 metres block size is a small reduction in the gold grades, and in the ounces

at cut off grades of 0.4 g/t and 0.55 g/t gold, because the dilution obtained with the

increase of the block size.

There are several reasons for the differences of the two estimates. The drill and assay

database available for the current estimate has been augmented by additional information

compared to that available a year ago (Table 2). The cut off grades where changed from

0.4 g/t Au to 0.3 g/t Au for oxides and from 0.55 to 0.45 for sulfides.

Page - 94 -

17.9 RE-BLOCKING

Re-blocking of the Angostura resource estimate from the original smaller block size to a

larger block size to incorporate dilution and mining losses into the block model had been

undertaken for the December 2007 estimate, increasing the block size from 125 cubic

metres to 1000 cubic metres (ten-metre blocks). At the cut-off grades used for the

December 2007 estimate, this had resulted in a gold grade reduction of about 10%, and a

reduction of the contained gold by about 7% (Strathcona 2008, page 78). Ten-metre

benches had also been used by the Hatch 2007 Scoping Study.

SRK Minproc have studied the question of the size of the smallest mining unit (SMU) for a

possible Angostura open-pit mining operation and have concluded that 8.75-metre blocks

are the maximum SMU possible. The evaluation of the mining equipment size was made

to obtain the SMU that could be used, obtaining that block sizes 6.25 metres and 8.75

metres can address the magnitude of work required to achieve good selectivity. Metalica

is currently conducting trade-off studies on two SMU sizes, 6.25 metres (the block size of

the current resource estimate), and 8.75 metres as proposed by SRK. Given these

ongoing studies, Table 16 compares the two estimates for the measured and indicated

resource categories, at cut-off grades of 0.3 g/t gold for oxides and 0.45 g/t gold for

sulphide material. Both estimates are constrained by the Metalica pit.

the majority of the contained ounces of gold in each tonnage determined the block

classification (“Majority Rule”). This majority rule is applied in the re-classification during

the re-blocking.

To illustrate the effects of the re-blocking in particular areas, Figure 17 compares the 6.25-

metre and 8.75-metre block models for one area at level 2 850 m, in the Perezosa area.

Figure 18 shows the change in classification as a result of re-blocking for one area to the

north of the area compared in the Figure 17, but at the same level 2 850.

Page - 95 -

Figure 17 Re-blocking Results. Gold Grade Comparison between 6.25 and 8.75 m

Blocks.

6.25 m block

8.75 m block

Page - 96 -

Figure 18 Re-blocking Results. Resource Classification Comparison between 6.25

and 8.75 m Blocks.

6.25 m block

8.75 m block

Page - 97 -

The re-blocking has induced a gold grade reduction as seen in the Figure 17. The re-

classification with the re-blocking has caused small changes generating more

homogeneous areas.

Table 16 Effect of Re-Blocking, Measured & Indicated Resources

– millions of tonnes and millions of ounces –

6.25 m by 6.25 m by 6.25 m 8.75 m by 8.75 m by 8.75 m

Tonnes

(Mt) (Au (g/t) Au (Koz)

Tonnes

(Mt) (Au (g/t) Au (Koz)

Oxide 86.9 0.81 2.3 92.4 0.74 2.2

Sulphide 244.0 1.18 9.3 259.8 1.06 8.8

Total 330.9 1.09 11.6 352.1 0.98 11.0

Identical cut-off grades are used in Table 16 for both sets of resources (0.3 g/t gold for

oxide and 0.45 g/t gold for sulphide resources). The re-blocking results in a grade

reduction by about 10%, and a smaller increase in the diluted tonnage, since some low-

grade blocks have fallen below the cut-off grade due to added dilution during the re-

blocking process. As a result, there is an overall loss of contained gold of about 5%. Re-

blocking also results in a partial re-classification by the application of the majority rule

explained in Section 17.7.

17.10 DECEMBER 2008 CONSTRAINED ANGOSTURA MINERAL RESOURCE

ESTIMATE

To satisfy the requirement that mineral resources have “reasonable prospects for

economic extraction”, that portion of the unconstrained regular 6.25 metre resource

estimate as of December 1, 2008 that is enclosed in the open-pit designed by Metalica

(2008). The resources using three different sets of cut off grades for oxides and for

sulfides is summarized in Table 17.

Metalica obtained the pit using the software Whittle as part of the feasibility study phase 1,

with the following parameters for the pit optimization; obtained from the information

provided by GRD Minproc, Metalica and McClelland laboratories, as part of the studies of

the feasibility study phase 1.

Page - 98 -

� Block Model Size 6.25 m x 6.25 m x 6.25 m

� Mining Cost 1.2 US$/t

� Heap Leaching Process Cost 2.39 US$/t (70,000 ktpd)

� Milling – Flotation Process Cost 20.73 US$/t (4.25 ktpd)

� Gold Selling Price 650 US$/oz

� Gold Selling Royalties(3.2% gold price) 20.8 US$/oz

� Gold Selling Costs (1% gold price) 6.5 US$/oz

� Silver Selling Price 9.0 US$/oz

� Silver Selling Royalties(3.2% gold price) 0.29 US$/oz

� Silver Selling Costs (1% gold price) 0.09 US$/oz

� Pit Wall Slope 43°

� Heap Leach Metallurgical Recoveries: Gold (RAu_HL) and Silver (RAg_HL):

Au If S < 3% RAu_HL = -25.415 x %S + 109.349; máx. 90%

Au If S>= 3% RAu_HL = 31%

Ag If S < 3% → RAg-HL = 54%; If S ≥ 3% → RAg_HL = 34%

� Flotation + Concentrate Processing Metallurgical Recoveries: Au (RAu_F) and

Ag(RAg_F):

RAu_F = 81% RAG_F=45%

Page - 99 -

Table 17 Angostura Mineral Resource Estimate, December 1, 2008, 6.25 metre

blocks and Constrained by Preliminary Metalica Pit.

Cut off grades Au

(g/t)

Sulfides Oxides Total

Tonnes (1000)

Au (g/t)

Ag (g/t)

Tonnes (1000)

Tonnes (1000)

Au (g/t)

Ag (g/t)

Au (oz, 1000)

Tonnes (1000)

Au (g/t)

Ag (g/t)

Au (oz, 1000)

Oxides 0.4

Sulfides 0.5 133,863 1.5 7 6,365 61,391 1.1 7 2,160 195,254 1.4 7 8,525

Oxides 0.3

Sulfides 0.45 156,984 1.3 7 6,717 88,263 0.9 6 2,460 245,247 1.2 6 9,177

Oxides 0.2

Sulfides 0.4 185,005 1.2 6 7,100 127,070 0.7 5 2,768 312,075 1.0 6 9,868

17.11 DISCUSSION OF CHOICE OF CUT-OFF GRADES

Reviewing the operating costs presented by Hatch, and a gold price of $650 per gold

ounce, a reduction of the cut off grades from 0.4 to 0.3 g/t Au for oxides and from 0.55 to

0.45 g/t Au, is now considered appropriate, if is considered that the incremental cut-off

grades calculate to less than 0.2 g/t for oxide material and 0.4 g/t for sulphides,

respectively, below the figures of 0.3 g/t for oxide and 0.45 g/t for sulphide as used to

report the unconstrained resource(Table 14).

The pit optimization developed by Metalica using the parameters described above,

obtained the blocks within the pit that paid for either heap leach or the flotation processes.

The population of the blocks that paid the heap leach process was used to obtain a

histogram of the gold grades with positive economic return. This is necessary because the

metallurgical recovery depends of the gold grade, silver grade and the sulphur content.

The histograms of the gold values of the economic blocks for heap leach process for

oxides and sulphides are shown in the Figures 19 and 20. The histogram of the gold

grades of the waste blocks in the sulphides zone is showed in the Figure 21.

Page - 100 -

Figure 19 Histogram of Gold Grade of the Oxidized Blocks within Metalica Pit,

Paying Heap Leach Process.

Figure 20 Histogram of Gold Grade of the Blocks of Sulphides within Metalica Pit,

Paying Heap Leach Process.

Oxides Cut off

0.3 g/t gold

Sulphides Cut off

0.45 g/t gold

Page - 101 -

Figure 21 Histogram of Gold Grade of the Waste Blocks of Sulphides within

Metalica Pit

The cut off grades selected for the resources reporting in oxides and sulphides, 0.3 g/t and

0.45 g/t gold respectively, were based on the analysis of the histograms of gold grade for

the economic blocks. Many blocks are economic with gold contents bellow the cut off gold

grades defined, because the silver content and the low cost of the heap leaching process.

The histogram in the Figure 21 represents the population of the blocks gold grade bellow

the cut off grade selected for the sulphides zone. Again, some of blocks with gold grade

above cut off grade are not economic (Waste), because their high content of sulphur

affecting the metallurgical recovery.

The parameters that affect the economic cut off grades are:

1. The long term gold price of US$650 per ounce and silver price of US$ 9 per ounce.

2. The fact that the silver grade and the sulphur grade are playing an important role in

the economics of the block.

Sulphides Cut off

0.45 g/t gold

Page - 102 -

3. The new information obtained from the metallurgical tests and the advanced

investigation of the operation costs makes it acceptable to use lower cut-off grade

4. The mining and process costs affect the economics of the blocks depending of the

exploitation rates defined for the mine. In this case, 70 000 ore tonnes/day going

to heap leach were assumed and 4,250 ore tonnes/day going to milling + flotation +

concentrate process (bio-oxidation).

17.12 RESOURCE MODEL VALIDATION, 6.25 M. X 6.25 M. X 6.25 M.

In order to verify the consistency of the model resources to use in long term exercises, it

has been realized a grade model review including the estimation methodology and ore

classifications, like also a comparison of grade model available. It is possible to indicate

that the validation corresponds to standards methodologies to block model review.

17.12.1 GOLD GRADE REVIEW

Model grade review is a comparison of mean model gold grade to mean 6.25 metres

composite gold grade according 100 m intervals. The results are included below; bench

2634 is displayed in Figure 22 and Table 18 compares the gold grades of the block model

and of the composites that were used to interpolate the grade in to the block model at a

cut of grade of cero.

Page - 103 -

Figure 22 Example, Bench 2 634, model and composites.

Model Gold Grade: 0.42 g/t

N° data: 17 279

130,500 130,600 130,700 130,800 130,900 131,000 131,100

307,600

307,700

307,800

307,900

308,000

308,100

308,200

308,300

308,400

308,500

Composite Gold Grade: 0.59 g/t

N° data: 94

Page - 104 -

Table 18.- Gold grade review, model 6.25m.

Bench Gold Mean Grade (g/t)

Difference Block Model Composite

2634 0.42 0.59 0.17

2734 0.40 0.70 0.30

2834 0.35 0.40 0.05

2934 0.30 0.42 0.12

3034 0.31 0.46 0.15

3134 0.28 0.33 0.05

3234 0.22 0.35 0.13

3334 0.10 0.14 0.04

According to selected bench, its shows a tendency to the model mean grade it is lower

than the composites. This give like result of a conservative model, with a average

difference of 0.1253 g/t.

Page - 105 -

17.12.2 CLASSIFICATIONS REVIEW

The resource classifications is shown graphically on a set of plans and north-south

sections spaced at 100 m. The Figures 23, 24 and 25 are displaying the block

classification in plains and in a N-S section.

Figure 23 Classification Example, Bench 2 634

Blocks

Drillhole Traces

Measured Indicated Inferred

Page - 106 -

Figure 24 Classification Example, Bench 2 834

Figure 25 Classification Example, Section North-South; East 130 784

Blocks

Drillhole Traces


Page - 107 -

17.12.3 ORE RESOURCES TONNAGE

Based on gold cut off grade of 0.3 g/t for oxides and 0.45 g/t for sulphides, the ore

resource model estimate the following quantities of minerals.

Table 19.- Tonnage, Oxides, 6.25 m Blocks

Tonnage Au (g/t) Ag (g/t) Cu (%) S(%)

Measured 49,620,528 0.63 4.6 0.014 0.75

Indicated 37,246,139 1.05 6.8 0.018 0.83

Inferred 6,240,636 1.33 9.1 0.022 0.80

Table 20.- Tonnage, Sulphides, 6.25 m Blocks


Measured 99,279,676 0.86 4.0 0.033 2.99

Indicated 144,760,412 1.41 7.1 0.038 2.97

Inferred 84.538,614 1.18 5.8 0.032 2.72

17.13 RESOURCE MODEL VALIDATION, 8.75 M X 8.75 M. X 8.75 M.

17.13.1 GOLD GRADE REVIEW

Similarly to the Model 6.25 m, the model for the gold grade review for 8.75 m. is based on

comparison of the gold grade mean to composite gold grade mean. The mean grade of the

composites is the same as the one used in the model gold grade review for 6.25 m. The

results are shown in an example of the bench 3 034 displayed in the Figure 26. Table 21

that summarizes the estimate and measured gold grade comparison.

Page - 108 -

Figure 26 Example, Bench 3 034, model 8.75 m

Model Gold Grade: 0.30 g/t

N° data: 19 389

Composite Gold Grade: 0.46 g/t

N° data: 469

130,800 131,000 131,200 131,400 131,600307,800

308,000

308,200

308,400

308,600

308,800

309,000

309,200

130,800 131,000 131,200 131,400 131,600 131,800 132,000307,800

308,000

308,200

308,400

308,600

308,800

309,000

309,200

309,400

309,600

Page - 109 -

Tabla 21.- Gold grade review, model 8.75m vs 6.25 composites.

Bench Gold Mean Grade (g/t)

Difference Block Model Composite

2634 0.40 0.59 0.19

2734 0.38 0.70 0.32

2834 0.33 0.40 0.07

2934 0.28 0.42 0.14

3034 0.30 0.46 0.16

3134 0.27 0.33 0.06

3234 0.22 0.35 0.13

3334 0.09 0.14 0.04

Like in the model of 6.25 m, in selected benches, its shows a tendency to the model mean

grade it is lower than the composites, with a average difference of 0.1410 g/t for the model

8.75 m.

17.13.2 CLASSIFICATION REVIEW

Resource classification is also reviewed using bench of 100 m and through north-south

sections (bench from 2634 till 3334), and displays north-south sections located from

the130 684 to 131 284 east coordinates. The Figures 27, 28 and 29 are displaying the

8.75 m block classification in benches and in a N-S section

Page - 110 -

Figure 27 Classification Example, Bench 2 634, 8.75 m blocks.

Blocks

Drillhole Traces

Figure 28 Classification Example, Bench 2 734, 8.75 m blocks


Page - 111 -

Figure 29 Classification Example, Section North-South; East 130,684, 8.75 m blocks

Blocks

Drillhole Traces

17.13.3 ORE RESOURCES TONNAGE

Based on gold cut off grade of 0.3 g/t for oxides and 0.45 g/t for sulphides, the ore

resource model estimate the following quantities of minerals.

Table 22.- Tonnage, Oxides, 8.75 m Blocks.


Measured 49,381,696 0.61 4.5 0.014 0.75

Indicated 42,993,839 0.89 6.1 0.017 0.83

Inferred 8,265,559 0.99 7.5 0.018 0.81


Page - 112 -

Table 23.- Tonnage, Sulphides, 8.75 m Blocks.


Measured 94,949,196 0.82 3.7 0.033 2.98

Indicated 164,869,382 1.19 5.9 0.033 2.86

Inferred 90,104,945 0.98 4.9 0.027 2.67


The estimates of the Angostura mineral resources summarized in Tables 14 and 17

require several comments:

1. The methodology of the current resource estimate continues to apply the principle of

separating the assay database into a high-grade and a low-grade population, which has

reduced the natural skewness of the assay statistics for each population. The low-grade

populations require very little capping. In the absence of mixed-assay populations,

constraining the influence of the high-grade population is now more controlled and is

accomplished both by capping of high-grade outlier values and by limiting the search

distances during grade interpolation.

2. The search ellipsoids used for grade interpolation reflect the different continuity ranges

of the two gold grade populations as determined by variography in the established six

structural domains of the deposit.

3. The gold grade in the measured mineral resources is lower than that of the indicated

and inferred resource categories. This is due to the fact that the measured tonnage

contains a larger proportion of the low-grade assay population with its larger continuity

range as a result of the “Majority Rule” described in Section 17.7.

4. The comparison of the current estimate with the unconstrained December 2007

estimate showed in the Table 15 reflect a small decreasing of the inferred resources,

because the new data added; but this is not completely comparable because the two

estimates used different block sizes (5 m in 2007 versus 6.25 m in 2008).

Page - 113 -

5. According to selected bench, it shows a tendency to the model mean grade it is lower

than the composites mean grade. This gives like result of a conservative model, with an

average difference of 0.1253 g/t to model 6.25m and 0.1410 g/t to model 8.75m. See

Figure 30.

Figure 30 Gold Grade Comparison, Block Modell versus Composites

Page - 114 -

18. OTHER RELEVANT DATA AND INFORMATION

The perception of the security problem influenced the investor interest in the past, but

important changes and the Colombian reality are projecting a new image Colombia to the

world. The new perception is based on true facts such as strong growth of the economy

and the political and financial stability of the country added to the improvement in the

security levels. Colombia is one of the most stable economies in Latin America with a

increasing Gross Domestic Product (GDP) since 2003 until 2007, with lesser but still

important growth in 2008 because the world crisis. Colombia is known as the Latin

American oldest and most stable democracy. All presidents have been elected

democratically, except for a short period, between 1953 and 1957, when there was a

military dictatorship.

Some changes to the mining code law are under discussion in the Colombian Congress,

and the new law expected in January 2009.

19. INTERPRETATION AND CONCLUSIONS

The exploration of the Angostura project has been ongoing since 1995, with some

interruptions. The new mineral resource estimate presented in this technical report has

been prepared to correspond with the increased exploration database. It provides the

newest update and reflects the results of nearly a half year of additional exploration of the

Angostura project since the previous estimate, which was described in a technical report

prepared by Strathcona Mineral Services Limited in January 2008.

The December 2008 resource estimate is reported at cut-off grades of 0.3 g/t and 0.45 t/t

Au for oxidized and un-oxidized mineralization, respectively, as discussed in section 16.8.

The reduction of the earlier cut-off grades was made based on a analysis of the behavior

of the gold grades of the economic blocks obtained within the Metalica Pit, developed

using parameters based in the advanced investigation of the operation costs and the

results of the metallurgical test work as part of the feasibility study phase 1.

19.1 GEOLOGY AND RESOURCES

In Angostura Project gold mineralization occurs non-continuously and it is associated with

structural controls. Mineralization is mainly due to veins or veinlets and the host rock

corresponds partially to gneisses and intrusive rocks, the mineralization is also located in

Page - 115 -

breccias and fault zones. The alteration is mainly due to argillization of the gneisses and

schists, but also silicification and sericitization of the porphyries and intrusive rocks. The

structural history of the area shows a series of faulting and deformation events, including

reactivation of older structures (principal strike is the NE direction), which controls the

emplacement of intrusives and probably also alteration and mineralization stages. The

development of secondary structural paths in this project (EW, NE-SW, NW-SE) defines

the division of the deposit into six structural domains.

At Angostura, the definition of the Estimation Units (EU),Block estimation within model, is

complicated and difficult to establish due to different structural and mineralization stages.

This situation generates multiple pulses where some structures are sealed and others are

reactivated. Thus defining one or more geology variables to define the EU is a complex

strategy.

From the former, we can perceive that a probabilistic approach by means of an indicator

kriging is correct as long as it is complemented with a geologic control of the process in

order to avoid overestimation in some areas. Therefore we recommend both a continuous

assessment of the Block Model and an expert geological judgment.

The geological control of mineralization is structural. Nevertheless is recommended the

continuous checking through control sections every 25m to check weaknesses of the

Block Model.

Two grade models were developed for mine planning. One has block dimensions of 6.25m

x 6.25 m, and the other 8.75 m x 8.75 m. Both models simulate high and low grades in the

area; and they were built up based on methodologies for international standards such as

protocols of drill holes sampling and the use of grade estimation methodologies accepted

by norm like the NI43-101 and JORC (inverse to the distance, kriging). Consequently,

each model is robust to be used in long term mine planning and on mine reserves with

different definition such as different cut off criteria used.

The first model (6.25 m) represents a total of 93.1 Mt. @ 0.85 Au (g/t) in oxides and 328.6

Mt @ 1.18 Au (g/t) in sulphides. These values correspond to measured and indicated 86.9

Mt @ 0.81 Au (g/t) y 244.0 Mt @ 1.18 Au (g/t) respectively

Page - 116 -

The second model (8.75 m) represents a total of 100.6 Mt @ 0.763 Au (g/t) in oxides and

349.9 Mt @ 1.039 Au (g/t) in sulphides. These values correspond to measured and

indicated 92.4 Mt @ 0.743 Au (g/t) and 259.8 Mt @ 1.058 Au (g/t) respectively.

20. RECOMMENDATIONS FOR FURTHER WORK

The exploration activities in the Angostura Project have been completed in October 2008.

The next step is to develop the feasibility study. In August 2008 the feasibility study phase

1, was started. In this phase the study will consider capital costs, operational costs,

conceptual engineering designs, costs estimation with +- 30% of precision, economical

and financial analysis of the project, sensibility analysis, risk analysis and all the necessary

elements to obtain a complete study at a pre-feasibility level. The results of the phase 1,

will be the start point for the definitive feasibility study (Phase 2), to obtain a bankable

document with a detailed estimation of the parameters studied in the phase 1, including

basic engineering designs and a costs estimation with +- 15% of precision.

20.1 RESOURCES

• We recommend doing a new variogram using standard methods, as it is not a good

practice to use variograms initially developed for different covariances.

• The method of assign, probability for high grade zones within the block model is

based on the inverse distance to the power of 12. This is similar to use the polygon

method. We suggest in future work to use the kriging method as long as proper

variogram are available.

• A new resource estimate needs to be prepared that incorporates all of the new

exploration information that has been generated for the Angostura project after

May 2008. This updated resource estimate will form the basis for a reserve

estimate developed as part of the feasibility study phase 2.

20.2 MINING AND PIT DESIGN

The mining and pit design in the feasibility study phase 1, includes the following activities:

- Define the optimum bench height

- Establish the primary crushing options for the project.

Page - 117 -

- Define the best option for mining transportation between conveyor belt and trucks.

- Elaborate the pit design and the mining plan

- Geotechnical investigations will determine pit-wall and waste dump design angles,

the geotechnical characteristics of the areas for heap leach, tailings impoundment

and all the mine infrastructure.

- Elaborate the project distribution, and the conceptual engineering in the the

feasibility study phase 1, and detailed engineering in the definitive feasibility study

(phase 2) for the open pit, waste dumps, the primary crushing, etc.

- The condemnation investigations and drilling have to be completed before the

definitive feasibility study (phase 2).

- Evaluate the capital and operational costs for the mining activities.

20.3 MINERAL PROCESSING AND METALLURGICAL TESTING

The metallurgical testing program designed by Greystar and McClelland Laboratories

incorporates all the necessary test work to support at a PFS level most of the alternatives

considered by the GRD Minproc trade off study.

The processing options currently under consideration include:

• Heap leaching of oxide ore types.

• Heap leaching of low grade transitional and intermediate sulphides ore types.

• Milling/flotation treatment of high grade sulphide ore types, followed by:

o Stirred tank bio-oxidation/cyanidation treatment of flotation concentrate.

o Roasting/calcine cyanidation treatment of flotation concentrate.

• Heap bio-oxidation/heap leach cyanidation of intermediate sulphides ore types.

• Environmental testing. This include metals mobility tests, static, TCLP, and where

appropriate, kinetic (humidity cell) acid rock drainage (ARD) testing.

• Comminution Testing. Crusher work index, abrasion index and Bond ball work

index tests for select metallurgical composites.

Page - 118 -

20.4 METALURGICAL PROCESING AND INFRASTRUCTURE

Based in the Hatch Study as a base case, the following activities have to be developed at

a PFS level, in the feasibility study phase 1:

- Study alternatives of metallurgical processes and define the best option.

- Evaluate the best alternative and design the primary, secondary and tertiary

crushers, leaching pads, solution ponds, flotation, concentrates treatment, solution

recovery, dore production, tailing ponds, tailing transport.

- Evaluate the best alternatives for all the service infrastructure necessary: access

roads, location of the camps, offices, workshops, warehouses, internal roads,

treatment plants, laboratories, water treatment plants, evaluation of the energy

consumes, refinery, communication systems, Industrial Health and Security,

physical security, construction camp, permanent camp, water supply.

- Develop an economic study to define the best option for the mineral transportation

- Define the electric installations

- Define the capital and operational costs

20.5 HYDROLOGY , HYDROGEOLOGY AND ENVIRONMENTAL BASE LINE

The environmental investigation will cover:

- hydrology and hydrogeology studies

- Environmental Base line studies

All the activities of these studies have to follow standards of the Colombian environmental

laws, the Guidelines of the World Bank and the Equator Principles3. The following

activities will be developed:

3 The Equator Principles are a benchmark for the financial industry to manage social and

environmental issues in project financing. www.equator-principles.com

Page - 119 -

- Hydrologic characterization of the surficial water for the different project areas such

as the pit, waste dumps, leach pads, tailing ponds, and for the entire mining

infrastructure.

- Determine the water balance for all of the mining project

- Geochemical characterization of the waste, including the acid potential generation.

- Collect all the information necessary for the environmental base line.

- The environmental impact study will be started parallel to the definitive feasibility

study (Feasibility Study Phase 2).

- Define the options of water supply for the project

20.6 OTHER STUDIES

Some additional studies have to be developed:

- Geotechnical studies in all of the areas of the mining project

- Seismic Risk

- Surface Water Management

Page - 120 -

20.7 COST ESTIMATE

Table 24 Angostura Evaluations and Exploration Program Budget for 2009

-Thousands of Dollars-

Activity January to December 2009

Field Exploration

Drilling New Exploration Targets $1 525

Sample Preparation 63

Assaying 125

Field and Camp Costs 599

Security, Health and Safety,Social & Environmental 1 605

Administrative Costs - Management

Administrative Costs 1 688

Management Costs 65

Corporate Management 1 399

Other Studies

Feasibility Study Phase 1 1 510

Feasibility Study Phase 2

(Include Environmental Impact Study)

6 063

Final Design 3 202

Early Works (Project Construction)

Energy, Access roads, etc 4 807

Other Costs

Mining Titles Costs 458

Capital Costs (Land, buildings, equipment) 2 950

Contingency (10%) 2 600

TOTAL 28 659

The costs estimate does not include other early works to be defined in the phase 2 of the

feasibility such as works for the water management in the waste dumps, earth moving, etc.

Page - 121 -

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Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists

and Mineral Council of Australia (JORC), 1999

Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC

Code) to take effect September 1999.

Canadian Institute of Mining and Metallurgy, 2005

CIM Definitions and Standards on Mineral Resources and Mineral Reserves (adopted by

CIM Council December 11, 2005).

Felder, F., 2004

Social Aspects of Developing a Mining Project in an Area of Conflict. Angostura Project –

Colombia. Paper presented at Symposium de Oro, Lima, Peru on May 6, 2004.

Felder, F., Spat, A. & Silva, R., 2000

Angostura Project, A High Sulphidation Gold Silver Deposit located in the Santander

Complex of North Eastern Colombia. Paper presented at Simposio de Oro, Lima, Perú,

May 2000

Felder, F., Ortiz, G., Campos, C, Monsalve, I., Silva, A. & Horner, J, 2005

Angostura Project, A High Sulfidation Gold-Silver Deposit located in the Santander

Complex of North Eastern Colombia. Paper given a the Newgen Conference, Perth,

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Golder Associates, 1999

Prefeasibility Design Report, Angostura Project. Heap Leach Pad, Tailings Impoundment,

Waste Rock Storage and Surface Water Storage Area. Unpublished Report dated March

17, 1999

Greystar Resources Ltd., 2006

Greystar adds 420,000 Ounces of Gold Resources at Angostura. Press release dated

December 13, 2006


Silencio Test Shows 17% Higher Gold Grades. Press release dated April 30, 2008

Page - 122 -


Greystar Launches Feasibility Study. Press release dated August 18, 2008

Harris, F., 1998

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Horner, J., 2005

Structural Geology and Tectonics of the Angostura Project Area. Unpublished Final Draft

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Horner, J., 2008

Geological, Geotechnical and Rock Mechanical Services at Angostura – Interim Report by

iC consulenten. Unpublished report dated January 17, 2008

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Lafreniere, T., Brown, P. & Shouldice, T., 2006

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Lavens, T., 1999

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Page - 123 -

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Page - 124 -

Smee, B., 2005a

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Page - 125 -


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Page - 126 -

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Page - 128 -

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