Henning Gold Mines Inc. · 2015-11-05 · Henning Gold Mines Inc. Eight Mile Lake Placer Deposit...
Transcript of Henning Gold Mines Inc. · 2015-11-05 · Henning Gold Mines Inc. Eight Mile Lake Placer Deposit...
Henning Gold Mines Inc.
Eight Mile Lake Placer Deposit Cariboo Regional District, British Columbia
NI 43-101 Technical Report
Authors and Qualified Persons:
Bruce Davis, FAusIMM, BD Resource Consulting, Inc. (Principal) Robert Sim, P. Geo, SIM Geological Inc. Detlef Eberle, Pr.Sci.Nat. (RSA), Dr. rer.nat.habil (TU Berlin), geotec Rohstoffe GmbH, Germany
Effective Date: August 7, 2014
Release Date: November 10, 2014
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TABLE OF CONTENTS
1 SUMMARY ......................................................................................................................................... 1-1
2 INTRODUCTION ................................................................................................................................ 2-1
3 RELIANCE ON OTHER EXPERTS ................................................................................................... 3-1
4 PROPERTY DESCRIPTION AND LOCATION ................................................................................. 4-1
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE & PHYSIOGRAPHY .. 5-1
5.1 ACCESSIBILITY ............................................................................................................................. 5-1 5.2 CLIMATE ...................................................................................................................................... 5-1 5.3 LOCAL RESOURCES ...................................................................................................................... 5-2 5.4 INFRASTRUCTURE ......................................................................................................................... 5-2 5.5 PHYSIOGRAPHY ............................................................................................................................ 5-3
6 HISTORY ........................................................................................................................................... 6-1
7 GEOLOGICAL SETTING AND MINERALIZATION.......................................................................... 7-1
7.1 REGIONAL GEOLOGY .................................................................................................................... 7-1 7.2 LOCAL GEOLOGY .......................................................................................................................... 7-1 7.3 PROPERTY GEOLOGY ................................................................................................................... 7-2 7.4 MINERALIZATION ........................................................................................................................... 7-3
8 DEPOSIT TYPES ............................................................................................................................... 8-1
9 EXPLORATION ................................................................................................................................. 9-1
9.1 SEISMIC REFRACTION ................................................................................................................... 9-3 9.2 2D RESISTIVITY ............................................................................................................................ 9-6 9.3 TEST PITTING ............................................................................................................................... 9-8 9.4 CONCLUSIONS .............................................................................................................................. 9-9
10 DRILLING .................................................................................................................................... 10-1
11 SAMPLE PREPARATION, ANALYSES AND SECURITY ......................................................... 11-1
11.1 SAMPLE COLLECTION ................................................................................................................. 11-2 11.2 SAMPLE PREPARATION ............................................................................................................... 11-2 11.3 SAMPLE ANALYSIS ...................................................................................................................... 11-2 11.4 SAMPLE SECURITY ..................................................................................................................... 11-5
12 DATA VERIFICATION ................................................................................................................. 12-1
13 MINERAL PROCESSING AND METALLURGICAL TESTING .................................................. 13-1
14 MINERAL RESOURCE ESTIMATES .......................................................................................... 14-1
14.1 INTRODUCTION ........................................................................................................................... 14-1 14.2 AVAILABLE DATA ........................................................................................................................ 14-2 14.3 GEOLOGIC MODEL ...................................................................................................................... 14-5 14.4 EVALUATION OF OUTLIER GRADES .............................................................................................. 14-7 14.5 COMPOSITING ............................................................................................................................ 14-8 14.6 VARIOGRAPHY .......................................................................................................................... 14-11
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14.7 MODEL SETUP AND LIMITS ........................................................................................................ 14-12 14.8 INTERPOLATION PARAMETERS ................................................................................................... 14-13 14.9 VALIDATION .............................................................................................................................. 14-14 14.10 RESOURCE CLASSIFICATION ................................................................................................. 14-16 14.11 MINERAL RESOURCES .......................................................................................................... 14-16 14.12 COMPARISON OF 3D AND 2D MODELS ................................................................................... 14-18
15 MINERAL RESERVE ESTIMATES ............................................................................................. 15-1
16 MINING METHODS ..................................................................................................................... 16-1
17 RECOVERY METHODS .............................................................................................................. 17-1
18 PROJECT INFRASTRUCTURE .................................................................................................. 18-1
19 MARKET STUDIES AND CONTRACTS ..................................................................................... 19-1
20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT ........ 20-1
21 CAPITAL AND OPERATING COSTS ......................................................................................... 21-1
22 ECONOMIC ANALYSIS .............................................................................................................. 22-1
23 ADJACENT PROPERTIES ......................................................................................................... 23-1
24 OTHER RELEVANT DATA ......................................................................................................... 24-1
25 INTERPRETATION AND CONCLUSIONS ................................................................................. 25-1
26 RECOMMENDATIONS ................................................................................................................ 26-1
27 REFERENCES ............................................................................................................................. 27-1
28 CERTIFICATES AND SIGNATURES ......................................................................................... 28-1
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LIST OF TABLES
Table 1.1: Inferred Mineral Resource Estimate for Eight Mile Lake Placer Deposit ................. 1-3
Table 4.1: Tenures Overview .................................................................................................. 4-4
Table 6.1: Record of Historic Gold Production at Eight Mile Lake (Kocsis, 2012) .................... 6-1
Table 9.1: Exploration at Eight Mile Lake ................................................................................ 9-1
Table 9.2: Seismic Interpretation (Frontier, 2014) ................................................................... 9-3
Table 9.3: Geological Interpretation of the Measured 2D Resistivity (Arctic, 2014) .................. 9-6
Table 10.1: Unit Description (Timmermann, 2013) ................................................................ 10-2
Table 10.2: Drill Hole Details ................................................................................................. 10-5
Table 14.1: Basic Statistical Summary of Sample Data ......................................................... 14-4
Table 14.2: Correlogram Parameters .................................................................................. 14-12
Table 14.3: Block Model Limits ........................................................................................... 14-13
Table 14.4: Inferred Mineral Resource Estimate for Eight Mile Lake Placer Deposit ........... 14-17
Table 14.5: Comparison of Resources by Model Type ........................................................ 14-18
LIST OF FIGURES
Figure 4-1: Location Map ........................................................................................................ 4-1
Figure 4-2: Claims Map ........................................................................................................... 4-4
Figure 5-1: Accessibility Map .................................................................................................. 5-1
Figure 6-1: Historic Mining Areas at Eight Mile Lake (Kocsis, 2012) ........................................ 6-2
Figure 7-1: Regional Geology (modified after BCGS, 2014) .................................................... 7-1
Figure 7-2: Local Geology (modified after BCGS, 2014) ......................................................... 7-2
Figure 9-1: Overview of Exploration Work at Eight Mile Lake .................................................. 9-2
Figure 9-2: Seismic Refraction Traverses Crossing the Thistle Valley ..................................... 9-5
Figure 9-3: 2D Resistivity Image (Arctic Geophysics, 2014) .................................................... 9-7
Figure 9-4: 2007 Test Pit (Kocsis, 2012) ................................................................................. 9-8
Figure 9-5: 2007 Test Pit - Example of Gold Grain Size (Kocsis, 2012) .................................. 9-8
Figure 10-1: Nodwell-Mounted Reverse Circulation Drill Rig ................................................. 10-1
Figure 10-2: Various Drilling Campaigns ............................................................................... 10-4
Figure 11-1: Sample Gold Recovery Sluices ......................................................................... 11-1
Figure 11-2: Sample Analysis Work Flow Chart (Timmermann, 2013) .................................. 11-4
Figure 11-3: Sample Collection Buckets with Labels ............................................................. 11-5
Figure 13-1: Upper and Lower Sections of the Wash Plant ................................................... 13-2
Figure 14-1: Drill Hole and Topographic Plan ........................................................................ 14-3
Figure 14-2: Drill Hole and Topographic Plan in Main Area ................................................... 14-3
Figure 14-3: Boxplot1 of Gold by Lithology Type ................................................................... 14-5
Figure 14-4: Boxplot2 of Gold by Lithology Type ................................................................... 14-6
Figure 14-5: Plan Showing Contours of Overburden Thickness in the Main Area .................. 14-7
Figure 14-6: Cumulative Probability Plot of Gold Assay Sample Data ................................... 14-8
Figure 14-7: Isometric View of 1.5-m Composite Samples in the Main Area ....................... 14-10
Figure 14-8: Isometric View of Composites Over Full Thickness of Overburden ................. 14-10
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Figure 14-9: Plan View Showing the Thickness of Overburden and Gold Grades in Full-
Thickness Composites ........................................................................................................ 14-11
Figure 14-10: Isometric View of Additional Points Used to Control the Thickness Estimates in
the 2D Model ...................................................................................................................... 14-14
Figure 14-11: Swath Plot of OK vs NN Gold in 3D Model .................................................... 14-15
Figure 14-12: Swath Plots of 2D Model Estimates .............................................................. 14-15
Figure 14-13: Plan Showing the Limit of Inferred Mineral Resource .................................... 14-17
Figure 14-14: Isometric Views of the Extent of Inferred Mineral Resource .......................... 14-18
Figure 14-15: Plan Showing Area of Production during June-July 2014 .............................. 14-19
Figure 26-1: Plan Showing Areas for Future Exploration Activity (Kocsis, 2012) ................... 26-1
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1 SUMMARY
Property Description and Location
The Eight Mile Lake Placer Deposit is located in the Cariboo Regional District of British
Columbia, Canada, approximately 460 km north-northeast of Vancouver, British Columbia.
Quesnel, British Columbia, is the closest town of reasonable size; it is situated to the west
about 89 km from the property. Eight Mile Lake is located in UTM Zone 10 at 597800 E
(easting), 5890000 N (northing).
Ownership
The property is currently comprised of four placer claims and two placer leases. Mr.
Stephen Kocsis holds a 100% interest in all four claims and one of the leases. RHD
Holdings Corp. (RHD) currently holds a 100% interest in the other lease (RHD Lease).
Pursuant to a Mining Agreement with Mr. Kocsis, a subsidiary of Henning Gold Mines Inc.
(HGMI) has the right to mine and produce gold from the property, subject to a 12.5%
production royalty in favour of Mr. Kocsis. Pursuant to a Claim Purchase Agreement with
RHD, HGMI has the right to mine and produce gold from the RHD Lease and to purchase
the RHD Lease in consideration for an initial $60,000 cash payment (which has been
made) and delivery of a total of 120 ounces of gold produced from the property covered by
the lease.
Mining permits with 5-year terms have been granted. The operation is currently permitted to
process up to 300,000 m3 of gold-bearing sediments per year total.
History
The first documented production from the property occurred for several years just prior to
and just after 1900. Approximately 22,000 ounces of gold were produced during that
period. Production in 1988-1989 and again in 2007-2009 amounted to another several
hundred ounces.
Geology and Mineralization
The geology indicates an interglacial or glacial depositional environment that includes
interglacial alluvial systems, glacial deposition, as well as single events such as mudflows.
The gold tends to be associated with coarser gravels and larger cobble and is not
necessarily linked to bedrock. This suggests gold is deposited during the higher energy
phases and is, therefore, erratically distributed throughout the column of sediments.
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Sample Database and Validation
As of August 7, 2014, 54 vertical holes have been drilled at Eight Mile Lake for a total of
1,896 m. Drilling results have been validated against recovery results from current
production. The correspondence suggests the drill information is adequate to estimate
Inferred resources.
Status of Exploration, Development and Operations
Drilling is continuing in an effort to expand the resource base. The main focus of the
ongoing drilling is to delineate additional gravel-bearing channels on the property
Mineral Resource Estimate
The resource estimate has been generated from the reverse circulation drill hole sample
assay results and the associated gravel thickness. The resources have been classified by
their proximity to the sample locations and are reported according to CIM standards on
Mineral Resources and Reserves.
As required under NI 43-101, mineral resources must exhibit reasonable prospects for
eventual economic extraction. The Eight Mile Lake Placer Deposit is comprised of
unconsolidated overburden which contains variable quantities of free gold. There is no
additional sampling during mining and it is assumed that there is no vertical selectivity of
ore versus waste after an area has been selected for mining; essentially, all the material
between surface and bedrock is removed and run through the wash plant.
A series of resource limiting pit shells was generated using a 3D block model and a series
of projected technical and economic parameters that were deemed appropriate for this
deposit. Shells based on gold prices as low as $1,000/oz, site operating costs of $7.50/m3,
and a pit slope of 35° indicated that the majority of the overburden in the Main area of the
deposit exhibits reasonable prospects for eventual economic extraction. The northern crest
of most pit shells remain outside the 10-m buffer from the shore of Eight Mile Lake.
A base case cut-off grade of 0.2 g/m3 is determined assuming site operating costs of
$7.50/m3, a gold price, based on an approximate average price over the past year, of
$1300/oz and projected recoveries of 85%. Using the 2D model, portions of overburden
above this cut-off threshold have been identified and this boundary limit has been used to
identify the parts of the 3D block model that can be included in the mineral resource
estimate. The Inferred mineral resource estimate for the Eight Mile Lake Placer Deposit is
shown in Table 1.1.
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TABLE 1.1: INFERRED MINERAL RESOURCE ESTIMATE FOR EIGHT MILE LAKE PLACER DEPOSIT
Cubic Metres (000)
Grade (g/m
3)
Contained Gold (oz)
2,459 0.43 34,000
Note: Includes areas where the vertical extent of overburden
has a gold grade > 0.2 g/m3. Mineral resources are not mineral
reserves and do not have demonstrated economic viability.
Conclusions and Recommendations
The drill data available are adequate to estimate mineral resources in the Inferred category.
The current resource remains open in several directions and additional drilling is required to
define the ultimate limits of the deposit. There are indications that additional satellite
deposits may be present on the property and additional exploration drilling is
recommended.
Inferred resources are too uncertain to have economic factors applied to them. Mineral
resources, which are not mineral reserves, do not have demonstrated economic viability.
The quantity and grade of reported Inferred resources are uncertain in nature and there has
been insufficient exploration to classify these Inferred resources as Indicated or Measured,
and it is uncertain if further exploration will result in upgrading them to an Indicated or
Measured category.
Although, at this stage, there are no mineral reserves at the Eight Mile Lake deposit, the
deposit is currently in operation. As stated above, the estimate of contained ounces is
necessarily uncertain due to the intrinsic variability of the mineralization and the drill hole
spacing. Whether any or all of the placer gold contained in the estimate can be recovered is
unknown and mining a deposit based on resources in the Inferred category is potentially
risky.
It is typical to develop production decisions on feasibility studies based on Proven and
Probable reserves derived from Measured and Indicated resources. In the case of the Eight
Mile property, current operations are not based on the results of a feasibility study. The
operation uses Inferred resources that are too uncertain to be the foundation of a feasibility
study. As such there is more technical and economic uncertainty associated with the Eight
Mile mining and gold recovery than is usually associated with a producing mine.
Historically, projects that have gone into production without first establishing mineral
reserves and the support of a feasibility study, have a higher risk of economic and technical
failure.
The following actions are recommended for the Eight Mile Lake Placer Deposit:
Drill additional holes on a 50-m grid pattern to identify the lateral extents of the
current resource (approximately 20 holes, total 700 m = $100,000)
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Drill additional exploration holes to identify other gravel-bearing channels in the
exploration areas (20 holes, total 700 m = $100,000).
Continue to validate drill results against gold recovery efforts. Current mining
activities are directed using Inferred-class mineral resources. Additional close-
spaced drilling may be required to improve production reconciliation.
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2 INTRODUCTION
Henning Gold Mines Inc. (HGMI) commissioned Robert Sim, P.Geo of SIM Geological Inc.
(SIM Geological) and Bruce Davis, FAusIMM of BD Resource Consulting, Inc. (BDRC) to
provide a mineral resource estimate for the Eight Mile Lake Placer Deposit in northern
British Columbia, Canada. Additional input has been made by Dr. Detlef Eberle of geotec
Rohstoffe GmbH, Germany. Robert Sim, P. Geo, Bruce Davis, FAusIMM, and Dr. Eberle
are all independent “qualified persons”, within the meaning of the Canadian National
Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101). They are
responsible for the preparation of this technical report on the Eight Mile Lake Placer
Deposit (Technical Report) which was prepared in accordance with NI 43-101 and Form
43-101F1. The information, conclusions, opinions, and estimates contained herein are
based on:
The qualified persons’ field observations.
Data, reports and other information supplied by HGMI and other third parties.
Bruce Davis visited the site on August 6-7, 2014. He was accompanied by Dr. Eberle and,
Stephen Kocsis, the owner. Although drilling was not active at the time, they reviewed RC
sampling procedures, and inspected several drill hole locations and most of the tenures
comprising the property. They also reviewed all aspects of the current mining operations
which are producing gold on the property.
In preparing this Technical Report, the authors reviewed and used several in-house
geological reports, maps, and miscellaneous technical papers, and relied on discussions
with Stephen Kocsis during the site visit. Both HGMI personnel and Stephen Kocsis were
very open during these discussions and provided all information that was requested by the
qualified persons. This report is based on drilling and sampling data available as of August
7, 2014.
HGMI possesses a valid “Occupant License to Cut and Remove Timber” on the property
and is currently permitted by the Ministry of Mines to remove up to 1,500 m3 of
merchantable timber.
All measurement units used in this report are metric, and currency is expressed in US
dollars (US$) unless stated otherwise.
The effective date for this Technical Report and the mineral resource estimate is August 7,
2014.
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3 RELIANCE ON OTHER EXPERTS
The report was prepared by Robert Sim, P.Geo of SIM Geological Inc. (SIM Geological)
and Bruce Davis, FAusIMM of BD Resource Consulting, Inc. (BDRC), and Dr. Detlef
Eberle; all are independent “qualified persons” for the purposes of NI 43-101.
For the purpose of Section 4 (Property Description and Location) of this Technical Report,
the qualified persons have relied on the ownership data (mineral, surface, access rights,
and royalty rights) provided by HGMI. The qualified persons believe these data and
information are essentially complete and correct to the best of their knowledge and that no
information was intentionally withheld that would affect the conclusions made herein. The
qualified persons have not researched the property title or mineral rights for the Eight Mile
Lake property and express no legal opinion as to the ownership status of the property.
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4 PROPERTY DESCRIPTION AND LOCATION
The Eight Mile Lake property, shown in Figure 4-1, is located in the Cariboo Regional
District of British Columbia, Canada, approximately 460 km north-northeast of Vancouver,
British Columbia. Quesnel, British Columbia, is the closest town of reasonable size; it is
situated to the west about 89 km from the property. Prince George is the largest population
centre in this part of central British Columbia; it is situated to the northwest about 190 km
from the property (driving distance). In UTM coordinates, Eight Mile Lake is located in Zone
10 at 597800 E (easting), 5890000 N (northing).
FIGURE 4-1: LOCATION MAP
The property is currently comprised of four placer claims and two placer leases. Details
regarding the tenures are shown in Table 4.1 and in Figure 4-2. In order to maintain the
aforementioned tenures in good standing, the recorded owner is required, in the case of the
claims, to either do the statutorily required amount of annual exploration and development
work on the claims, or pay the required amount of cash in lieu of such work, as set out in
the British Columbia Mineral Tenure Act (MTA) and the Mineral Tenure Act Regulation
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(MTA Regulation). In the case of the leases, the recorded owner is required to make the
annual lease rental payment as set out in the MTA and MTA Regulation.
All of the tenures listed in Table 4.1 are 100% owned by Stephen Kocsis, with the
exception of placer lease 391993, which is 100% owned by RHD Holdings Corp.
Effective March 15, 2013, Henning Gold Mines Inc. (HGMI) and its wholly-owned indirect
subsidiary Wildhorse River Gold Mines Inc. (Wildhorse) entered into a Mining Agreement
(Mining Agreement) with Stephen Kocsis (Kocsis) to extract gold from the Eight Mile Lake
property. Under the terms of the Mining Agreement, Kocsis agreed to provide Wildhorse
with access to the property in order to conduct an initial exploration program, and to
subsequently conduct mining activities for a period of 10 years from the date of
commencement of mining operations. In September 2013, HGMI began mining activities
on the property pursuant to the terms of the Mining Agreement.
The Mining Agreement provides that in consideration for providing HGMI with the right to
conduct mining operations, Kocsis shall be entitled to a percentage of production royalty on
the following basis:
(a) 12.5% of all gold produced if such production is equal to or greater than 25 ounces
per day; or
(b) on any day, if the amount of gold recovered is less than 25 ounces, Kocsis shall
receive 10% of the amount of gold recovered; however, if the amount of gold recovered
for the production year exceeds an average of 25 ounces per day, Kocsis shall be paid
an additional amount of gold, such that the total amount of gold Kocsis will recover for a
production year shall be the average of 12.5% of all gold recovered.
The Mining Agreement also provides that if:
(a) a mining Technical Report can substantiate a minimum grade of 0.5 g/m3 and a total
Inferred resource of at least 10,000 ounces of raw gold (with an average 86% finesse);
or
(b) an average and a minimum of 500 ounces per month would have been produced in
two consecutive months,
then, whichever is earlier, (a) or (b), Wildhorse will:
(c) purchase a private house (selected by Kocsis) and land having a minimum purchase
price of $450,000 (the Milestone House) and furniture value of $50,000; and
(d) rent the Milestone House to Kocsis for the monthly rate of $1.00 during the term of
the mining operation. However, in the event that production during the period up to
December 31, 2014 is at least 3,000 ounces of gold in aggregate, then Wildhorse will
forthwith sell the Milestone House, land and furniture to Kocsis for $1.00.
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With respect to placer lease number 391993, Wildhorse entered into a Claim Purchase
Agreement (Claim Purchase Agreement) on September 1, 2013 with Robert Davie; this
agreement gave Wildhorse the right to acquire a 100% interest in such lease. Mr. Davie is
now deceased, and, as a result, the Claim Purchase Agreement and the lease were
transferred via Mr. Davie’s estate to RHD Holdings Corp. on August 5, 2014.
Pursuant to the terms of the Claim Purchase Agreement, Wildhorse may acquire the lease
by fulfilling the following requirements: make an initial $60,000 payment (this payment has
been made, and Wildhorse has obtained the right to commence mining), and deliver a total
of 120 ounces of gold produced from the property covered by the lease in instalments of 12
ounces per month. Wildhorse commenced production from the lease in June 2014.
A mining permit has been granted for tenure numbers 398947, 559739, and 391993. There
is a second mine permit for tenure number 391993. Both permits have 5-year terms: Kocsis
(July 1, 2013 to December 31, 2017) and RHD Holdings Corp. (May 15, 2014 to December
31, 2018). Each permit includes approval for 150,000-m3 production of pay-gravel sluicing,
so the mine is currently permitted to process up to 300,000 m3 of gold-bearing sediments
per year total.
HGMI intends to submit an application this year to increase production to 500,000 m3 or
more. The permits include authorization to drill 210 holes and excavate 65 test pits.
Permitting also includes seismic and other geophysical surveys, a 4-km access road,
construction, camp, fuel storage, ERP, settling ponds, and sufficient areas for overburden
and tailings disposal.
HGMI possesses a valid “Occupant License to Cut and Remove Timber” on the Property.
HGMI is currently permitted by the Ministry of Mines to remove up to 1,500 m3 of
merchantable timber. Water for sluicing is 100% recycled in a closed-circuit, four-pond
system. No water license is required for groundwater extracted from the ponds and or
neighbouring flooded mine pits. However, the mine is permitted to rejuvenate the ponds by
pumping water from Eight Mile Lake; this is sometimes needed during the summer dry
season.
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TABLE 4.1: TENURES OVERVIEW
Property Name Owner Tenure Number
Area (ha)
Tenure Type
Tenure Sub-Type
Expiry Date
Eight Mile Lake
Stephen Kocsis 398947 200.50 Placer Lease March 21, 2017
RHD Holdings Corp. 391993 28.84 Placer Lease October 11, 2014
Stephen Kocsis 559739 213.29 Placer Claim June 2, 2016
Stephen Kocsis 1022444 38.77 Placer Claim May 10, 2016
Stephen Kocsis 1022445 19.39 Placer Claim May 10, 2016
Stephen Kocsis 1015736 38.97 Placer Claim January 5, 2015
FIGURE 4-2: CLAIMS MAP
Eight Mile Lake extends across some parts of the property. Wetland areas and streams,
which require environmental protection, are associated with the lake. It is understood that
any activity that causes surface disturbance will require a minimum distance of 10 m to the
water or wetland areas; sediment must not be transported into water bodies such as Eight
Mile Lake.
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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,
INFRASTRUCTURE & PHYSIOGRAPHY
5.1 ACCESSIBILITY
The Eight Mile Lake property is located in the Cariboo Regional District of British Columbia,
Canada, approximately 460 km north-northeast of Vancouver, British Columbia shown in
Figure 5-1. It is easily accessible by vehicle from Quesnel, British Columbia on a series of
paved highways and gravel roads. The route is as follows: take Highway 97 from Quesnel,
proceed 7 km north to Highway 26, continue 80 km east on Highway 26 towards
Wells/Barkerville; proceed approximately 10 km north on the Bowron Lake Road towards
Bowron Lakes and then 1.5 km west on 2200 Road to the Eight Mile Lake site. Numerous
logging roads crisscross the claims. All claim sections can be accessed by a vehicle.
FIGURE 5-1: ACCESSIBILITY MAP
5.2 CLIMATE
Eight Mile Lake has significantly higher rainfall and snowfall than the Quesnel area; this is
due to its higher elevation and proximity to the Cariboo Mountains. The climate is cooler
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than Quesnel. The weather conditions can change quickly, and temperature drops can
occur at any time of the year. Frost and snow can occur even during the summer season.
Due to its higher elevation (approximately 1,220 m above mean sea level), the hottest
month rarely exceeds an average temperature of 22°C. The climate at Eight Mile Lake is
boreal, with warm summer months and full humidity. The area is covered in snow from the
end of October to the middle of May; snowfall is usually between 100 and 200 cm.
Depending on winter temperatures, drilling and seismic activities can occur year round,
except when temperatures reach only daily highs of -25°C or colder. All other operations
are shut down during the winter period. In 2013, production (sluicing) ended in late
November and restarted again in early April 2014; production can occur approximately 8
months per year. Overburden removal can extend into December and restart in March;
removal can occur approximately 10 months per year.
5.3 LOCAL RESOURCES
Local resources have been established on site. The mine site is accessible by paved
highways and well-maintained gravel roads. Electrical power is provided by on-site diesel
generators. Diesel fuel is stored in tanks, which are regularly refilled by fuel trucks. Timber,
water, and mining surface rights have been obtained (Eight Mile Lake permit number:
Permit P-11-133, Mine No. 1101348, and Thistle Mining Company (391933) permit
number: Permit P-11-563, Mine Number 1101075).
Water is supplied by the nearby Eight Mile Lake, other surface sources, and several man-
made ponds located on site. HGMI has established areas for the processing plant, settling
ponds, process material storage, waste material storage, overburden stockpiles, as well as
an office complex. There are approximately 10 operating personnel who commute daily
from their homes to the production site.
5.4 INFRASTRUCTURE
The closest settlement is the community of Wells (see Figure 5-1), approximately 10 km
southwest of the property. Wells provides grocery stores and basic accommodations.
The closest town from Eight Mile Lake is Quesnel, about 89 km to the west. Quesnel has a
population of approximately 10,000 and about 25,000 in the metro area. Quesnel is
accessible from Vancouver via Williams Lake on Highway 97, or from Vancouver by plane
or train. Flight time is about 1.5 hours; driving time is about 8 hours. The closest railway
access is at Quesnel.
Additional services are available in Prince George; it has a population of approximately
70,000 and about 88,000 in the metro area. Prince George is located about 190 km
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northwest of Eight Mile Lake and 115 km north of Quesnel. Driving time is about 1.5 hours
from Quesnel (Highway 97) and 2.5 hours from Eight Mile Lake (Highways 26 and 97).
5.5 PHYSIOGRAPHY
Eight Mile Lake is situated at the edge of the Cariboo Plateau, which forms a part of the
Interior Plateau between the Coast and Hazelton Mountains to the west, and the Cariboo
Mountains to the east. The placer gold tenures at Eight Mile Lake cover an area of
approximately 4.66 km2. From north to south, the maximum extension is about 2,800 m;
from east to west, the maximum extension is about 2,900 m. Elevation of the property
ranges between 1,200 m and 1,340 m above mean sea level (amsl). Although the property
is located in the Cariboo Mountains, the topography is not mountainous but undulating. The
landscape gently slopes towards the lake located in the centre of the property. The lake
extends about 860 m from the northwest to the southeast, and its maximum width is about
240 m. The groundwater table ranges around 1,219 m amsl. The maximum depth is
assumed to be between 40 m and 50 m below ground surface; however, there are no
reliable records. Most of the Eight Mile Lake property is covered by boreal coniferous
forest. There is some clear-cutting from previous exploration or mining activities.
During the summer, ferns and a variety of shrubs grow all over the property. Due to
reforestation that resulted from previous mining activities, some small areas have
deciduous trees.
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6 HISTORY
Historic gold production is summarized in Table 6.1 and shown in plan in Figure 6-1.
From 1897 to 1906, the Thistle Mining Company (Thistle) mined in and around the Eight
Mile Lake property (Kocsis, 2012). Thistle produced about 22,000 ounces of placer gold
from a hydraulic mine pit that was about 400 m long by 50 m to 100 m wide. Approximately
275,000 m3 of placer ground were processed from a surface mine cut averaging 12 m thick.
In the winter of 1988-89, the Eight Mile Lake property was the focus of a large operation
that targeted the gravels below the lake bottom. Although the lake was drained during the
mining activity, operations encountered major problems with lake-bottom sediments and
organics. A successful suction-dredging operation was also conducted at this site before
the more recent open-pit mining attempts (Levson and Giles, 1993).
TABLE 6.1: RECORD OF HISTORIC GOLD PRODUCTION AT EIGHT MILE LAKE (KOCSIS, 2012)
1 These areas correspond to areas shown in Figure 6-1.
2 This is an estimate based on the royalty received by Steve Kocsis.
Company Name Year Area1
Production (ounces)
Description
Thistle Mining Company 1897-1906 A 22,000 Hydraulic Pit Mine
Church Mining Ltd. 1988 B No Records Open Pit Mine
Church Mining Ltd. 1989 C No Records Open Pit Mine
Stephen Kocsis 2007 D 48 Test Pit
2 Can Mining Ltd. 2008 E 160 Open Pit Mine
2 Can Mining Ltd. 2009 F 4202 Open Pit Mine
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FIGURE 6-1: HISTORIC MINING AREAS AT EIGHT MILE LAKE (KOCSIS, 2012)
HGMI resumed operating activities at Eight Mile Lake in late September 2013 to the middle
of November 2013. During that time period, according to HGMI records, 254 raw ounces
were recovered from 24,876 bank cubic metres (bcm), resulting in an overall gold grade of
0.28 g/m3. During 2014, an additional 365 raw ounces were recovered from 27,498 bcm for
a recovered grade of 0.41 g/m3. These production grades correlate reasonably well with the
mineral resource estimates described in Section 14 of this report.
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7 GEOLOGICAL SETTING AND MINERALIZATION
7.1 REGIONAL GEOLOGY
The Eight Mile Lake Placer Deposit lies within the Upper Proterozoic to Upper Triassic
continental margin carbonates of the Cariboo/Cassiar Terrane. This portion of the terrane is
thrust-bound between the intensely deformed, variably metamorphosed, and poorly dated
Proterozoic to Triassic, siliceous clastic sediments with subordinate volcanics and
limestones of the Kootenay Terrane to the southeast and the oceanic marginal basin
volcanics and sediments of Devonian to Late Triassic Slide Mountains Terrane to the
northeast (Figure 7-1).
FIGURE 7-1: REGIONAL GEOLOGY (MODIFIED AFTER BCGS, 2014)
7.2 LOCAL GEOLOGY
The local geology of the property is characterized by the lithologies of the Snowshoe
Group, the Cariboo Group, and the Black Stuart Group. The Snowshoe Group consists of
metamorphic rocks: predominantly black silite, phyllite, micaceous quartzite, limestone, and
gneiss of Palaeozoic age. The Cariboo Group consists of sedimentary rocks: predominantly
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mudstone, siltstone, limestone, dolostone, and marble. The Black Stuart Group consists of
undivided sedimentary rocks: predominantly chert, limestone, dolostone, derived
conglomerate, and breccia. The property is traversed by northwesterly trending faults,
which separate the Snowshoe and Cariboo Groups (see Figure 7-2).
FIGURE 7-2: LOCAL GEOLOGY (MODIFIED AFTER BCGS, 2014)
7.3 PROPERTY GEOLOGY
Natural bedrock outcrops occur over less than 3% of the property area. Bedrock is
predominately a steeply dipping, variably orange weathered limestone to fresh and
competent grey limestone. Most of these outcrops are located along the eastern boundary
of the property. Mining along the south central border in 1988 and 2009 exposed additional
bedrock, most of which is orange weathered limestone and large limestone boulders
(Timmermann, 2013).
Seismic surveys, drilling, and mine/test pit results show that the property surrounds an area
occupied by at least two deeply-buried valleys or paleochannel bedrock floors reaching up
to 60 m deep: one extends northwest parallel along the length of Eight Mile Lake and Big
Valley, and a second smaller buried tributary (Thistle paleochannel) extends in a
northeasterly direction.
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The bedrock floors are buried from top to bottom by five distinct sedimentological units:
1. thin layer of postglacial alluvium (Holocene)
2. non-weathered grey-coloured lodgement till (Fraser Glacial Period)
3. weathered red-brown interglacial alluvium (Pleistocene) made up of gravel, debris
flow facies, sand, and lacustrine mud layers
4. a second older glacial lodgement till layer weathered red-brown in most parts
5. a second older weathered sequence of interglacial alluvium (Pleistocene and
possibly Tertiary?) which is similar to unit 3.
Significant gold concentrations occur in units 3, 4, and 5. Highest gold grades are confined
to high-energy cobble/boulder-rich interglacial fluvial gravel and debris flow layers found in
units 3 and 5. The sequence of alluvial layers in units 3 and 5 are horizontally and vertically
complex or exhibit typical reworking of underlying sediments in a wandering stream
environment.
The historic watercourses that contain gravels tend to meander which might, in part,
account for the erratic spatial distribution of gold deposition. Gravel thickness varies from
less than one metre to tens of metres. No relationship between gravel thickness and gold
grade has been identified.
7.4 MINERALIZATION
Drilling results from Eight Mile Lake Placer Deposit show that gold is heterogeneously
scattered throughout the entire sedimentary cover. Visual observations show typical
rounded placer-type gold nuggets and particles. Gold occasionally occurs near the bedrock
surface, but it might also be very close to surface. As discussed in Section 7.3,
mineralization occurs more often when the gravel is coarse. This relationship suggests a
debris-flow placer environment (Stanway, 2012).
Mineralization within the considered area at Eight Mile Lake cannot be explained using the
model of a pre-glacial alluvial channel. The geology model indicates an interglacial or
glacial depositional environment that includes interglacial alluvial systems, glacial
deposition, as well as single events such as mudflows.
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8 DEPOSIT TYPES
The following excerpt describes the placer units and recovered gold morphology (Johnston
and Uglow, 1926):
“Eight Mile Lake is one of the few areas in the Cariboo where a placer
deposit has been documented between two till units and, therefore, is
clearly interglacial or interstadial. The gold was concentrated in a bouldery
unit between two diamictons interpreted as tills. The lower diamicton was
partially cemented and acted as false bedrock. It was underlain by
limestone bedrock and overlain by poorly stratified glacial gravel, silt and an
upper diamicton. The lower diamicton contained erratic clasts and was
believed to have been deposited by a north-eastward-flowing glacier that
had incorporated gold from an older bedrock channel. Recovered gold was
flattened and worn with nuggets up to approximately 20 grams. The
channel was only mined above lake level and was believed to extend below
the lake”.
In addition to the potential of buried paleo-channel deposits in the Eight Mile Lake valley,
there is further potential for the discovery of gold-bearing gravels in buried tributary
channels. The original hydraulic mine at the site exploited a tributary channel that drains
the slope south of Eight Mile Lake. The Pleasant Valley thrust lies just to the southwest of
the lake and, together with related structures, might control the distribution of gold in source
rocks in the area (Levson and Giles, 1993).
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9 EXPLORATION
All exploration activities conducted at Eight Mile Lake since 1993, excluding drilling, are
shown in Table 9.1 and Figure 9-1. The goal of the various exploration programs was to
identify the gold-bearing paleo-channels.
TABLE 9.1: EXPLORATION AT EIGHT MILE LAKE
Exploration Method
Subcontractor Year
(No. of Profiles) Reference
Seismic Refraction Frontier Geosciences Inc.
1993 (8)
2001 (5)
2013 (2)
Frontier, 1993
Frontier, 2001
Frontier, 2013
Seismic Refraction Brental Resources Limited 2008 (2) Kocsis, 2012
2D Resistivity Arctic Geophysics Inc. 2013 (1) Arctic, 2014
Test Pitting Geologist Stephen Kocsis 2007 Kocsis, 2012
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FIGURE 9-1: OVERVIEW OF EXPLORATION WORK AT EIGHT MILE LAKE
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9.1 SEISMIC REFRACTION
Frontier Geosciences Inc. (Frontier) conducted two measurement campaigns comprising
seismic lines (SL) numbered SL2 to SL9 in 1993 and lines SL14 to SL15 in 2013 (Figure 9-
1) (Frontier, 1993/2001/2013). Lines numbered SL8-extended and SL13 were measured by
Brental Resources Limited in 2008 (Kocsis, 2012).
Most of the seismic lines are located parallel to each other along the southern margin of
Eight Mile Lake. This is because a northwest-southeast trending paleo-channel was
assumed to run parallel to the southern site of the lake. The seismic traverses are shown in
Figure 9-1.
Table 9.2 shows Frontier's interpretation of its seismic measurement of line SL14 and
SL15.
TABLE 9.2: SEISMIC INTERPRETATION (FRONTIER, 2014)
Layer Velocity
(m/s) Geological Interpretation
Thickness (m)
1 360 – 460 Surficial layer: inconsistent with surficial exposures of loose surficial sand, gravels, and cobbles.
Approximately 1.5
2 1,215 – 1,340 Relatively thin intermediate layer: might correspond to moderately dense silt, sand, gravels, and cobbles.
2.5 (SL14) to 7 (SL15)
3 1,850 – 2,390 Thicker intermediate layer: believed to correspond to saturated, coarse, dense glacial till.
Unknown
4 2,815 – 6,150 Bedrock surface. Depth varies significantly
between 4.5 to 70+
The basal layer, with velocities from 2,815 m/s to 6,150 m/s, is the interpreted competent
bedrock surface (Frontier, 2013):
“The 2,815 m/s low velocity zone may be indicative of a deeper depression
in the bedrock. The 2,815 m/s velocity may be due to a diffraction from the
edge of competent bedrock located between geophones 4 and 5."
Some profiles show depressions that might indicate a pre-glacial channel incised into the
bedrock surface (Frontier, 2013). However, most of the sections suggest an uneven
surface abraded by glacier movements. The depressions picked up in some sections could
not be correlated or tracked.
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The situation looks different for the three traverses crossing the Thistle Valley shown in
Figure 9-2. Those profiles show strong depressions that basically agree with the course of
the valley and might indicate a real channel structure that runs towards the main valley.
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FIGURE 9-2: SEISMIC REFRACTION TRAVERSES CROSSING THE THISTLE VALLEY
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9.2 2D RESISTIVITY
A single 2D resistivity traverse was measured across the main valley just north of the lake
with a total length of 495 m (see Figure 9-1). The first objective was to locate a paleo-
channel structure in the centre of the valley. The second objective was to determine the
bedrock depth. The interpreted image from Arctic Geophysics Inc. is shown in Figure 9-3
and Table 9.3 (Arctic, 2014).
TABLE 9.3: GEOLOGICAL INTERPRETATION OF THE MEASURED 2D RESISTIVITY (ARCTIC, 2014)
Layer Resistivity Values Geological Interpretation Depth
(m)
1 High Surficial Layer: coarse overburden with very little
fine sediments; probably fairly dry. up to 10
2 Moderate Intermediate Layer: same material as layer 1 but
more groundwater. Otherwise material with matrix supported fine sediments.
up to 27
3 Very Low Thicker Intermediate Layer: lacustrine sediments or other clay-dominated sediments; groundwater
saturated. up to 47
4 Moderate Bedrock: “softer” bedrock; most likely sedimentary rocks such as limestone or a metamorphic rock.
-
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FIGURE 9-3: 2D RESISTIVITY IMAGE (ARCTIC GEOPHYSICS, 2014)
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9.3 TEST PITTING
In 2007, Stephen Kocsis dug a number of test pits in the gravels to test for gold
mineralization (see Figures 9-4 and 9-5). The test pits were excavated over a relatively
small area of the property, but the type of samples collected are considered to be
representative of placer gold mineralization in the local area. A total of 48 ounces of placer
gold was recovered from the pits (Kocsis, 2012).
FIGURE 9-4: 2007 TEST PIT (KOCSIS, 2012)
FIGURE 9-5: 2007 TEST PIT - EXAMPLE OF GOLD GRAIN SIZE (KOCSIS, 2012)
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9.4 CONCLUSIONS
The geophysical exploration successfully defined bedrock surfaces and areas of potential
mineralized gravel deposition.
The test pits were excavated over a relatively small area of the property, but the type of
samples collected were representative of placer gold mineralization in the immediate area.
The pits and the recovery of gold from the material collected indicated that successful
recovery of gold on a larger scale might be possible. Overall, the test pits were not
designed to be used in any resource calculation; instead, the program was completed to
demonstrate the viability of placer gold recovery.
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10 DRILLING
As of August 7, 2014, 54 vertical drill holes for a total of 1,896 m have been drilled at Eight
Mile Lake. The average drill hole depth is 35.1 m. As of August 7, 2014, the effective date
of this report, gold grade data is pending for one of these holes (EM14-RC053).
Figure 10-1 shows the drill rig that was used: a Nodwell-mounted reverse circulation (RC)
drill manufactured in 1979. A 6.25-in. tri-cone bit was used with a 5.50-in. diameter drill rod.
Each rod section was 10 feet long.
RC drilling produces rock cuttings with a particle size range (16 mm to 32 mm) of coarse
pebbles. Coarser particle fractions get destroyed during the drilling process which results
in more fine material. The drill cuttings do not preserve the particle size distribution of the
gravels. Samples for gold recovery from the drilling were collected at the cyclone discharge
in five-gallon, plastic pails. Samples were typically taken every five feet down-the-hole.
FIGURE 10-1: NODWELL-MOUNTED REVERSE CIRCULATION DRILL RIG
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Geologic logging was done under the direction of Stephen Kocsis, and supervised by
geotec Rohstoffe GmbH. The geologist logged the cuttings as they were discharged from
the cyclone located on the drill rig. Particular attention was paid to the colour of the cuttings
and the behaviour of the drill rig; these parameters helped determine when the cuttings
were collected. The sediment types shown in Table 10.1 were used to log the RC rock
chips.
TABLE 10.1: UNIT DESCRIPTION (TIMMERMANN, 2013)
Unit Number
Unit Name Unit Description
1 Postglacial Alluvium Represents recent Holocene alluvium (< 11,000 ybp) and melt-water sediment accumulation during ablation of the Fraser ice sheet.
2 Glacial Sediments Wisconsinan Fraser Glacial Sediments (25,000 - 9,000 ybp) dominated by light to medium grey-coloured lodgement till and lacustrine mud.
3 Interglacial Alluvium Including "older gravel" accumulation during the mid-Wisconsin Interstadial (45,000 to 30,000 ybp) or possibly Sangamon Interglacial.
3a Mud/Silts Glaciolacustrine mud. Medium brown to orange-brown containing minor clasts of limited size suspended in a > 80% mud and silt matrix.
3b Sandy Gravel Sand-rich matrix with clast size varying from granules to cobbles. Medium brown to orange-brown.
3c Granule Pebble Gravel
Granule to pebble-rich gravel matrix with rare cobbles and varying mud content from 5% to < 50%. Medium brown to orange-brown.
3d Cobble Gravel Abundant cobbles and minor boulders in a granule to pebble-rich gravel matrix with varying mud content from 5% to < 50%. Medium brown to orange-brown.
4a Older Glacial Sediments
Partly cemented with weathered tops, densely compacted, commonly dark grey to black coloured, deposited during the early Wisconsin (75,000 to 45,000 ybp) or late Illinoian (200,000 to 131,000 ybp) or older glacial period.
4b Pre-Glacial Alluvium Highly weathered bedrock boulders with fresh interiors if large enough. Greater than 2.58 million years (GSSP) with textures exhibiting long periods of weathering.
The initial drilling campaign was conducted during the spring and summer of 2013. This
campaign consisted of 22 drill holes. The holes were drilled in three different areas: west of
the lake, south of the lake, and southeast of the lake. The three areas were selected based
on the assumption of a northwest-southeast trending paleo-channel running south of the
southern margin of the lake (see Section 9.1).
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In the area west of the lake, a second drilling program was carried out in the fall of 2013.
The intent was to extend drilling to the west (see Figure 10-2). The fall program comprised
an additional 13 drill holes.
A third drilling campaign, conducted in winter 2013 and spring 2014, included 19 additional
drill holes to increase data density in and around the western area. The 19 holes were part
of an exploration program designed by geotec Rohstoffe GmbH (geotec, 2014a) in January
2014.
All drill hole locations and details are shown in Table 10.2.
A sample recovery factor could not be calculated for the drilling. Also, the extent of gold
loss caused by the RC drilling method could not be determined.
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FIGURE 10-2: VARIOUS DRILLING CAMPAIGNS
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TABLE 10.2: DRILL HOLE DETAILS
Drill Hole ID Date Easting Northing Depth
(m)
Elevation (amsl)
(m) Dip
EM13-RC001 13-Apr-2013 598560 5889441 36.58 1,229 vertical
EM13-RC002 15-Apr-2013 598575 5889398 45.72 1,230 vertical
EM13-RC003 17-Apr-2013 598572 5889353 53.64 1,232 vertical
EM13-RC004 19-Apr-2013 598430 5889494 57.14 1,228 vertical
EM13-RC005 22-Apr-2013 598459 5889525 32.00 1,228 vertical
EM13-RC006 25-Apr-2013 597644 5889953 46.79 1,228 vertical
EM13-RC007 29-Apr-2013 597604 5889925 36.58 1,230 vertical
EM13-RC008 01-May-2013 597668 5889896 23.47 1,223 vertical
EM13-RC009 02-May-2013 597699 5889935 18.44 1,222 vertical
EM13-RC010 07-May-2013 597718 5889883 14.78 1,222 vertical
EM13-RC011 08-May-2013 597696 5889857 16.76 1,224 vertical
EM13-RC012 09-May-2013 597651 5889926 31.70 1,225 vertical
EM13-RC013 16-May-2013 598010 5889637 22.86 1,235 vertical
EM13-RC014 23-May-2013 597944 5889628 24.38 1,237 vertical
EM13-RC015 28-May-2013 597962 5889676 12.19 1,231 vertical
EM13-RC016 29-May-2013 598002 5889599 19.81 1,234 vertical
EM13-RC017 30-May-2013 598114 5889551 4.57 1,229 vertical
EM13-RC018 30-May-2013 598132 5889593 14.94 1,228 vertical
EM13-RC019 31-May-2013 598202 5889539 26.52 1,226 vertical
EM13-RC020 03-Jun-2013 598646 5889523 6.10 1,220 vertical
EM13-RC021 04-Jun-2013 597731 5889930 27.43 1,221 vertical
EM13-RC022 05-Jun-2013 597574 5889892 28.35 1,229 vertical
EM13-RC023 19-Sep-2013 597568 5889930 42.67 1,231 vertical
EM13-RC024 23-Sep-2013 597541 5889933 40.54 1,232 vertical
EM13-RC025 24-Sep-2013 597509 5889943 37.34 1,231 vertical
EM13-RC026 26-Sep-2013 597591 5889961 48.77 1,230 vertical
EM13-RC027 01-Oct-2013 597559 5889806 43.59 1,229 vertical
EM13-RC028 02-Oct-2013 597523 5889829 42.67 1,231 vertical
EM13-RC029 04-Oct-2013 597500 5889857 27.43 1,232 vertical
EM13-RC030 07-Oct-2013 597559 5889854 36.58 1,231 vertical
EM13-RC031 10-Oct-2013 597498 5890599 39.47 1,226 vertical
EM13-RC032 15-Oct-2013 597584 5890644 33.53 1,229 vertical
EM13-RC033 17-Oct-2013 597685 5890654 20.57 1,240 vertical
EM13-RC034 17-Oct-2013 597781 5890663 7.01 1,249 vertical
EM13-RC035 18-Oct-2013 597301 5890432 57.76 1,233 vertical
EM13-RC036 17-Feb-2014 597645 5890000 50.90 1,226 vertical
EM13-RC037 20-Feb-2014 597550 5890050 62.79 1,230 vertical
EM13-RC038 25-Feb-2014 597500 5890050 43.59 1,229 vertical
EM13-RC039 27-Feb-2014 597504 5890002 60.96 1,233 vertical
EM13-RC040 04-Mar-2014 597506 5889896 34.75 1,231 vertical
EM13-RC041 07-Mar-2014 597546 5889892 35.36 1,229 vertical
EM13-RC042 11-Mar-2014 597600 5890050 42.67 1,226 vertical
EM14-RC043 16-Apr-2014 597550 5890000 47.55 1,231 vertical
EM14-RC044 22-Apr-2014 597600 5890000 64.01 1,234 vertical
EM14-RC045 12-May-2014 597482 5889786 32.00 1,237 vertical
EM14-RC046 13-May-2014 597506 5889772 59.44 1,234 vertical
EM14-RC047 15-May-2014 597443 5889756 15.24 1,241 vertical
EM14-RC048 15-May-2014 597518 5889798 28.96 1,232 vertical
EM14-RC049 16-May-2014 597430 5889817 33.53 1,241 vertical
EM14-RC050 20-May-2014 597445 5889841 57.91 1,240 vertical
EM14-RC051 20-May-2014 597428 5889903 35.05 1,239 vertical
EM14-RC052 23-May-2014 597444 5889950 32.00 1,237 vertical
EM14-RC053 26-May-2014 597450 5890000 41.76 1,241 vertical
EM14-RC054 ? 597477 5889716 41.15 1,241 Vertical
Total
1,895.72
Average
35.1
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11 SAMPLE PREPARATION, ANALYSES AND
SECURITY
Commercial laboratories typically do not provide a gold-recovery-by-gravity service on a
scale that is necessary to support a drilling program the size of Eight Mile Lake. Some
metallurgical-testing laboratories might conduct gravity recovery gold analyses, but results
might not be made available in a timely manner. For these reasons, HGMI built an on-site
facility to analyze the placer samples.
Note: The HGMI laboratory does not hold a certification from any standards organization,
and there might not be any specific standards associated with processing placer deposit
samples. In addition, it is difficult to verify results in an independent laboratory setting
because entire samples are consumed as a result of the gold recovery process; therefore,
no duplicates can be collected during the drilling process.
Figure 11-1 shows the sample processing sluices. This historic method of recovering placer
gold has proved to be very efficient: sample tailings tests show that almost no gold (< 1%)
reports to the tailings.
FIGURE 11-1: SAMPLE GOLD RECOVERY SLUICES
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11.1 SAMPLE COLLECTION
The following sample collection procedures were set up by HGMI:
1. All drilling material derived from the cyclone during RC drilling was collected in
five-gallon, plastic pails. Sample intervals were typically five feet, with an
average of 2 to 3 pails collected per interval.
2. Both the pail and the lid were labelled with the project name, date, pail number,
and total number of pails collected per interval. All pails were photographed
before the lids were securely sealed.
3. At the end of each day, all samples were transported to the laboratory where
they were securely stored in locked metal Sea-Can containers until they were
ready to be processed. During processing, the handling of all samples was
restricted to authorized laboratory personnel only.
11.2 SAMPLE PREPARATION
The following sample preparation procedures were set up by HGMI:
1. All the pails to be processed during the interval are moved from the secured
Sea-Can container to the processing room where the excess water is removed
from each pail.
2. Each pail is then weighed to the nearest hundredth of a kilogram, and the
height of the material in the pail is measured; this is later converted to a volume.
All values are recorded on the whiteboard.
11.3 SAMPLE ANALYSIS
The following sample processing procedures were set up by HGMI (Timmermann, 2013):
1. Once the sample has been prepared, it is washed through the jig which
classifies the material by size: fine, coarse or oversized material.
2. Both the fine and coarse materials are panned by hand to a concentrate. The
oversized material is removed and visually inspected for coarse nuggets before
it is weighed and recorded on the whiteboard.
3. Trace gold from the concentrate is photographed and documented; gold with
more than trace amounts is retrieved, dried, weighed, photographed, and
recorded on the whiteboard.
4. Concentrate from any fine material that contains more than trace amounts of
gold are sent through a secondary separation process to retrieve all the fine
gold.
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5. Concentrate from any coarse material that contains more than trace amounts of
gold are placed in filter paper and dried in an oven. The gold is then weighed,
photographed, recorded on the whiteboard, and stored with the recovered gold.
6. All recovered gold is placed in labelled glass vials and stored with the
concentrate.
7. Any data that is recorded on the white board is transferred to sample sheets
before being inputted to an electronic spreadsheet.
8. Tailings from samples with more than trace amounts of recovered gold are
stored; tailings and concentrates from samples with no gold or only trace
amounts of gold are discarded.
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The sample process procedures are also shown in Figure 11-2 (Timmermann, 2013).
FIGURE 11-2: SAMPLE ANALYSIS WORK FLOW CHART (TIMMERMANN, 2013)
Note: When more than trace gold is recovered, the entire sample is securely stored. Only
samples with less than trace gold are discarded.
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The average time required to process a sample is approximately one hour. All equipment is
thoroughly washed to ensure no contamination occurs between sampling intervals.
11.4 SAMPLE SECURITY
Figure 11-3 shows sample collection buckets and labelling.
FIGURE 11-3: SAMPLE COLLECTION BUCKETS WITH LABELS
Samples are delivered from the site to the processing laboratory in Quesnel by truck.
Although it might be possible for someone to access and tamper with the samples, there
would be little incentive to do this; inflated sample grades would tend to be viewed as a
detriment because the objective is to produce gold. Salting would possibly divert attention
away from areas where gold actually exists. The author saw nothing to indicate that
samples had been compromised before they were processed through the washing process.
Sample preparation, security, and analytical procedures are adequate for the intended
purposes. Drill holes are appropriately located by map coordinates and physical location.
Observations and inspections conducted during the site visit indicate that the data collected
to characterize placer gold mineralization on the property is adequate for the estimation of
Inferred resources.
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12 DATA VERIFICATION
All available data have been reviewed in order to verify their correctness and integrity. For
the 54 drill holes, the checks include the sediment logging, log sheets, and a sample
collection process. Dr. D. Eberle has monitored drilling activities to validate correct
operating procedures and sample collection. The geophysical data from seismic refraction
and 2D resistivity have been reviewed and interpretations have been collated with current
scientific knowledge, historic data, and property geology.
The authors reviewed the sample processing during their site visits. The analytical data
have been reviewed regarding measured volume, gold recovery, and gold-grade
calculations. No errors were found. The documentation during sample processing and
grade calculations has been verified to be correct.
To verify the sample grades, an area in the resource estimation model (see Section 14)
was outlined around drill holes 27, 28, 46, and 48; it was estimated to contain 16,000 m3.
The grade in the model for this volume was 0.36 g/m3. Production from approximately the
same area was 16,815 m3 with an average grade of 0.49 g/m3.
The rough agreement between drill hole sample results interpolated into a model and the
actual production suggests that the sample grades derived in the lab are reasonable. The
reconciliation test gives no indication that sample results are inflated or otherwise
inappropriate.
Sample verification results observations, and inspections conducted during the site visit
indicate that the data collected and analyzed to characterize placer gold mineralization on
the property are adequate for the estimation of Inferred resources.
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13 MINERAL PROCESSING AND METALLURGICAL
TESTING
Placer gold is recovered through gravity separation of gold from the sediments that contain
the mineralization. In the case of Eight Mile Lake, the main recovery mechanism is the
sluice. Sluices have been used to recover placer gold from ancient times and the basic
principle remains the same. The gravel to be processed is mixed with water which runs
down an inclined channel containing ridges or riffles which trap the gold. Lighter material is
discharged at the end of the channel. The material trapped behind the riffles contains the
gold nuggets. Typically the trapped material is extracted from the sluice and then panned to
remove everything but the gold. A sluice can be a very effective and efficient method of
recovering gold from unconsolidated material.
Figure 13-1 shows the production scale wash plant that is currently operating on the Eight
Mile Lake property.
The wash plant has several distinct sections. The light-coloured upper bin is the loading
receptacle; it also acts as the rocker to remove large boulders. The boulders are
discharged at the lower end of the rocker. Smaller particles are discharged into the sluice
below the rocker. In this sluice there is a nugget trap that will capture nuggets larger than
1.25 cm in diameter. Following this initial sluice, there is a rotating trommel. Nuggets
greater than 1.25 cm are discharged at the end of the trommel. This discharge is examined
daily to ensure no gold is being lost. Nuggets less than 1.25 cm pass through the screens
in the trommel and into the set of sluices below. The first set captures most of the gold in
the riffles of the sluice. The second set has flexible mesh or carpet to capture finer particles
that were not deposited in the riffles, mentioned above. The remaining material is
discharged into the tailings. The tailings are checked by sampling and washing through a
separate wash system in the HGMI laboratory to make sure no gold is being lost from the
last set of sluices.
The sampling of discharge material has shown that 98-99% of the placer gold is being
recovered by the wash plant. Most of the gold recovered (more than 95%) is captured in
the first and second sets of sluices. Less than 5% of the recovered gold is fine enough to
report to the third set of sluices and get captured there.
The recovery achieved by the wash plant is typical for placer gold processing plants, as is
the particle size distribution of the gold on the property.
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FIGURE 13-1: UPPER AND LOWER SECTIONS OF THE WASH PLANT
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14 MINERAL RESOURCE ESTIMATES
14.1 INTRODUCTION
The mineral resource estimates for the Eight Mile Lake Placer Deposit were prepared
under the direction of Robert Sim, P.Geo, with the assistance of Bruce Davis. Estimations
are made from 3D block models based on geostatistical applications using commercial
mine planning software (MineSight® v9.10). The project limits are in metric units based in
UTM (Zone 10) coordinates.
During the past two years, a total of 54 reverse circulation (RC) holes have been completed
on the property. Data has been provided by the property owner, Stephen Kocsis, in a series
of MS Excel spreadsheet files. One file contains drilling data, including drill hole collar
locations, logged lithology type designations, and sample intervals with corresponding gold
grades calculated in grams per cubic metre (g/m3). Also provided was an MS Excel file
containing point data representing the estimated depth to bedrock determined from several
seismic refraction campaigns conducted over the property. The combination of seismic and
drilling data has been used to estimate the depth to the bedrock interface over the property.
An AutoCAD drawing (DWG) file was provided that contains 3D contour and point data that
represent the topographic surface over the property area.
The modeling approach assumes that there is essentially no grade selectivity in the
resource estimate; in other words, all material above the bedrock surface will be processed
through the wash plant. The estimate of mineral resources is derived using a traditional 3D
block model in which grade estimates are integrated into a regular matrix of model blocks
using the available drill hole sample data. The block size in the 3D model is 5 x 5 x 2 m (L x
W x H). A second model was produced for validation purposes, which represents a
transition between a traditional block model and a gridded-seam model traditionally used
with relatively thin tabular ore bodies. The blocks in the 2D model cover the extents of the
deposit in both the X (east-west) and Y (north-south) dimensions, but only one level of
blocks is generated in the Z (vertical) dimension. Both the thickness and grade x thickness
have been interpolated into the 2D model from which volume (cubic metres) and mining
grades (g/m3) are determined.
As described in Section 6, mining activity has taken place on the property at various times
and locations dating back to the 1880s. Records of this past production are not well
documented. Areas of past production are reflected in the current 3D topographic surface
and this ensures that all past production is excluded from the current estimate of mineral
resources.
The mineral resource estimate has been generated using drill hole sample results which
define both the grade and thickness of the unconsolidated material occurring above
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bedrock. A geostatistical approach has been taken to develop a block model and the
estimate of mineral resources. The mineral resources have been classified according to
their proximity to the sample locations, and they are reported as required by NI 43-101,
according to the CIM standards for Mineral Resources and Reserves.
This report includes estimates for mineral resources. There are no mineral reserves
prepared or reported.
14.2 AVAILABLE DATA
Beginning in the spring of 2013, 54 reverse circulation (RC) drill holes, with a combined
length of 1,896 m, have been completed on the property. As of August 7, 2014, the
effective date of this report, gold grade data is pending for one of these holes (EM14-
RC053). All holes are drilled in a vertical orientation. The distribution of drilling is shown in
plan view in Figures 14-1 and 14-2. Thirty-five drill holes are spaced at 30 m to 50 m
intervals in an area roughly measuring 300 x 300 m in the western or Main area of the
property. The remaining holes are irregularly distributed to the north and southeast of this
Main cluster of holes. Although gold is present in these peripheral areas, there is
insufficient drilling at this time to support the estimation of mineral resources in the North
and Southeast areas.
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FIGURE 14-1: DRILL HOLE AND TOPOGRAPHIC PLAN
FIGURE 14-2: DRILL HOLE AND TOPOGRAPHIC PLAN IN MAIN AREA
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Drill holes typically penetrate through overburden material until they intersect bedrock.
Logging of RC chips defines the nature of the overburden material and marks the depth-to-
bedrock in most holes; some drill holes did not reach bedrock. Comparisons of gold content
versus material type, described below, indicate that the gold grade is higher in the coarser
fractions, a feature which is generally typical in deposits of this type.
Drilling is conducted using imperial units, which are converted into metric equivalents. The
amount of gold in each sample interval is determined, and the grade, in grams per cubic
metre, is calculated. There are 1,223 individual sample intervals that have been tested for
gold content. Of these, 955 samples do not contain any measurable gold content (zero
grade). The remaining 268 samples contain gold grades ranging from 0.017 g/m3 to a
maximum of 22.642 g/m3. Individual sample intervals range from 0.3 m to 3.05 m, and
average 1.49 m in length. The majority of samples have been collected using a standard
1.52-m (5-foot) length.
The general distribution of sample data is presented in Table 14.1. In general, some of the
drill holes in the North and Southeast areas have encountered gold, but these holes are not
as well mineralized as the Main area. Further exploration of the zones between the Main-
to-North and Main-to-Southeast areas is warranted.
TABLE 14.1: BASIC STATISTICAL SUMMARY OF SAMPLE DATA
Area # of
Holes # of
Samples
Sample Length
(m)
Minimum
(Au g/m3)
Maximum
(Au g/m3)
Mean
(Au g/m3)
Standard Deviation
Main 36 899 1,345 0 22.642 0.411 1.586
North 5 105 158 0 2.387 0.033 0.249
Southeast 13 218 316 0 6.398 0.080 0.493
Total 54 1,222 1,820 0 22.642 0.320 1.390
An AutoCAD drawing file (ACAD-Henning Gold Site Plan.dwg) was provided that contains
3D contour line and point data for the current topographic surface. A 3D digital terrain
surface was generated from this data. Areas of past production are evident in this data.
Several seismic refraction surveys have been conducted on the property, as described in
Section 9. The depth to bedrock derived from these surveys was provided in an MS Excel
spreadsheet file. Each station contains the projected x, y, z locations of both the bedrock
and the surface location where the readings were taken. Although some local differences
exist in the topographic elevations between the GPS-measured seismic survey and the
digital terrain surface generated from the AutoCAD (DWG) file, the relative depths to
bedrock from these two surveys correlate reasonably well with the drilling data. The seismic
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data was used to generate a series of points that represent the top of bedrock in areas
outside of the current drilling. These additional points were used to produce a triangulated
3D surface that represents the top of bedrock over the project area.
14.3 GEOLOGIC MODEL
The RC chips are logged during drilling and the lithology type is recorded. Logging is
conducted while drilling and the logged (from-to) intervals do not necessarily correlate with
the standard (1.52-m/5-ft) sample intervals. There are 15 different lithologic types defined in
the database; these generally identify material of different particle sizes, ranging from silt
and mud, to gravel and boulders. Gold content versus lithology type is evaluated in the
boxplots shown in Figures 14-3 and 14-4; these figures show that, in general, gold tends to
occur in the coarser fractions. This is a common feature in this type of placer deposit where
gold is deposited during periods of high energy water flow. The fact that these features are
evident in the data suggests that there is limited contamination of gold between samples
during RC drilling.
The distribution of the various lithology types is quite complex and individual units cannot
be interpreted into unique domains with any degree of confidence. As a result, there is no
geologic model, in the typical sense, used in this resource estimate. The Main area of the
deposit contains about 60% coarse and 40% fine fractions in drilling. The North area
contains about 40% coarse and 60% fine fractions, and the Southeast area contains about
55% coarse and 45% fine fractions. This very general trend suggests that future expansion
of the resource may be more successful to the Southeast.
FIGURE 14-3: BOXPLOT1 OF GOLD BY LITHOLOGY TYPE
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FIGURE 14-4: BOXPLOT2 OF GOLD BY LITHOLOGY TYPE
A surface that represents the top of bedrock is interpreted using the combined drilling and
seismic data. Resources are confined to the overburden material between the topographic
surface and bedrock. The thickness of overburden in the Main deposit area is shown in
plan view in Figure 14-5.
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FIGURE 14-5: PLAN SHOWING CONTOURS OF OVERBURDEN THICKNESS IN THE MAIN AREA
14.4 EVALUATION OF OUTLIER GRADES
The presence of anomalous, “outlier” grades in the sample database was evaluated using
the cumulative probability plot shown in Figure 14-6. Samples begin to deviate from the
overall trend above 4 g/m3. Above 7 g/m3, the distribution becomes somewhat erratic
suggesting that these are potentially anomalous and their influence on the resource
estimate should be restricted. As a result, a top-cut threshold has been applied to a total of
16 samples with grades above 7 g/m3. This step has reduced the contained gold in the
resource model by about 12%. This reduction is considered appropriate for the deposit at
this stage of evaluation. Additional, more closely spaced drilling is required to confidently
delineate these higher-grade parts of the deposit.
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FIGURE 14-6: CUMULATIVE PROBABILITY PLOT OF GOLD ASSAY SAMPLE DATA
14.5 COMPOSITING
Compositing of drill hole samples is carried out in order to prepare the samples to be used
in the development of the resource models. The approach to compositing is different
depending on which model is being developed: 2D or 3D. The 3D model is generated from
composites of constant length and roughly equivalent to the original sample interval. The
2D model is generated from composites of varying lengths produced over the full thickness
of the overburden at each drill hole location.
To retain the original characteristics of the underlying data, the composite length used in
the 3D model is a reflection of the average original sample length. The generation of
longer composites results in some degree of smoothing which could mask certain features
of the data. Sample intervals are relatively consistent in the database, with approximately
95% at exactly 1.52 m in length (i.e., representing a 5-ft rod length during RC drilling). As a
result, a standard composite length of 1.5 m has been applied to the sample data. Drill
hole composites are length-weighted and have been generated down-the-hole, which
means that composites begin at the top of each hole and are generated at 1.5-m intervals
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down the length of the hole. Figure 14-7 shows the distribution of gold grades in the 1.5-m
composites.
The 2D model is produced using drill hole composites generated over the full thickness of
overburden. Individual samples are length-weighted over this interval resulting in one
composite per drill hole that contains an average grade over varying thicknesses. The gold
grades in these full-thickness composites are shown in isometric view in Figure 14-8 and in
plan, relative to the overburden thickness contours, in Figure 14-9.
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.
FIGURE 14-7: ISOMETRIC VIEW OF 1.5-M COMPOSITE SAMPLES IN THE MAIN AREA
FIGURE 14-8: ISOMETRIC VIEW OF COMPOSITES OVER FULL THICKNESS OF OVERBURDEN
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FIGURE 14-9: PLAN VIEW SHOWING THE THICKNESS OF OVERBURDEN AND GOLD GRADES IN FULL-THICKNESS
COMPOSITES
14.6 VARIOGRAPHY
The degree of spatial variability in a mineral deposit depends on both the distance and
direction between points of comparison. Typically, the variability between samples
increases as the distance between those samples increases. If the degree of variability is
related to the direction of comparison, then the deposit is said to exhibit anisotropic
tendencies which can be summarized with the search ellipse. The semi-variogram is a
common function used to measure the spatial variability within a deposit.
The components of the variogram include the nugget, the sill and the range. Often
samples compared over very short distances, even samples compared from the same
location, show some degree of variability. As a result, the curve of the variogram often
begins at some point on the y-axis above the origin; this point is called the nugget. The
nugget is a measure of not only the natural variability of the data over very short distances
but also a measure of the variability which can be introduced due to errors during sample
collection, preparation, and analysis.
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The amount of variability between samples typically increases as the distance between the
samples increases. Eventually, the degree of variability between samples reaches a
constant, maximum value; this is called the sill, and the distance between samples at which
this occurs is called the range.
The spatial evaluation of the data in this report has been conducted using a correlogram
rather than the traditional variogram. The correlogram is normalized to the variance of the
data and is less sensitive to outlier values, which generally gives better results.
Correlograms were generated using the commercial software package Sage 2001©
developed by Isaaks & Co.
From the 1.5-m composite data, used in the 3D block model, multi-directional correlograms
were generated for the distribution of gold grades. For the full interval composites, a series
of 2D correlograms were developed based on variables produced from gold grade x
thickness. Note: Because this is essentially a 2D block model, the search parameters are
defined in only the X and Y dimensions (see Table 14.2).
TABLE 14.2: CORRELOGRAM PARAMETERS
1st Structure 2nd Structure
Type Nugget S1 S2 Range
(ft) AZ Dip
Range (ft)
AZ Dip
Gold in 1.5-m Composites
0.148 0.552 0.301 148 82 3 140 297 0
15 173 10 46 25 88
10 334 80 28 207 2
Gold x Thickness in Full-Thickness Composites
0.308 0.387 0.305 47 139 0 191 90 0
39 49 0 35 0 0
10 0 0 10 0 0
Note: All models are spherical. AZ stands for azimuth.
14.7 MODEL SETUP AND LIMITS
Two block models were initialized in MineSight®. The dimensions of both models are
identical in the X (west-east) and Y (north-south) directions, but they differ in the Z (vertical)
direction. The 3D model is comprised of blocks that are 2 m in the vertical dimension and
cover the vertical extent of the deposit. The 2D model has only one model block in the
vertical dimension located at the 1,150-m elevation. The 3D model contains grade
estimates, and the 2D model stores both grade and thickness variables at each X-Y
location.
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The selection of a nominal block size measuring 5 x 5 x 2 m (L x W x H) is considered
appropriate with respect to the shape and size of the deposit and the current drill hole
spacing. The limits of the models are shown in Table 14.3.
TABLE 14.3: BLOCK MODEL LIMITS
Direction Minimum Maximum Block size
(m) # Blocks
East 597300 597850 5 110
North 5889600 5890150 5 110
Elevation 1150 1250 2 50
Note: The 2D model has only one bench of blocks at the 1,150-m elevation.
Blocks located inside the overburden domain in the 3D model are assigned Zone codes to
be used during interpolation.
14.8 INTERPOLATION PARAMETERS
In the 3D block model, gold grade estimates are made in model blocks, located in the
overburden domain, using ordinary kriging (OK). A maximum search range of 200 m is
applied and estimates are made using a maximum of 4, 1.5-m composite samples from a
single drill hole and maximum total of 12 composites per block. Using these parameters,
block gold grades are estimated using data from the three closest drill holes.
Prior to estimation in the 2D model, all full-thickness drill hole composites are assigned a
default elevation equal to that of the model at 1,150 m. This step ensures that the search
properties during interpolation are in a horizontal (X-Y) plane. In the 2D block model,
estimates are made of thickness (T) and gold grade x thickness (GT) and, following this,
individual block gold grades are determined using GT/T. Both Thickness and Grade x
Thickness estimates are made using OK with a 200-m maximum search range. Block
estimates are made using data from the four closest drill holes.
Also prior to estimation in the 2D model, a series of 19 additional data points were added at
a distance of 50 m laterally outside of the existing drill holes. The thickness of overburden
at these additional points is derived from the thickness of the interpreted overburden
domain. As described previously in this report, seismic data indicates that the overburden
narrows in some locations and this step ensures that these trends are reflected in the 2D
resource model. The locations of these additional points are shown in Figure 14-10.
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FIGURE 14-10: ISOMETRIC VIEW OF ADDITIONAL POINTS USED TO CONTROL THE THICKNESS ESTIMATES IN THE
2D MODEL
14.9 VALIDATION
The results of the modeling process were validated using a combination of visual and
statistical comparisons between the estimated values in the blocks and the analyzed grade
values in the drill holes.
Visual Inspection
A detailed visual inspection of the block model was conducted in both section and plan to
ensure the desired results following interpolation. This includes confirmation of the proper
coding of blocks within the overburden domain. The distribution of block grades, and
thickness in the 2D model, were compared relative to the drill hole samples in order to
ensure the proper representation in the model.
Swath Plots (Drift Analysis)
A swath plot is a graphical display of the grade distribution derived from a series of bands,
or swaths, generated in several directions through the deposit. Grade variations from the
OK model are compared using the swath plot to the distribution derived from the
declustered nearest neighbour (NN) grade model.
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On a local scale, the NN model does not provide reliable estimations of grade, but, on a
larger scale, the NN is an unbiased estimator of the average grade based on the underlying
data. Therefore, if the OK model is performing correctly, the grade OK model plot will be
somewhat smoother than the NN values.
Swath plots have been generated in three orthogonal directions for gold grades in the 3D
block model; these are shown in Figure 14-11. For the 2D model, swath plots have been
generated for T, GT, and gold grades. Examples from west-east-oriented swaths are
shown in Figure 14-12.
Overall there is good correspondence between the OK and NN models. The degree of
smoothing in the OK estimates is evident in the swaths.
FIGURE 14-11: SWATH PLOT OF OK VS NN GOLD IN 3D MODEL
FIGURE 14-12: SWATH PLOTS OF 2D MODEL ESTIMATES
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14.10 RESOURCE CLASSIFICATION
The mineral resources for the Eight Mile Lake Placer Deposit have been classified in
accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves
(May 10, 2014). The classification parameters are based on the distance between blocks
estimated in the model and the drill hole sample data; these are intended to encompass
zones of reasonably continuous mineralization. The applied distances are derived, in part,
from ranges exhibited in the variograms.
The Eight Mile Lake Placer Deposit is relatively small in size and contains somewhat
variable gold grades in the sample database. The current distribution of drilling in the Main
area of the deposit is deemed sufficient to support the estimation of mineral resources in
only the Inferred category. Additional, more closely spaced drilling is required to exhibit the
level of confidence required for resources in the Indicated or Measured categories.
Inferred Resources refer to model blocks located within a maximum distance of 50 m from
a drill hole.
14.11 MINERAL RESOURCES
As required under NI 43-101, mineral resources must exhibit reasonable prospects for
eventual economic extraction. The Eight Mile Lake Placer Deposit is comprised of
unconsolidated overburden which contains variable quantities of free gold. There is no
additional sampling during mining and it is assumed that there is no vertical selectivity of
ore versus waste after an area has been selected for mining; essentially all the material
between surface and bedrock is removed and run through the wash plant.
A series of resource limiting pit shells were generated using the 3D block model and a
series of projected technical and economic parameters that were deemed appropriate for
this deposit. Shells based on gold prices as low as $1,000/oz, site operating costs of
$7.50/m3, and a pit slope of 35° indicated that the majority of the overburden in the Main
area of the deposit exhibits reasonable prospects for eventual economic extraction. The
northern crest of most pit shells remain outside the 10-m buffer from the shore of Eight Mile
Lake.
A base case cut-off grade of 0.2 g/m3 is determined assuming site operating costs of
$7.50/m3, a gold price, based on an approximate average price over the past year, of
$1300/oz and projected recoveries of 85%. Using the 2D model, portions of overburden
above this cut-off threshold have been identified and this boundary limit has been used to
identify the parts of the 3D block model that can be included in the mineral resource
estimate. The limits of the Inferred mineral resource are shown in plan view in Figure 14-
13. The Inferred mineral resource estimate for the Eight Mile Lake Placer Deposit is shown
in Table 14.4.
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TABLE 14.4: INFERRED MINERAL RESOURCE ESTIMATE FOR EIGHT MILE LAKE PLACER DEPOSIT
Cubic Metres (000)
Grade (g/m
3)
Contained Gold (oz)
2,459 0.43 34,000
Note: Includes areas where the vertical extent of overburden
has a gold grade > 0.2 g/m3. Mineral resources are not mineral
reserves and do not have demonstrated economic viability.
There are no known factors related to mining, metallurgical, infrastructure, environmental,
permitting, legal, title, taxation, socio-economic, marketing or political issues which could
materially affect the mineral resource.
FIGURE 14-13: PLAN SHOWING THE LIMIT OF INFERRED MINERAL RESOURCE
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The extent of the Inferred mineral resource is shown in a series of isometric viewpoints in
Figure 14-14.
FIGURE 14-14: ISOMETRIC VIEWS OF THE EXTENT OF INFERRED MINERAL RESOURCE
14.12 COMPARISON OF 3D AND 2D MODELS
Table 14.5 shows a comparison of the volume and grade of resources generated from the
2D and 3D block models.
TABLE 14.5: COMPARISON OF RESOURCES BY MODEL TYPE
Model Cubic Metres
(000) Grade (g/m
3)
Contained Gold (oz)
3D 2,459 0.430 34,000
2D 2,567 0.467 38,500
Note: Includes areas where the vertical extent of overburden has a gold grade > 0.2 g/m3.
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There is about a 12% difference in the amount of contained gold between the two model
types, with the 3D model providing a somewhat more conservative estimate than the 2D
model. And although the 2D model is considered to be an acceptable approach to
estimating resources in a placer deposit, the 3D model method is more robust and, as a
result, has been used to provide the statement of mineral resources for the Eight Mile Lake
Placer Deposit. The similarity between these two modeling approaches serves to increase
the level of confidence in the overall mineral resource estimate for the deposit.
14.13 RECONCILIATION
During the period from June 2014 to July 2014, HGMI extracted and processed a total of
16,800 m3 of material from the Eight Mile Lake Placer Deposit producing 6,836 grams of
gold. This equates to an average in-situ (bank) grade of 0.49 g/m3. The general location of
this production is shown in plan in Figure 14-15. A query of the resource model in this
location gives a somewhat conservative average grade of 0.36 g/m3, but that higher grade
material is present in the immediate vicinity. Although this represents a relatively small
volume in which to conduct reconciliation analyses, these results suggest that the resource
model correlates reasonably well with actual production.
FIGURE 14-15: PLAN SHOWING AREA OF PRODUCTION DURING JUNE-JULY 2014
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15 MINERAL RESERVE ESTIMATES
At present there are no mineral reserve estimates for the Eight Mile Lake property.
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16 MINING METHODS
This section is not applicable.
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17 RECOVERY METHODS
This section is not applicable.
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18 PROJECT INFRASTRUCTURE
This section is not applicable.
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19 MARKET STUDIES AND CONTRACTS
This section is not applicable.
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20 ENVIRONMENTAL STUDIES, PERMITTING, AND
SOCIAL OR COMMUNITY IMPACT
This section is not applicable.
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21 CAPITAL AND OPERATING COSTS
This section is not applicable.
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22 ECONOMIC ANALYSIS
There was no economic analysis done for this project.
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23 ADJACENT PROPERTIES
This section is not applicable.
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24 OTHER RELEVANT DATA
There is no other relevant data or information.
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25 INTERPRETATION AND CONCLUSIONS
The drill data available are adequate to estimate mineral resources in the Inferred category.
The current resource remains open in several directions and additional drilling is required to
define the ultimate limits of the deposit. There are indications that additional satellite
deposits may be present on the property and additional exploration drilling is
recommended.
Inferred resources are too uncertain to have economic factors applied to them. Mineral
resources, which are not mineral reserves, do not have demonstrated economic viability.
The quantity and grade of reported Inferred resources are uncertain in nature and there has
been insufficient exploration to classify these Inferred resources as Indicated or Measured,
and it is uncertain if further exploration will result in upgrading them to an Indicated or
Measured category.
Although, at this stage, there are no mineral reserves at the Eight Mile Lake deposit, the
deposit is currently in operation. As stated above, the estimate of contained ounces is
necessarily uncertain due to the intrinsic variability of the mineralization and the drill hole
spacing. Whether any or all of the placer gold contained in the estimate can be recovered is
unknown and mining a deposit based on resources in the Inferred category is potentially
risky.
It is typical to develop production decisions on feasibility studies based on Proven and
Probable reserves derived from Measured and Indicated resources. In the case of the Eight
Mile property, current operations are not based on the results of a feasibility study. The
operation uses Inferred resources that are too uncertain to be the foundation of a feasibility
study. As such there is more technical and economic uncertainty associated with the Eight
Mile mining and gold recovery than is usually associated with a producing mine.
Historically, projects that have gone into production without first establishing mineral
reserves and the support of a feasibility study, have a higher risk of economic and technical
failure.
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26 RECOMMENDATIONS
The following actions are recommended for the Eight Mile Lake Placer Deposit:
Drill additional holes on a 50-m grid pattern to identify the lateral extents of the
current resource (approximately 20 holes, total 700 m = $100,000).
Drill additional exploration holes to identify other gravel-bearing channels in the
exploration areas shown in Figure 26-1 (20 holes, total 700 m = $100,000).
Continue to validate drill results against gold recovery efforts. Current mining
activities are directed using Inferred-class mineral resources. Additional close-
spaced drilling may be required to improve production reconciliation.
FIGURE 26-1: PLAN SHOWING AREAS FOR FUTURE EXPLORATION ACTIVITY (KOCSIS, 2012)
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27 REFERENCES
Arctic Geophysics (2014). Geophysical Survey with 2D Resistivity for Placer Prospecting at Eight Mile, British
Columbia. Dawson City, February 2014.
British Columbia Geological Survey (BCGS) (2014). Geospatial Data Downloads. http://www.empr.gov.bc.ca/Mining/Geoscience/MapPlace/GeoData/pages/defa ult.aspx. retrieved on March the 17th 2014. Coldwell, James R. (2002). Economic Prefeasibility Studies of Mining n the Koyukuk Mining District, Northern Alaska, BLM-Alaska Technical Report 38, February 2002, U. S. Department of the Interior Bureau of Land Management Frontier Geosciences Inc. (2013). Seismic Refraction Survey Toop Mine, Eight Mile Lake and Fraser River Projects, Quesnel Area, B.C. Vancouver, May 2013. Frontier Geosciences Inc. (2001). A1 Cats. Report on Seismic Refraction Investigation Eight Mile Lake Prospect, Cariboo Mining District, Wells Area, B.C. Vancouver, September 2001. Frontier Geosciences Inc. (1993). Jeslin Resources. Report on Seismic Refraction Investigation Eight Mile Lake Prospect, Wells Area, B.C. Vancouver, September 1993. geotec Rohstoffe GmbH. (2014a). Mining Plan 2014 – Eight Mile Lake Production Site. Confidential. Berlin, February 2014. geotec Rohstoffe GmbH. (2014b). Summary - Quotations for Mining Equipment. Eight Mile Lake Production Site, British Columbia, Canada. Berlin, February 2014. geotec Rohstoffe GmbH. (2014c). Technical Report – Exploration Drill Road Map 2014. Confidential. Berlin, February 2014. geotec Rohstoffe GmbH. (2014d). Draft Technical Report Eight Mile Lake Property, Berlin, July 2014. Google Inc., Google Maps (2014). retrieved on March the 17th, 2014. G.U.B. INGENIEUR AG (2009). Technischer Bericht. Fact Finding Mission Gold Exploration. Cottonwood and Mary Creek Claims, Quesnel, B.C. Kanada. July 2009. Jacob, Gerhard (2013). Eight Mile Lake Placer Project, B.C. Canada. An Executive Summary and Valuation Summary. April 2013. Kocsis, S. (2012). Eight Mile Placer Gold Property, British Columbia, Canada. Quesnel, December 2012. Levson, V. M. and Giles, T. R. (1993). Geology of Tertiary and Quaternary gold-bearing placers in the Cariboo region, British Columbia (93A, B, G, H). Canada. Ministry of Energy and Mines. British Columbia (2013). Notice of work. Tracking Number: 100006219, 2013. Silva, M. (1986). Placer Gold Recovery Methods. Sacramento: California Department of Conservation - Division Mines and Geology. Stanway, K.J. (2012) Ten Placer Deposit Models from Five Sedimentary Environments, Applied Earth Science (Trans. Inst. Min. Metall. B), vol. 121, no. 1, pp. 43-51. Stewart, Alex (2013). Gold Analysis Report. Dubai, United Arab Emirates, October 2013. Timmermann, J. (2013). Eight Mile Property 2013 Drilling Report. Quesnel, August 2013.
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28 CERTIFICATES AND SIGNATURES
Bruce Davis, FAusIMM, BD Resource Consulting, Inc.
I, Bruce Davis, FAusIMM, do hereby certify that:
1. I am an independent consultant of BD Resource Consulting, Inc., located at 4253 Cheyenne Drive, Larkspur, CO, U.S.A., 80118, and incorporated January 18, 2008.
2. I graduated with a Doctor of Philosophy in Geostatistics from the University of Wyoming in 1978.
3. I am a fellow of the Australasian Institute of Mining and Metallurgy, Registration Number 2111185.
4. I have practiced my profession continuously for 33 years and have been involved in geostatistical studies, mineral resource and reserve estimations and feasibility studies on numerous underground and open pit base metal and gold deposits in Canada, the United States, Central and South America, Europe, Asia, Africa and Australia.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past work experience on gold placer deposits in California, Alaska and Wyoming, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.
6. I am the primary author responsible for the preparation of all sections (except Sections 7, 8, 9 and 14) of the technical report titled “Eight Mile Lake Placer Deposit, Cariboo Regional District, British Columbia, NI 43-101 Technical Report” dated November 10, 2014, with an effective date of August 7, 2014 (the “Technical Report”).
7. I visited the property on August 6-7, 2014.
8. I have had no prior involvement with the property that is the subject of the Technical Report.
9. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.
10. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical Report has been prepared in compliance with that instrument and form.
11. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to make the Technical Report not misleading.
Dated this 10th day of November, 2014.
“original signed and sealed”
_
Bruce M. Davis, FAusIMM
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Robert Sim, P.Geo, SIM Geological Inc.
I, Robert Sim, P.Geo, do hereby certify that:
1. I am an independent consultant of:
SIM Geological Inc.
6810 Cedarbrook Place
Delta, British Columbia, Canada V4E 3C5
2. I graduated from Lakehead University with an Honours Bachelor of Science (Geology) in 1984.
3. I am a member, in good standing, of the Association of Professional Engineers and Geoscientists of British Columbia, License Number 24076.
4. I have practiced my profession continuously for 30 years and have been involved in mineral exploration, mine site geology and operations, mineral resource and reserve estimations and feasibility studies on numerous underground and open pit base metal and gold deposits in Canada, the United States, Central and South America, Europe, Asia, Africa and Australia.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience in Alaska, I fulfill the requirements to be a “qualified person” for the purposes of NI 43-101.
6. I am a co-author of the technical report titled Eight Mile Lake Placer Deposit, Cariboo Regional District, British Columbia, NI 43-101 Technical Report, dated November 10, 2014, with an effective date of August 7,
2014 (the “Technical Report”), and accept professional responsibility for Section 14 and portions of 1, 2, 25 and 26.
7. I have not visited the Property.
8. I have no prior involvement with the Property.
9. As of as of the effective date of the Technical Report, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.
10. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.
11. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical Report has been prepared in compliance with that instrument and form.
Dated this 10th day of November, 2014.
“original signed and sealed”
_____________________________________
Robert Sim, P.Geo
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Detlef Eberle, Pr.Sci.Nat. (RSA), Dr.rer.nat.habil. (TU Berlin), geotec Rohstoffe GmbH,
Germany
I, Detlef Eberle, Pr.Sci.Nat. (RSA), Dr.rer.nat.habil., do hereby certify that:
1. I am an independent consultant of geotec Rohstoffe GmbH, Germany, located at 95 Friedrichstrasse,
10117 Berlin, Germany.
2. I graduated with a Doctor degree in Geophysics from Ludwig-Maximilian-University Munich, Germany,
in 1978 and a Habilitation degree from Berlin Technical University in 1993.
3. I satisfy the requirements determined by the South African Council for Natural Scientific Professions
(SACNASP) for the Earth Science category. I am subject to a Code of Conduct administered by
SACNASP. I am a member, in good standing, of the Society of Exploration Geophysicists (SEG), Tulsa,
Oklahoma, registration number 3390, the Australian Society of Exploration Geophysicists (ASEG), the
European Association of Geoscientists and Engineers, registration no. M2001-1037, the South African
Geophysical Association (SAGA) and the Austrian Geophysical Society (AGS, Vienna).
4. I have practiced my profession continuously for 45 years and have been involved in geostatistical
research, in ground- and air-borne exploration of mineral, hydrocarbon and groundwater resources as
well as in environmental and engineering investigations in Europe, Latin America, Canada, sub-
Saharan Africa and SE-Asia. My mineral exploration experience includes the search for placer deposits
of gold and heavy minerals in palaeo-valleys of Brazil, Canada, West and Southern Africa.
5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and
certify that by reason of my education, affiliation with a professional association (as defined in NI 43-
101) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the
purposes of NI 43-101.
6. I am responsible for the preparation of Sections 7-9 of the technical report titled “Eight Mile Lake Placer
Deposit, Cariboo Regional District, British Columbia: NI 43-101 Technical Report” dated November 10,
2014 with an effective date of August 7, 2014 (the “Technical Report”).
7. Beginning in April 2012, I visited the property on several occasions to direct geophysical exploration
programs and geology studies in support of those programs. My most recent visit was from July 24 to
August 14, 2014.
8. I am independent of Henning Gold Mines Inc. applying all of the tests in Section 1.5 of NI 43-101.
9. I have read National Instrument 43-101, Form 43-101F1, and the Technical Report, and the Technical
Report has been prepared in compliance with that instrument and form.
10. As of the effective date of the Technical Report, to the best of my knowledge, information and belief, the
Technical Report contains all scientific and technical information that is required to make the Technical
Report not misleading.
Dated this 10th day of November, 2014.
“original signed and sealed”
_
Detlef Eberle, Pr.Sci.Nat.(RSA)