GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Preliminary Economic Assessment of the
halite and potash mineral concessions Isabel
1/42, Cote 1/12 and Engañadora, Salar
Grande, Northern Chile
Prepared in accordance with National Instrument NI 43-101
The concessions and observations lie in the western part of northern Chile between the Tana
canyon 19° 30' lat. in the N and the Río Loa canyon 21° 30' lat. in the South.
Report compiled by:
John Alan Gould, B.Sc., B.Sc. (Hons), Pr.Sci.Nat.
Executive Vice President, Gold Dragon Resources Corporation
Page 1 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
_____________________________
John Alan Gould,
B.Sc., B.Sc. (Hons), Pr.Sci.Nat.
4 February 2014.
Page 2 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
TECHNICAL REPORT
Preliminary Economic Assessment of the halite and potash mineral concessions Isabel 1/42 and Cote
1/12, and Engañadora Salar Grande Northern Chile
Contents
LIST OF TABLES ...................................................................................................................................... 6 ITEM 1: SUMMARY ................................................................................................................................. 9 GEOLOGY SUMMARY, RESOURCE AND RESERVE ESTIMATES .................................................................. 10 PRELIMINARY ECONOMIC ASSESSMENT ................................................................................................. 11 CONCLUSIONS ......................................................................................................................................... 14 RECOMMENDATIONS ............................................................................................................................... 14 ITEM 2: INTRODUCTION..................................................................................................................... 15 THE ISSUER FOR WHOM THE TECHNICAL REPORT IS PREPARED .............................................................. 15 THE TERMS OF REFERENCE AND PURPOSE FOR WHICH THE TECHNICAL REPORT WAS PREPARED .......... 15 THE DETAILS OF THE PERSONAL INSPECTION ON THE PROPERTY BY EACH QUALIFIED PERSON ............. 16 ITEM 3: RELIANCE ON OTHER EXPERTS ...................................................................................... 16 THE QUALIFIED PERSON WHO PREPARED THIS REPORT, .......................................................................... 16 ITEM 4: PROPERTY DESCRIPTION AND LOCATION.................................................................. 16 PREFERENT AREAS OF MINING CONCESSIONS HELD ................................................................................ 17 LOCATION ............................................................................................................................................... 17 THE NATURE AND EXTENT OF THE ISSUER’S TITLE ................................................................................. 22 THE TERMS OF ANY ROYALTIES .............................................................................................................. 22 ENVIRONMENTAL LIABILITIES ................................................................................................................ 22 PERMITS THAT MUST BE ACQUIRED ........................................................................................................ 22 ITEM 5: ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND
PHYSIOGRAPHY .................................................................................................................................... 22 TOPOGRAPHY, ELEVATION AND VEGETATION ........................................................................................ 22 ACCESSIBILITY ........................................................................................................................................ 23 ITEM 6: HISTORY .................................................................................................................................. 25 THE PRIOR OWNERSHIP OF THE PROPERTY AND OWNERSHIP CHANGES .................................................. 25 PREVIOUS WORK DONE ON THE PROPERTY ............................................................................................. 25 SIGNIFICANT HISTORICAL MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ............................ 26 PRODUCTION FROM THE PROPERTY ........................................................................................................ 26 ITEM 7: GEOLOGICAL SETTING AND MINERALISATION ....................................................... 26 THE REGIONAL, LOCAL AND PROPERTY GEOLOGY.................................................................................. 26 STRATIGRAPHIC UNITS AND GEOLOGICAL MECHANISM OF EMPLACEMENT ........................................... 29 GEOLOGICAL MECHANISM OF EMPLACEMENT FOR THE LACUSTRINE SEQUENCES ................................. 31 LITHOFACIES DESCRIPTIONS ................................................................................................................... 32 CALICHE-TYPE MINERALISATION............................................................................................................ 35 ENGAÑADORA ......................................................................................................................................... 37 Page 3 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
ROSA ....................................................................................................................................................... 37 DOLORES ................................................................................................................................................. 37 ITEM 8: DEPOSIT TYPES ..................................................................................................................... 37 IN-HOUSE GEOCODES .............................................................................................................................. 38 ITEM 9: EXPLORATION ....................................................................................................................... 39 SAMPLING METHODS AND SAMPLE QUALITY .......................................................................................... 39 RELEVANT SAMPLING INFORMATION PER LOCATION ............................................................................. 39 Isabel surface sampling ...................................................................................................................... 39 Isabel borehole samples ...................................................................................................................... 41 Cote surface sampling......................................................................................................................... 48 Borehole solution test ......................................................................................................................... 48 Discussion on the Cote brine sampling............................................................................................... 50 EXPLORATION MODELS ........................................................................................................................... 53 Isabel conglomerate sediment and soluble sulphate model ................................................................ 53 The Pampa Engañadora and the Isabel models ................................................................................. 54 The Pampa/caliche model ................................................................................................................... 55 Dolores................................................................................................................................................ 55 Engañadora Model ............................................................................................................................. 56 ITEM 10: DRILLING .............................................................................................................................. 56 DRILLING METHODOLOGY, DRILLING SUMMARY AND INTERPRETATION OF RESULTS ........................... 56 IMPACT ON DRILLING, SAMPLING AND RECOVERY FACTORS .................................................................. 56 ITEM 11: SAMPLE PREPARATION, ANALYSES AND SECURITY ............................................. 58 SAMPLE QA AND QC .............................................................................................................................. 58 RELEVANT INFORMATION REGARDING SAMPLE PREPARATION, ASSAYING AND ANALYTICAL
PROCEDURES USED .................................................................................................................................. 59 ITEM 12: DATA VERIFICATION ........................................................................................................ 64 COMMENTS ON THE ENGAÑADORA SAMPLING PROGRAM ...................................................................... 67 ITEM 13: MINERAL PROCESSING AND METALLURGICAL TESTING ................................... 68 SALT METALLURGICAL PROCESSES........................................................................................................ 68 BULK DE-ICING SALT PRODUCTION ......................................................................................................... 69 POTASH METALLURGICAL PROCESSES ................................................................................................... 69 ITEM 14: MINERAL RESOURCES AND MINERAL RESERVES .................................................. 70 ISABEL HALITE RESERVES ....................................................................................................................... 71 COTE RESERVES ...................................................................................................................................... 72 ISABEL FOOTWALL TUFF ANALYSIS ........................................................................................................ 76 PAMPA/CALICHE INTERFACE SALTS......................................................................................................... 78 ISABEL RESOURCE TABLES ...................................................................................................................... 79 ENGAÑADORA PROJECT .......................................................................................................................... 80 ITEM 15: MINERAL RESERVE ESTIMATES ................................................................................... 86 ITEM16:MININGMETHODS–............................................................................................................... 86 Page 4 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
ISABEL MINE DESIGN ............................................................................................................................... 86 COTE MINE DESIGN ................................................................................................................................ 90 OTHER MINING RELATED FACTORS ....................................................................................................... 91 Other parameters relevant to mine plans are as follows: ................................................................... 91 Production rate, expected mine life, mining unit dimensions and mining dilution factors used ........ 91 Requirements for stripping, underground development and backfilling............................................. 92 ITEM 17: ISABEL RECOVERY METHOD AND PROCESS PLANT ............................................. 92 HALITE PRODUCTION .............................................................................................................................. 92 ITEM 18: ISABEL PROJECT INFRASTRUCTURE: ......................................................................... 96 ITEM 19: MARKET STUDIES AND CONTRACTS ........................................................................... 97 The bulk de-icing salt market .............................................................................................................. 97 Chemical Requirements ...................................................................................................................... 97 Physical Requirements ........................................................................................................................ 97 Bulk salt pricing .................................................................................................................................. 97 Blended de-icing products ................................................................................................................ 100 Premium ice melting products .......................................................................................................... 101 Water conditioning salt ..................................................................................................................... 102 Possible substitutes ........................................................................................................................... 102 PREMIUM FERTILIZER PRODUCTS .......................................................................................................... 102 POTASSIUM USES ................................................................................................................................... 104 MURIATE OF POTASH (MOP) ................................................................................................................ 105 SULPHATE OF POTASH (SOP) ................................................................................................................ 105 POTASSIUM MAGNESIUM SULPHATE ..................................................................................................... 105 POTASSIUM NITRATE ............................................................................................................................. 105 POTASH HOLIDAY .................................................................................................................................. 105 FERTILISER USAGE ................................................................................................................................ 106 OTHER USES OF POTASSIUM .................................................................................................................. 107 POTASH DEMAND .................................................................................................................................. 107 INCREASING POPULATION ..................................................................................................................... 107 INCREASING LAND PRODUCTIVITY REQUIRED ...................................................................................... 107 POTASH PRODUCTION............................................................................................................................ 109 POTASH PRICE FORECAST ...................................................................................................................... 112 ITEM 20: ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL/COMMUNITY
IMPACT .................................................................................................................................................. 114 DISCUSSION OF ANY POTENTIAL SOCIAL OR COMMUNITY RELATED REQUIREMENTS AND PLANS FOR THE
PROJECT AND THE STATUS OF ANY NEGOTIATIONS OR AGREEMENTS WITH LOCAL COMMUNITIES ...... 114 A DISCUSSION OF MINE CLOSURE (REMEDIATION AND RECLAMATION) REQUIREMENTS AND COSTS. . 114 ITEM 21 AND 22: CAPITAL, OPERATING COSTS AND ECONOMIC ANALYSIS ................. 115 PEA: ROCK SALT PRICE ASSUMPTIONS ................................................................................................. 116 PEA: 4MF AND BY-PRODUCT PRICE ASSUMPTIONS .............................................................................. 116 PEA: ISABEL AND COTE SALT MINE...................................................................................................... 117 PEA: ISABEL IN-SITU LEACH MINE ........................................................................................................ 117 Page 5 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
PEA: ENGAÑADORA HEAP LEACH MINE .............................................................................................. 118 SENSITIVITY ANALYSIS ......................................................................................................................... 125 TAXES AND ROYALTIES ......................................................................................................................... 126 ITEM 23: ADJACENT PROPERTIES ................................................................................................ 127 ITEM 24: OTHER RELEVANT DATA AND INFORMATION ...................................................... 127 ITEM 25: INTERPRETATIONS AND CONCLUSIONS .................................................................. 127 CONCLUSIONS ....................................................................................................................................... 128 ITEM 26: RECOMMENDATIONS ...................................................................................................... 130 ISABEL, COTE, ISABEL FOOTWALL AND ENGAÑADORA ....................................................................... 130 DOLORES AND VULTURE CAVE ............................................................................................................ 131 ITEM 27: REFERENCES ...................................................................................................................... 132 ITEM 28: QUALIFIED PERSON CERTIFICATE ............................................................................ 134 APPENDIX 1 ........................................................................................................................................... 135 APPENDIX 2 ........................................................................................................................................... 145 ListofTables
Table 1: Resource estimate summary .......................................................................................................................... 11 Table 2: Reserve estimate summary ............................................................................................................................ 11 Table 3: Economic Indicators ..................................................................................................................................... 13 Table 4: Preferent concession area listing .................................................................................................................. 17 Table 5: Hartley and Evenstar age dating................................................................................................................... 34 Table 6: GDR geocodes ............................................................................................................................................... 38 Table 7: Chemical and lithological profile through boreholes A part 1 ..................................................................... 42 Table 8: Chemical and lithological profile through boreholes A part 2 ..................................................................... 43 Table 9: Chemical and lithological profile through boreholes L part 1...................................................................... 44 Table 10: Chemical and lithological profile through boreholes F .............................................................................. 46 Table 11: Chemical and lithological profile through boreholes OV2 ......................................................................... 46 Table 12: Chemical and lithological profile through boreholes I ............................................................................... 47 Table 13: The results of the Cote added water borehole brine samples ...................................................................... 49 Table 14: Isabel halite QA/QC based on duplicate sampling analysis (variable sample size included) ..................... 66 Table 15: Engañadora sampling data set .................................................................................................................... 68 Table 16: Isabel reserves ............................................................................................................................................. 72 Table 17: Cote reserves ............................................................................................................................................... 72 Table 18: Density determination using the salt intersection in borehole F1 ............................................................... 75 Table 19: Isabel footwall tuff Unit mineral assemblage, borehole A3 ........................................................................ 76 Table 20: Isabel tuff: upper and lower layers XRD results ......................................................................................... 77 Table 21: K-Ar age dating results of Isabel footwall tuff (SERNAGEOMIN 2013) .................................................... 77 Table 22: Isabel resource tables.................................................................................................................................. 79 Table 23: BH L chemical profile ................................................................................................................................. 80 Table 24: Engañadora resource estimation ................................................................................................................ 85 Table 25: Isabel pit, upper surface and floor contact coordinates .............................................................................. 87 Page 6 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Table 26: Equipment selection criteria ....................................................................................................................... 91 Table 27: SQM 2012 Annual Report Specialty Plant Nutrients (SPN) and Iodine prices received........................... 103 Table 28: Supplier consolidation and fracture .......................................................................................................... 110 Table 29: Consensus USD:CLP FX Forecast ............................................................................................................ 116 Table 30: Salt Demand and Price ............................................................................................................................. 116 Table 31: Solar evaporation product prices .............................................................................................................. 116 Table 32: Economic Indicators ................................................................................................................................. 119 Table 33: Isabel and Cote Salt Project Financial Analysis Years 1 to 11 ................................................................. 120 Table 34: Isabel and Cote Salt Project Financial Analysis Years 11 to 22 ............................................................... 121 Table 35: Isabel In-Situ Leach Project Financial Analysis part 1 ............................................................................ 122 Table 36: Isabel In-Situ Leach Project Financial Analysis part 2 ............................................................................ 123 Table 37: Engañadora Heap Leach Project Financial Analysis ............................................................................... 124 Table 38: Resource estimate summary ...................................................................................................................... 128 Table 39: Reserve estimate summary ........................................................................................................................ 128 Table 40: Economic indicators .................................................................................................................................. 129 List of Figures
Figure 1: CMDGR concessions location ..................................................................................................................... 18 Figure 2: Engañadora property location .................................................................................................................... 19 Figure 3: Rosa property location ................................................................................................................................ 20 Figure 4: Dolores property location ........................................................................................................................... 21 Figure 5: Precipitation in mm p.a. (vert. axis) against altitude as m.a.s.l. (horiz. axis) (anon.) ................................... 24 Figure 6: Evaporation in mm/month (anon.)............................................................................................................... 25 Figure 7: Extract from the SERNAGEOMIN geology map of the considered region (c.f. with Figure 8). ................. 27 Figure 8: SERNAGEOMIN Geology map, key features legend (2000) ....................................................................... 28 Figure 9: Surface sample locations at Isabel with the relative K values..................................................................... 40 Figure 10: Chemical and lithological profile through boreholes L part 2 .................................................................. 45 Figure 11: Surface sampling at Cote, View E ............................................................................................................. 48 Figure 12: Surface sample points at Cote ................................................................................................................... 51 Figure 13: Line 5 of the Cote NanoTem (Left) and Line 2 of the NanoTem at Isabel (Right). .................................... 52 Figure 14: The Camanchaca ....................................................................................................................................... 53 Figure 15: Salt at Guanillos del Norte 800 m W of Cote ............................................................................................ 54 Figure 16: Dolores area K solids anomalies............................................................................................................... 55 Figure 17: The Isabel borehole locations.................................................................................................................... 57 Figure 18: An example of bagged samples .................................................................................................................. 61 Figure 19: Halite in the drill core ............................................................................................................................... 61 Figure 20: Drill core logging ...................................................................................................................................... 62 Figure 21: Engañadora sampling extent ..................................................................................................................... 67 Figure 22: Solid halite in the NW pit at Isabel ............................................................................................................ 70 Figure 23: Halite isopach (Isabel project) .................................................................................................................. 71 Figure 24: Isabel WE cross section ............................................................................................................................. 72 Figure 25: Cote Project, Upper halite isopach ........................................................................................................... 73 Figure 26: Cote Project, Lower halite and sediments isopach.................................................................................... 74 Figure 27: Cote Project, Section shown halite and footwall units .............................................................................. 75 Figure 28: 200µm scale SEM image of the Isabel footwall tuff horizon ..................................................................... 76 Figure 29: Isabel footwall tuff Scanning Electron Microscope-Semi-Quant mineralogy ...........................................77 Figure 30: Engañadora orientation map..................................................................................................................... 81 Page 7 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Figure 31: Engañadora: Sernageomin geological interpretation ............................................................................... 82 Figure 32: SERNAGEOMIN surface geology legend .................................................................................................. 83 Figure 33: Engañadora, property orientation ............................................................................................................. 83 Figure 34: Plan view of the pit design ......................................................................................................................... 88 Figure 35: Pit design with section lines 1 to 4 indicated............................................................................................. 89 Figure 36: Section line views from figure 63, in descending numerical order ............................................................ 89 Figure 37: Diagram of the Isabel pit with E–W section .............................................................................................. 90 Figure 38: Isabel Process flow diagram ..................................................................................................................... 95 Figure 39: Extract from 2012-2013 Washington State Department of Transportation Nationwide Salt Price Map
price comparison & 5 year average use ...................................................................................................................... 98 Figure 40: World salt consumption by category ......................................................................................................... 99 Figure 41: Chlor Alkali product usage...................................................................................................................... 100 Figure 42: De-icing salt sales routes ........................................................................................................................ 101 Figure 43: SOP price comparison for North America .............................................................................................. 103 Figure 44: Approximate distribution of potassium in various fertilisers................................................................... 104 Figure 45: Global MOP usage by crop in 2006/7 (IFA (2008)), and their sensitivity to chloride and recommended K
fertiliser (K+S KALI GmbH (2012)).......................................................................................................................... 106 Figure 46: World population growth by income (The World Bank (2010)) .............................................................. 107 Figure 47: Total arable land (Bruinsma (2003)) ...................................................................................................... 108 Figure 48: Required increase in land productivity.................................................................................................... 108 Figure 49: Distribution of potassium production and reserves (Jasinski (2012)) ..................................................... 109 Figure 50: Anticipated production capacity increases (Jackson et al (2012)) .......................................................... 111 Figure 51: Anticipated deliveries and operating rate (Jackson et al (2012))............................................................ 111 Figure 52: BMO fertilizer commodity price forecast ................................................................................................ 112 Figure 53: Historical and forecast K₂O prices ......................................................................................................... 113 Figure 54: Recent Exchange Rates............................................................................................................................ 115 Figure 55: Isabel and Cote Salt project NPV sensitivity chart.................................................................................. 125 Figure 56: Isabel In-Situ Leach Project NPV sensitivity chart ................................................................................. 125 Figure 57: Engañadora Heap Leach Project NPV sensitivity chart ......................................................................... 125 Page 8 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Item1:Summary
GDR Mining (Barbados) Inc. owns 100% of its Chile subsidiary Compañia Minera Gold Dragon
Resources Ltda. (“CMGDR”) which owns rights to 3985 hectares of mineral concessions located in the
Atacama Desert of N Chile that make up the following individual projects forming the basis of a
Preliminary Economic Assessment (“PEA”). GDR Mining (Barbados) Inc is a 100% owned subsidiary of
Canadian incorporated Gold Dragon Resources Corporation (“GDR”).
The projects are as follows:



The Isabel and Cote Rock Salt Project: The project will mine salt from two locations on the Salar
Grande. The salt will be crushed and screened and then transported to a port facility by road. The
salt products will be shipped to the market in bulk dry cargo ships via a yet to be constructed
private marine terminal, or possibly, the public port of Iquique. The project has received the
permits necessary to start mining, but still requires the permits to build a private bulk dry cargo
ship loading facility
The Isabel Footwall Fertilizer Project: This is an in-situ leach project of a 34 m thick layer of
water soluble, largely sulphate evaporite minerals. The unit contains 30% soluble salts identified
below the high purity halite deposit at Isabel. The brine generated will be solar evaporated and
the harvested salts will be processed for sale. The expected products represent approximately
10% of the rock layer by mass and are K₂SO₄, Na₂SO₄, MgCl₂ and NaNO₃ with Li₂CO₃ with
H₃BO₃as by-products. Potassium sulphate is expected to be the primary revenue contributor.
Brine for use as a leach solution, has been identified below the evaporite minerals, but the
availability needs to be determined. Sea water could be used as an alternate leach solution. The
suitability of the hydrology to enable solution mining needs to be confirmed.
The Engañadora Caliche Project: This project will mine caliche ore, which will be heap leached
using sea water pumped 15 km from the coast. The brine will then be solar evaporated and the
harvested salts processed for sale. The expected products are K₂SO₄, Na₂SO₄ MgCl₂ and NaNO₃
with Li₂CO₃ and H₃BO₃ as by-products. In this area iodine is a significant product from caliche
mining, but has not been included in the evaluation at this time. Additional resource potential is
projected to exist, both at depth and laterally. This potential has not been estimated and needs to
be further delineated by drilling. Higher margin fertilizer products will be shipped via the public
port of Iquique or via a nearby private salt export terminal where GDR has negotiated a fixed cost
off-peak season fertilizer export contract with a local salt exporter
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GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Geology summary, resource and reserve estimates
Halite deposits
The 45 km long Salar Grande basin is host to a near pure halite deposit that is reported to be greater than
100m thick. The halite sequences, which also outcrop in the Pampa del Tamarugal, 50 km to the SE in the
Lomas de la Sal area, show physical continuity with the saline deposits of the Salar Grande basin. Two
tephra layers, found between lower halite layers in an outcrop at Co. Tambillo Alto, were dated by
40
Ar/39Ar step-heating at 0.21 Ma ± 0.066 and 0.098 Ma ± 0.042 (Saez et al., 2012). The GDR halite
properties cover an area of 33 hectares of the Salar Grande and have a proven reserve of 6.4 Mt of 95.6%
purity halite at Isabel with a further 27.2 Mt of probable reserves at the Cote property. The halite deposits
of the Salar Grande are currently being mined at a rate of more than 8 Mt per year for the de-icing and
industrial chemical market by Sociedad Punta de Lobos and Compañía Minera Cordillera for export to the
North American and European markets.
GDR’s 52 % owned subsidiary (Potash Dragon SpA) holds exploration rights over 2,156 hectares of the
halite outcrop at Lomas de la Sal, which is reported to be 100 m thick. The Lomas de la Sal halite
deposits have been mined for rock salt in the past.
Isabel Footwall Sulphate Deposit
The Isabel footwall evaporite deposits consist of a suite of clastic sediments comprising predominantly
conglomerate of volcanic origin, cemented together with economic concentrations of soluble potassium,
magnesium, and sulphate minerals indentified as glauberite and polyhalite, among others. The sediments
show significant increases in water solubility of approximately 30% by mass from approximately 50 m to
90 m below surface. The conglomerates contain a 1.5 m thick tuff layer, approximately 80 m below
surface, which has been recently K-Ar age dated at 21.5 Ma ± 1.4 (early Miocene) and is thought to be
equivalent of the Hilaricos Formation sulphates found at Lomas de la Sal. An ephemeral playa lake type
environment is likely responsible for the development of the water soluble sulphate evaporite salts. This
evaporite unit is open at depth and contains products which are planned to be produced from solar
evaporation of solution brines, termed Four Mixed Fertilizers (4MF) such as K2SO4, Na2SO4, MgCl2 and
minor amounts of NaNO3. Based on an inferred resource estimate, the average 4MF concentration
(including a significant kriging discount), for the deeper 34 m thick sequence, is 9.2% containing 1.4 Mt
of 4MF.
Water use applications for solution mining
In addition to the solid evaporite mineral accumulation in the footwall sediments at Isabel, hypersaline
groundwater has been intersected in the lower sediments with potassium concentrations of approximately
5,000 ppm. CMDGR has lodged applications for the abstraction of 6.7 liters of water per second, from
each of three extraction wells located on the Isabel property, with Ministry of National Assets’ Iquique
office.
Enganãdora duricrust deposits
The Enganãdora property, located in the NE of the Salar Grande basin, covers an area of 2,851 hectares
and is host to two types of surface duricrust deposit, known locally as caliche. These deposits contain
economic quantities of soluble nitrates, potassium, magnesium and sulphates with possible by-products
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GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
such as boron, lithium and iodine. At Enganãdora, the caliche is present in two forms. A breccia related
caliche is found within the tectonically sheared volcanic rocks of the higher lying area of the property. A
sedimentary-type caliche is found in the lower lying areas of the property. Based on an inferred resource
estimate, an area that covers 46% of the property, which excludes known lateral extensions and possible
depth extensions of the deposits, is estimated to contain an average concentration of 7% for the 4MF heap
leach solar evaporation products of K2SO4, Na2SO4, MgCl2 and NaNO3 and approximately 8.3 Mt of
4MF product.
The resource and reserve estimates for the Isabel, Cote and Engañadora Projects are as follows:
Category
Stratigraphic Unit
Ore Tonnes
Inferred
Inferred
Inferred
Total Inferred
Isabel FW
Engañadora
Cote
15 543 360
98 033 497
113 576 857
Rock Salt
Tonnes
3 574 668
3 574 668
4MF (%)
4MF Tonnes
9.17%
7.03%
1 426 088
6 832 888
7.32%
8 312 977
Table 1: Resource estimate summary Category
Stratigraphic Unit
Proven
Isabel rock salt
Probable
Cote rock salt
Total Proven and Probable
Rock Salt Tonnes
6 485 770
24 481 783
30 967 553
Table 2: Reserve estimate summary The two major commodity groups are:
1. 4MF (4 Mixed Fertilisers) being a combination of solar evaporated products including K₂SO₄,
Na₂SO₄, NaNO₃ and MgCl₂ with iodine, lithium and boron as by-products
2. Halite: Rock salt used as road de-icing and as a feedstock for the chlor-alkali industry.
PreliminaryEconomicAssessment
The economic analysis for the Isabel and Cote Rock Salt project is based on proven and probable reserves
and the analysis for the Isabel Footwall Fertilizer project and the Engañadora Caliche project is based in
part on inferred resources, and is preliminary in nature. Inferred resources are considered too geologically
speculative to have mining and economic considerations applied to them and to be categorized as Mineral
Reserves. There is no certainty that the reserves development, production and economic forecasts on
which this preliminary assessment is based, will be realized.
Based on the results of GDR’s solar evaporation chemical analysis, two thirds of anticipated sales
revenues are expected to be derived from Specialty Plant Nutrition (SPN) products such as potassium
sulphate (SOP) and nitrate fertilizers, collectively referred to SPN. SOP commands a significant premium
over potassium chloride or Muriate of Potash (MOP) due largely to the process costs involved in
converting MOP to SOP, which process accounts for 85% of world SOP supply. The conversion cost,
combined with the scarcity of primary SOP production buoyed by the demand for application to premium
crops has contributed to a price premium of SOP over MOP averaging approximately 50% for the past
decade. The SOP premium increased significantly in the latter part of 2013 to 98% as demonstrated by
Compass Minerals’ Q3/13 realized price of $712/ton for SOP and Potash Corp’s Q3/13 realized price
$360/ton for MOP. GDR’s long term price assumption modelled for SOP is $585/t. Sociedad Química y
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GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Minera de Chile S.A. (SQM) is one of the world’s largest producers of SPN, from its operations in the
Atacama Desert of Chile, and during 2012 SQM reported $675 million in sales of SPN at an average sales
price of $893 per tonne.
According to various industry sources global potash consumption is expected to grow at 4% per annum
with approximately, 47% of potash fertilizer consumption, equivalent to 17-18 Mt per annum of K2O,
being used for "premium" crops where SOP is preferred over MOP as the most commonly used
alternative to MOP when the presence of chloride ions is undesirable. SOP holds additional advantages
over MOP, due to improved crop yield, quality, shelf life, and taste benefits. SOP performs particularly
well with crops that have a low tolerance to the chloride in MOP (such as fruits, vegetables, beans, nuts,
potatoes, tea, tobacco and turf grass) and in arid, saline and heavily cultivated soils.
The economic indicators are as shown in the table below.
Notes for Table 3
The NPV has been calculated using an 8% discount rate
The operating costs have a 15% contingency
The capital cost includes a 30% contingency
*Isabel Operating costs based on contractor quotes therefore no contingency
# Peak funding $10.6m due to deferred capital (purchase of rented barges)
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GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Item
Unit
Mining
Mined (t millions)
Mined per Year (t millions)
Brine pumped (m3 millions)
Brine pumped (l/s)
Product Sales.
Revenue
Operating costs
EBITDA
Summary
Tonnes 4MF Product Rec.
LOM
% 4MF Resource Recovered
NaCl Tonnes / Year
MgCl2 Tonnes / Year
K2SO4 Tonnes / Year
Na2SO4 Tonnes / Year
NaNO3 Tonnes / Year
MgCl2 % Revenue
K2SO4 % Revenue
Na2SO4 % Revenue
NaNO3 % Revenue
By-products % Revenue
$m
$/t rock mined
$/ m3 brine pumped
$/t product sold
$m/year
The Isabel and
Cote Rock Salt
Project
31
1.2
Isabel Footwall
Fertilizer
Project
The Engañadora
Caliche Project
70
6.3
8.5
18
1 010 308
1 512 246
71%
22%
5 450
21 147
48 520
1 133
9%
57%
21%
4%
9%
50 051
37 860
0
47 514
23%
28%
0%
40%
9%
287
885
12.7
925 000
725
30.7
39.2
36.2
33.7
283
21.7
$m
$/t rock mined
$/ m3 brine pumped
$/t product sold
$m/year
261*
11.1
$m
$/t rock mined
$/ m3 brine pumped
$/t product sold
$m/year
Margin %
457
19.4
24.7
22.8
63%
27.1
227
17.4
80%
225
31.1
39%
Construction years
Production years
Capital $m
NPV at 8% discount
IRR
1.8
20
13.8#
154
129%
1.8
13.3
46
61
29%
1.8
11.2
69
109
40%
14.1
13.0
57
573
79.3
6.6
55.7
4.3
231
538
7.7
348
48.1
348
5.0
Table 3: Economic Indicators Page 13 of 145
GDR Mining (Barbados) Inc.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
Conclusions
All three projects have robust economics. In order to minimise capital requirements it is recommended
that one project should initially be financed to production, with the remainder being funded from
operating cash flow. With the return of normal winters in Europe and North America the salt market
should return to positive supply and demand levels. This would suggest the Isabel Salt or Isabel fertilizer
project being the lowest capital required and the most advanced from a permitting perspective would be
the optimal starter project.
Recommendations
The following recommendations are made for the various projects:
Isabel Rock Salt Project
In this regard, the following needs to be addressed:
a. Completion of the detailed work required to obtain permits to construct a bulk salt
loading marine terminal
b. Obtaining a suitable off-take agreement
c. Obtain and finalise detailed supply and build agreements for the mining, processing,
transportation and shipping service providers
d. Provide a final schedule and detailed plan for the implementation of the project including
the funding facilities
Isabel Footwall Project:
The following additional work is recommended to improve confidence in the footwall project and also to
apply for the necessary amendments to the existing operating permit for the rock salt mine:
a. Regular follow up on the water use applications submitted to authorities during January
2014
b. Commence scoping of the amendment required to the existing Isabel DIA in order to
construct and operate solution wells and solar evaporation ponds
c. Additional drilling is required to firm up on the chemical distribution of the resource
d. Work needs to be done to assess the suitability of the conglomerates for solution mining
e. The solution mining methodology needs to be tested, designed and financially assessed
f. Metallurgical test work needs to be done to assess the recovery process
g. Detailed work needs to be completed on the mining and plant design
h. The logistics for the export of the final product need to be planned and designed
i. Suitable off-take agreements need to be put in place to secure the revenue stream
Engañadora Project:
To take this project further, the following is recommended:
a. The implementation of a detailed sampling grid of the caliche to improve on both the
areal size and confidence of the resource estimation
Page 14 of 145
GDR Mining (Barbados) Inc.
b.
c.
d.
e.
f.
Preliminary Economic Assessment of the Isabel, Cote and Engañadora properties
The metallurgical characteristics of the resource need to be investigated
The detailed layout for the mining operation needs to be designed
The appropriate DIA authorization needs to be obtained for the mining of the property
The logistics for the export of the final product need to be planned and designed
Appropriate off-take agreements need to be obtained to secure the revenue stream
Item2:Introduction
Theissuerforwhomthetechnicalreportisprepared
This technical report was prepared for: Compañia Minera Gold Dragon Resources Ltda. (CMGDR)
RUT.76141718-5 Avda. Andrés Bello 2711, Piso 19, Las Condes, Santiago de Chile. This company is a
wholly owned subsidiary of GDR Mining (Barbados) Inc., which in turn is a 100% subsidiary of Gold
Dragon Resources Corporation (GDR) headquartered in Toronto, Canada
The readership of the report is intended to be those persons seeking to verify that the exploration data,
interpretation and mineral resource estimation for the Isabel 1/42(South), Cote 1/44 and Engañadora
prospects are compliant to Canadian standards for mineral deposit exploration disclosure and ore resource
and reserve evaluation. This technical report follows the procedures set out in the National Instrument 43101 standards of disclosure for mineral projects in which exploration methods and results are required to
be independently assessed and reported by a Qualified Person (QP) following the protocol of form 43-101
F1 for Technical Reports in order to verify the adequacy of the measures taken to establish full economic
viability for the deposit(s).
An extension of the appropriate readership will be to persons and companies working in association with
CMGDR or GDR in regional mineral exploration in northern Chile.
Thetermsofreferenceandpurposeforwhichthetechnicalreportwas
prepared
This Technical Report was prepared to disclose mineral resource estimates and Preliminary Economic
Assessments for the Isabel 1/42, Cote 1/12 and Engañadora projects to internationally acceptable
standards for reportage as set out in NI 43-101.The sources of information and data contained in the
technical report or used in its preparation
The sources of information and data are numerous and may be classified into the following categories:
a.
b.
c.
d.
e.
f.
g.
Published information in the form of technical and geological learned papers in international
journals that are openly available either without charge or for a fee.
Specialist technical books (Spanish and English).
General information widely available on the Internet (Spanish, English, French and German).
Geological maps and accompanying bulletins produced by the Servicio Nacional de Geología y
Mineria (SERNAGEOMIN) (Spanish).
Unpublished open file company mining and exploration reports (mostly Spanish, some English).
Unpublished internal reports to SERNAGEOMIN (Spanish).
Unpublished academic theses (Spanish).
Page 15 of 145