Ruby Mine Mining Plan May 2017 Revision of April 2016 Plan

Transcription

1 Ruby Mine Mining Plan May 2017 Revision of April 2016 Plan

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3 Introduction This report addresses the short-term capital and mining requirements to place the Ruby Mine into gold production. Taking advantage of the turn-key permit status and upgraded infrastructure, the focus is on establishing operations through the two existing mine entrances: the Lawry Shaft and the Ruby Tunnel. Recently, North Bay Resources Inc. (NBRI) conducted a substantial rehabilitation of the Ruby, including: rejuvenation of surface works, equipment and electrical; extensive tunnel re-timbering; installation of new underground utilities; partial construction of a new escape way and air pass (Big Bend By-pass Raise); construction of an underground Mine Rescue chamber; and considerable time/money invested into the updating of Federal/State Permit and Safety Compliance requirements. The next Operator will need to finish the Big Bend By-pass Raise and pathway to the Lawry to satisfy the Second Exit escape way Safety requirement. This will also allow access to several areas of interest including the Mid-Black Channel Gravels. The Lawry Shaft will require safety compliance work as well, which will then provide working access into the primary target ore body. A previous Gold Mining Plan (2008) was authored by Ruby Development Co. I have reviewed this Plan and all background reports/studies, both historical and current. I have gleaned certain facts, figures and assumptions and have injected my own interpretations and experiences to produce this study. I have concluded that this is a particularly attractive project owing to: (a) the small initial capital expenditure required; (b) the quick time to production, with an expectation of profitability in Year Two; and, (c) the low production cost per ounce of gold. In addition, there is strong evidence suggesting that the Mine Life could prove to be far beyond the conservative Ten Years estimated by this report. Please note that property acquisition costs are NOT included in this study. A Ruby Mine Property Map is included as Figure 1 on page 2. T.M. (Bud) DeGrio DECONCO May

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5 Ruby Mine Mining Plan Overview Renewed operations of the Ruby will be considerate of lessons learned from past operators, local demographics and Mother Nature. The Plan envisions a 7 month work year, 2-shifts working 16 hours per day, 5 days per week or 150 days per year. This schedule can be altered as weather allows, but generally, winter freeze up prevents operation of the wet recovery plant and snow removal can significantly erode expected profits. However, conducting projects such as underground exploration and development work could be realistic during this winter period. The Plan has a built-in 3% annual cost inflation rate; $1,250/oz. gold through Year 5; $1,500 oz. Years 6 through 10. Of course, the spread sheet can be altered to reflect any value desired. This Plan sets a Target Rate of Production for the Ruby nearly 10,000 ounces of Gold per Year, and projects reaching this target rate of production during Year 4, creating a potential net profit averaging $5 million per year for Years 4 thru 10. The Turn-key Infrastructure and Permitting Status make it possible to Startup mining activity with only a minimal expense and lead time: the Mining Plan budgets a net initial capital investment of $1.4 million and expects to achieve Profitable Production during Year 2. Gold recovered from the Lawry Development Headings in Year 1 should provide substantial cash flow to help keep the initial capital investment low. Four Placer Channels have been selected for initial mining, and they will be mined simultaneously as two separate projects: the Lawry Shaft Project and the Alling Project. The Mid-Black Channel Gravels, between the Lawry and Big Bend areas, are expected to add modest gold production through Year 5. The Lawry Shaft Project targets two channels: the Mount Vernon Channel and the Pilot Channel. Previous studies (Sandberg 1994) estimated that these two channels should total in excess of 4,500 feet in length and contain more than 85,000 ounces of gold. However, for the purpose of this report, a reserve of 85, oz. au/ton delivers 17,500 oz. gold. This author has purposely down-graded the Sandberg estimates to show the feasibility of a smaller scale operation that can be profitable. The upside is a longer mine life or, with additional capital investment, a larger, higherproducing operation with greater returns. 3

6 The Alling Project targets two channels: the Deep Rock Creek Channel and the Downstream Extension of the Black Channel. It is estimated (Alling 1914, Keewatin 1992) that these two channels should total in excess of 4,500 feet in length and contain more than 85,000 ounces of gold as well. Again, however, for the purpose of this report, a conservative estimate of 175, oz. au/t delivers 35,000 oz. gold. (This reserve too is down-graded as explained in a previous paragraph.) As always, within the Ruby s properties with its history of concentrations of coarse nuggets, the nugget effect can dramatically alter the final value of gold recovered. Once progress in the Lawry Shaft and Alling targets is well established (Year 4), a simultaneous program of Exploration and Development is to be initiated. This is intended to be an ongoing program to prepare additional Placer Channel targets to provide continuous future production from the Ruby Mine Placer Channels for at least 10 years. Quartz Gold has been mined from the Ruby as well, but development has been minimal and the potential of this resource is undetermined. The Ruby Mine s Quartz Veins provide attractive exploration targets in addition to the Placer Channels. This mining district is well-known for high-grade, bonanza Quartz Gold, and the Goldbearing Quartz structures typically persist to great depth. Several of the most successful Quartz Mines in the district were developed from quartz outcrops discovered in the underground placer channels. It should be noted that a market has been developed for Gold-in-Quartz as a specimen and jewelry stone where the gold together with the quartz that contains it are sold by the carat. Keewatin's Geological Reports (Nov & Oct. 1992) and Summary Report (p. 7) estimate that the Ruby Mine has a potential of up to 200,000 ounces of Placer Gold -- $240,000,000 at $1,200 gold. This large Placer Gold potential, together with the possibilities offered by Exploration and Development of the Ruby Mine s Quartz Gold potential, indicates that both the total production and the mine life ultimately realized at the Ruby Mine could far exceed the conservative production targets utilized in this report. (See Overview Map, Fig. 2 on p. 5, and Keewatin Targets Map, Fig. 3 on p.8) 4

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8 A Summary Report by Keewatin Engineering PLACER GOLD POTENTIAL AND INITIAL TEST MINING WITHIN THE RUBY CLAIMS GROUP Production figures from the Tertiary channels of the Alleghany-Downieville mining district average in excess of 100,000 ounces of gold per mile of channel developed. This figure is derived from historical data on past operations at the Ruby mine, the adjacent Bald Mountain mine, the Bald Mountain Extension mine and the City of Six/Golden Bear mine (figure 1). In total, approximately 4.3 miles of channel development produced 440,475 ounces of gold, or 102,436 ounces per mile. The overall grade is calculated to have been 0.2 ounces per ton, based on the known extent of the mined out areas and an average thickness of 6 feet. Recent studies by Keewatin Engineering indicate that less than half of the existing channel systems have been mined to date on the Ruby property. Surface and underground geological mapping and reinterpretation of the historical data by Keewatin geologists indicate that the property contains 4.7 miles of undeveloped channel. Of this total, 2.0 miles is accessible for development from the existing underground workings at the Ruby mine; both from the main access tunnel and from the Lawry shaft [Figure 3]. This includes undeveloped portions of the Black Channel, the Pilot Channel and the Deep Rock Creek Channel, which together host a potential resource of 200,000 ounces of gold. Although it is not possible to assign reserve categories to any of the undeveloped channels at present, preliminary sampling along the accessible sections indicates gold grades of up to ounces per ton in the White Channel and ounces per ton in the Black Channel. These figures, together with the historical data, indicate that a mill head grade of 0.2 ounces per ton gold is a realistic objective. The remaining 2.7 miles of unexplored channel comprises sections of the Cincinnati Channel, the Wisconsin Channel and the Hawkeye Channel [Figure 3]. Little information is available on these channels and therefore the gold resource must remain purely hypothetical. The placer channels within the Ruby property host a potential resource of 200,000 ounces of gold. At the present market value ($ per ounce of gold), this is equivalent to $70,000,000 worth of gold. The less explored Cincinnati, Hawkeye and Wisconsin channels have the potential to more than double this value. It is felt that a carefully run, selective mining operation could yield a profit of $ per ounce of gold mined, for a potential profit of $20,000,000. It must be emphasized that this figure refers only to the placer gold potential of the Carson-Ruby claims groups [note: The Carson is now part of the current Ruby Mine]; it does not include the lode gold potential of these properties. 6

9 It is presently anticipated that the placer washing plant beside the Ruby mine portal will be fully installed and operational by December 5, This plant has a capacity of 1,000 yards per day and will initially be operated at a volume of 100 yards per day. Material treated will consist of development muck from the Black Channel and the Deep Rock Creek Channel. Arthur C. Freeze, B.Sc., Project Manager Ronald F. Nichols, P.Eng., Vice President for Keewatin Engineering Inc. November 27,

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11 Ruby Mine Gold Mining Plan Budget & Mining Plan Description (see spread sheet on page 13 following written Description) May

12 Ruby Mine Operating Plan Year 1 The Plan anticipates that prior to the first work season (May Nov), the new operator will have an office established, and the Mine Manager, Office Manager, Safety Rep and runner will be hired as salaried employees. The annual overhead is estimated to be $463,000. The property carrying costs, i.e. taxes, assessments, insurances, permit fees, etc., is estimated to be an additional $154,000, for a combined annual overhead of $617,000. Also, the crews will be interviewed, hired and Safety Trained. Initially, work will be concentrated on the rehabilation of the Lawry Shaft surface works, shaft and underground equipment. A budget of $168,000 in new works and equipment is budgeted and expected to take 40 days to complete. The remaining work season will be the 2-shift development of the Pilot and Mount Vernon channels. Tunnelling ( drifting ) will be with air-powered slushers and trackless loaders ( LHD s ). Approximately 6,000 tons of development gravels will be processed. A herring bone drift pattern is planned for ore development in the Channels. A central tunnel (known as a drift ) will be driven following the gut of the channel. This drift will be continued until the end of the channel is reached and the length of the ore body has been defined. Regularly spaced crosscuts (known as crosscut drifts ) will be driven out on each side of the central drift to determine the width of the channel. The ore material mined from these drifts will be hoisted to the surface, loaded into dump trucks and hauled to the Placer Plant at the Ruby Mine. Careful records of the gold recovery will also provide a grade for the ore blocked out in this process, thereby developing a proven ore reserve to be mined. The Lawry work force requires 11 persons per shift; 2-miners (1-shift boss), 2- helpers; 2-muckers, 1-topman, 1-hoistman, 1- mechanic/welder, 1-dump truck driver and 1-plant operator (days only). Concurrently, single shift start-up activities will the Ruby Tunnel, with most efforts being to complete the Big Bend By-pass raise (escape and air way) and pathway to the Lawry shaft. The pathway opens the Mid-Black Channel Gravels reserve. This crew will mine a portion of this reserve for five years. Extensive survey, mapping, sampling and testing will be completed in newly accessed ground. The Ruby work force, for year 1, requires 7 persons; 2- miners (1-shift boss), 2-muckers/trammers, 2-helpers and 1-topman. Author s note: no additional monies are budgeted toward Exploration or Development at this time due to initial capital constraints. 10

13 (see Spread Sheet on p. 13 immediately following this written Description) Year 2 Production from the Lawry and Mid-Black Channel gravels will reach design quantities (4,800 oz/yr. and 750 oz/yr.) early in this season. Some of the expected accumulated profits will be used to partially fund ($600,000 this year) construction of the 1,500 lineal foot Alling Project (Deep Rock Creek and Southern Black Channel targets) access tunnel. This work is scheduled to advance at 6 linear feet/day and be completed by the end of Year 3. This tunnel will be a tracked haulageway that connects directly to the Ruby Tunnel near the daylite turn. Year 3 It is anticipated that production from the Lawry and Mid-Black gravels will continue as planned. Again, the expected accumulated profits will be used ($400,000 this year) to finish tunnel construction and some developement of the Alling Project channels. The Channel Targets are likely to develop at somewhat different rates, so it is anticipated that work in Year 3 will include a combination of Development and Production activities. Year 4 In Year 4, all of the channel developments in the Lawry and Alling projects should have advanced into production. At this point, the primary objective of the Mining Plan is to ramp production up to the target rate of 320 tons per day at the target mining cost of $690 per ounce or less. This should provide production of about 9,600 ounces of gold per year. At the historical ore grade of about 0.2 ounces per ton, and assuming a gold price of $1250 per ounce, the Mining Plan projects an Operating Profit of approximately $5 million per year on gross production of $12 million of gold. Of this profit, $500,000 is budgeted in each of years 4 and 5 toward the exploration and development of the Hawkeye channel through the Lawry site. A combination of surface gravity and seismic lines may define orientation and an access tunnel driven from the Lawry underground works. 11

14 Future Years The Mining Plan anticipates that, from the beginning of Year 4 through year 10, $500,000/yr. is budgeted to place The Hawkeye into production (year 6) and explore other targets suggested by Alling, Pease, Keewatin and others. The Lawry Shaft, Alling and Hawkeye Projects have the potential to provide more than 10 years of production. An ongoing Program of Exploration/ Development of additional Channel and Quartz Targets should be aggressively pursued thoughout the life of the mine. This will provide the targets for a continuous source of new ore for the operation. The $500,000 per year Capital Fund is expected to provide the funding for this ongoing activity. Quartz Gold Potential This Mining Plan is founded on exploiting the Ruby Mine s well-known Placer Gold Potential. The Ruby also hosts known Quartz Veins which have produced gold, offering the probability of substantial production of Quartz Gold. Furthermore, the Ruby Property is an excellent target for additional future Quartz Gold Exploration and Development targets. A Line of Coarse Gold that produced a 201 oz. nugget was noted in the placer workings in the Old Ruby. Such distinctive quartz veins and associated concentrations of placer gold led to the development of some of the most productive Quartz Gold Mines in this area. The Ruby s best-known vein, the Wolf, was initially discovered but left behind by miners in the Placer Channels, with Mr. Wolf returning to the placer workings years later to develop the vein. The Quartz Veins in this region typically extend to thousands of feet in depth, and are noted for rich ore shoots often containing spectacular pockets of Gold-in-Quartz. Considering the large size and coarse nature of the Ruby s nuggets, and the fact that both the Melones Fault structure and the northern continuation of the 16-to-1 vein system pass directly through the Ruby Mine Property, the Ruby Mine has an excellent potential for long-term Quartz Gold production in addition to the Ruby s famous production of Placer Nuggets. 12

15 Ruby Mine projected mining costs' and revenues over ten year mine life expected grade Production: Gold price GP -- Gold total cost Expl/Devl NGP - Net Year reserves in tons tons mined oz/ton Gold in troy oz $$/oz. Produced in $ cost/oz. of Production Expenditure Gold Produced NOTES: 1 Lawry 86,500 6, $1,250 $675,000 na $1,575,000 $712,500 Net Loss 1st year Operation Mid-Black 51, $1,250 $187,500 na $654,000 6 wks. Operating cost for year 2 $1,366,500 Total 1st year capex 2 Lawry 80,500 24, ,800 $1,250 $6,000,000 $650 $3,120,000 $2,730,000 Net Profit for Year after all Mid-Black 50,000 5, $1,250 $937,500 $650 $487,500 Production Costs & Expenditures Alling $0 $0 $0 $600,000 costs to begin Alling tunnel 3 Lawry 56,500 24, ,800 $1,250 $6,000,000 $670 $3,216,000 $2,819,000 Mid-Black 45,000 5, $1,250 $937,500 $670 $502,500 Alling 175, $1,250 $0 $400,000 finish Alling tunnel 4 Lawry 32,500 24, $1,250 $6,000,000 $690 $3,312,000 $5,296,000 Aling 175,000 24, $1,250 $6,000,000 $690 $3,312,000 Mid-Black 40,000 5, $1,250 $937,500 $690 $517,500 Hawkeye $1,250 $0 $0 $0 $500,000 Sandberg Lawry 8,500 7, $1,250 $1,900,000 $710 $1,079,200 $3,317,800 Alling 151,000 24, $1,250 $6,000,000 $710 $3,408,000 Mid-Black 35,000 5, $1,250 $937,500 $710 $532,500 last year for Mid-Black Channel Hawkeye 85, $1,250 $0 $500,000 6 Alling 127,000 24, $1,500 $7,200,000 $730 $3,504,000 $6,276,000 Hawkeye 85,600 20, $1,500 $6,000,000 $730 $2,920,000 Lawry Qrtz. 0 $500,000 offset drilling 7 Alling 103,000 24, $1,500 $7,200,000 $750 $3,600,000 $6,100,000 Hawkeye 65,600 20, $1,500 $6,000,000 $750 $3,000,000 Pliocene 0 $500,000 Pease 2017; Clifton's Alling 79,000 24, $1,500 $7,200,000 $770 $3,696,000 $5,924,000 Hawkeye 45,600 20, $1,500 $6,000,000 $770 $3,080,000 Pliocene 0 $500,000 Pease 2017; Clifton's Alling 55,000 24, $1,500 $7,200,000 $790 $3,792,000 $5,748,000 Hawkeye 25,600 20, $1,500 $6,000,000 $790 $3,160,000 Cincinnati 0 $500,000 Pease 2017; Clifton's Alling 31,000 24, $1,500 $7,200,000 $810 $3,888,000 $3,584,800 Hawkeye 5,600 5, $1,500 $1,680,000 $810 $907,200 hard rock 0 $500,000 Pease 2017; Clifton's Alling 7,000 7, $1,800 $2,520,000 $830 $1,162,000 $1,358,000 Tons AU in troy oz Revenue Cost Expl/Devlp Net Gold Prod Totals 367,200 71,730 $100,712,500 $53,771,400 $4,500,000 $42,441,100 13

16 Closing Thoughts This "Start Up and Mining Plan" does not discuss the extensive infrastructure of the mine, the property position and claim status, the operating permits in place, or the voluminous archive of maps and reports and other information on the Ruby Mine. These materials and information are readily available elsewhere. The Ruby Mine has a long and colorful history, and the author has included a few items from this history that he found of particular interest in the following pages. The Ruby is probably best known for the almost 1,000 ounce nugget collection owned by Sierra County and featured in the permanent Native Gold display at the Los Angeles Museum of Natural History. These gold nuggets, each specimen three (3) troy ounces or larger, are believed to constitute close to two percent (2%) of the placer gold production of C. L. Best's operation in the 1930's and 1940's. In addition to being one of the most outstanding placer gold collections in the world, these nuggets indicate a uniquely coarse gold deposit. This Mining Plan deliberately understates the reserve potential and mine life and proposes a relatively small-scale approach to developing and mining the Ruby operation that the author considers an optimal fit with the existing mine infrastructure. By showing that a small operation can be attractive and profitable while holding initial capital expenditures to a minimum, it is hoped that this will also help keep expectations realistic. Once profitable production is established and a gold reserve developed, investing in upgrades to ramp up production can be evaluated. T.M. (Bud) DeGrio DECONCO May

17 DISCLAIMER DECONCO has prepared and compiled this Mining Plan from information -- foremost the Phase I & Phase II Geological Report by Keewatin Engineering dated Nov & Oct which is believed to be accurate, reliable and authoritative. Other reports by Mark Alling 1914, Sandberg 1994, Pease 2017 and numerous others were also used to develop an accurate understanding of the remaining potential mineral reserves within the Ruby properties. It should be noted that all "reserves" and "resources" referenced in this report by DECONCO are anticipated to be developed by established methods as mining work progresses in the Ruby Mine ore bodies. DECONCO makes no warranty or guarantee as to the accuracy or reliability of the information, projections, estimates or conclusions contained in this document. This information is provided for the information and convenience of the reader only. DECONCO makes no warranty or claim regarding the suitability of this information or of the Ruby Mine for the use or purposes of any person, and encourages any person using the information herein to do their own independent research, investigations, and due diligence before taking any action based upon the information contained in this document. DECONCO takes no responsibility for the use of this document or of the information herein by any person. Gold Mining is a speculative undertaking involving considerable risks. While the projections of the locations of potential ore bodies, the estimates of the amount of gold potentially contained in or recoverable from such ore bodies, and the estimated timetables and costs of the potential mining activities presented in this Mining Plan are believed to be based upon sound historical, geological and engineering information and studies; any actual results may differ from such estimates and projections. Past performance and history is no guarantee of future results. 15

18 Ruby Mine Gold Mining Plan Items of Interest May

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