Projects

Overview

The Cieneguita project is located 375 kilometers west of Chihuahua City in the Occidental Sierra Madres of southwest Chihuahua province. The mine site is 20 kilometers from El Sauzal, which is among Goldcorp's larger gold producers---it produced over 152,000 ounces of gold in 2010, its sixth year of production.

The Cieneguita silver - gold deposit was discovered by Geologist, Hector Fernandez while working for Minera Cuicuilco ( Cyprus ) between 1974 and 1986. It was subsequently sold to Glamis Gold (now owned by Goldcorp) which began production in November, 1995 in a joint venture with Aquiline Resources (Glamis 60%). From 1995 to 1998, Glamis Gold mined and processed 198,000 metric tonnes with a grade of 2.33 grams gold per tonne. This major gold company stopped production on this site before drill testing the western strike of the Cieneguita. Glamis discontinued operations at La Cieneguita in 1999, the same year gold fell to a low of US $252 per ounce.

The Cieneguita Project is currently being operated at a limited or pilot scale under an agreement with Minera Rio Tinto ("MRT"). Under the first agreement MRT has the right to mine the first 15 meters depth of the deposit from which the Company receives 20% of net profits and 80% of any net profits from material mined deeper than 15 meters. Under a new production and development agreement signed in September 2012, MRT can continue small scale mining through 2013 and Pan American's share of net profits increases to 35%. After December 31st, 2012, 100% of the project reverts back to the Company and MRT has the right to earn a 20% interest by contributing on a pro-rata basis to the costs of the development of a planned larger operation. This larger operation is the subject of a preliminary economic assessment ("PEA") being prepared by M3 Engineering & Technology of Tucson, Arizona with an expected completion in May 2013.

The Cieneguita Project hosts a NI43-101 compliant measured and indicated mineral resource of 35.0 million tonnes grading at 0.45 g/t gold, 33.4 g/t silver, 0.16% lead, and 0.25% zinc. This amounts to 509,800 ounces of gold and 37.6 million ounces of silver. The inferred mineral resource is an additional 22.9 million tonnes at 0.48 g/t gold, 28.6 g/t silver, 0.13% lead, and 0.22% zinc. This amounts to 352,200 contained gold ounces and 21.0 million contained silver ounces. The resources are contained within a floating cone pit shell and are compliant with the "reasonable prospects for economic extraction" clauses of the Canadian NI 43-101 regulations. It is estimated that no more than two percent of this resource will be mined under the current operating agreement with MRT.

At the MRT operation, mineralized material from a small open pit is crushed and ground in a ball mill of approximately 500-600 tonnes per day capacity, and then fed to a bank of flotation cells to produce a bulk sulfide concentrate. This concentrate is then shipped to an MRT owned facility in Choix, Sinaloa where it is reground and a saleable lead sulfide concentrate is produced which contains the valuable gold and silver. This lead concentrate is then sold to Trafigura who makes a provisional payment to MRT equaling 85% of the value of the concentrate with the balance paid within 10 days of the date of closing of the lot in Manzanillo. Based on the payments from Trafigura to MRT, MRT then subtracts the cost of mining, processing, royalties and general administration costs to calculate the net profits generated by the operation. The Company is then paid 35% of this amount.

Production at the Cieneguita site was negatively impacted by a drought which persisted through much of 2011, but the impact was lessened in the second half of the year through the construction of two water collection and storage facilities and improved water recycling efforts. These measures have helped to stabilize production at the rate of about 500 tonnes per day since July 2011. This level of production was maintained through the remainder of 2012.

Production in the Company's fiscal third quarter 2012 (September-November) averaged 565 tonnes per day through the ball mill, with average feed grades of 1.07 grams per tonne ("g/t") gold and 130 g/t silver, and recoveries of 92.34% and 93-98%, respectively. A total of 4,162 tonnes of bulk concentrate was produced during the quarter, containing a total of 1,575 ounces of gold and 192,303 ounces of silver.

Capitalizing on Existing Infrastructure

Accessible by road, rail, or air, La Cieneguita was---prior to the recent start of production---also an operational mine from 1995 to 1998. As a consequence, its infrastructure makes further development easier and cheaper. This includes:

• Existing mine equipment
• Town site including health center and elementary school
• Local work force
• Phone service and radio communication
• Power
• Water
• Complete environmental study and necessary permits

Major Exploration Activity

Given the now established potential of the Cieneguita mine, the considerable activity in this region over the past 50 years, and the numerous small and medium-sized mines with recent finds in the immediate vicinity, the geological evidence for additional precious metals discoveries on the concession is compelling.

History Of Geological Surveys

• Drilling program by Glamis Gold in 1991-1992 with total of 51 diamond drill holes (6,700 meters) defined an auriferous zone approximately 1000 meters by 200 meters.
• This programs established the presence of two mineralized zones.
• From 1994 to 1997, a second drilling program by Glamis confirmed initial findings.
• Two representative ore samples processed for cyanide leach tests. Results for gold recovery were considerably higher than expected.
• The CMX and T2 duplicate tests yielded 80-90% recovery of the total gold.

Cieneguita Gold Project Drilling Results

Click here to view April 3, 2008 Assay Results CI-07 to CI-12 [50 KB]
Click here to view detailed drill results CI-01 to CI-06 March 10, 2008 [122 KB]

New Areas of Mineralization Discovered at Cieneguita Project

Pan American Goldfields is pleased to announce that it has discovered new mineralized and altered zones inside the group of concessions of its Cieneguita project, Urique District, Chihuahua.

In addition to the vigorous core drilling program completed at the Cieneguita project a field follow-up through a mapping and sampling process at 1:1,000 has delineated three new highly mineralized and intensively altered areas including: (1) Piedras Blancas, an area 500 meters to the south of the main Cieneguita mine inside Pan American Goldfields' concessions; and (2) two areas just on the south of the known Cieneguita mineralization limit. A brief description for the new areas identified is provided below:

1. Piedras Blancas is a new identified area 500 meters to the South of the known limits of Cieneguita's Pit 1 and Pit 2. Piedras Blancas is exhibiting an intense alteration characterized by quartz-sericite-pyrite assemblages where pyrite has been partially and/or completely oxidized. Areas with intense fracturing and stockworking where limonites are dominated by goethite and hematite are also common. Assays results from surface sampling have returned values ranging from trace to 1.98 g/t Au. The mineralized and altered area dimension is at least 700 x 300 meters and is located in the intersection of main structures to the south of the concessions group.
2. Gold mineralization identified in two areas immediately to the south of the Cieneguita's known limits of mineralization are mainly structurally controlled exhibiting quartz-sericite-pyrite and small and localized area with clay content. Limonites are dominated by goethite (±hematite ± jarosite). Sampling of the two mineralized zones has returned values varying from trace to 6.38 g/t Au.

The results and information gathered from this latest mapping and sampling campaign have provided significant evidence that increases the current known limits of the mineralization further south and the possibility to have another mineralized system at Cieneguita only 500 meters away from the main project.

The mapping and sampling program will continue in the south part of our concessions aimed to fully evaluate the potential and identify drilling targets at Piedras Blancas, the new mineralized area.

Click to enlarge

Piedras Blancas Area

Figure 2 is showing photos of the different mineralization and alteration characteristics of the newly found Piedras Blancas Area. (A) Pyrite veinlets partially oxidized hosted by a sedimentary sequence. (B) Area with intense fracturing exhibiting an oxidized cap dominated by goethite and jarosite. (C) Intense fracturing and stockworking area shoeing a limonite capping dominated by hematite ± goethite. (D) Intense fracturing and stockworking area with hematite and goethite filling fractures.