An Introduction to Underground MiningUnderground Mining

On the Rocks, December 6, 2012Ron Stewart

Introduction

Challenge Mine economics - and therefore investment success - is a derivative of geology, engineering, metallurgy, management markets and management, markets and jurisdiction.

Our Intent An introduction to underground mining - an overview of mining methods, selection criteria and what to consider when you are reading a technical report or

Source: www.gedc.com

reading a technical report or visiting a mine

December 6, 2012 2

Underground Vs. Open Pit

Underground Vs. Open Pit

Deposits Relatively small, high grade or Deep with sub-vertical ore zone

Relatively large, low grade or Shallow, with sub-horizontal ore zone

Geology Structurally controlled veins and Lithology controlled stockworks Geology Structurally controlled veins and breccias

Lithology controlled stockworks, disseminated zones.

Resources / Reserves Generally difficult or not cost effective to prove up large resources /

Generally cost effective to establish 10 to 15 year resource / reserve lifep p g

reservesy

Productivity 500 to 8,000 tonnes per day 5,000 to 100,000 tonnes per day

Environmental Generally easier to permit, limited Large footprint from pit, waste footprint. Relatively cheap to reclaim dumps and tailings, relatively

expensive to reclaim

Mine Life To >100 years 10 to 25 years, rarely longer

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Underground Vs. Open Pit Mining

In 2011, only 117 gold mines reported >100,000 oz of gold production31% or 11 5 million ounces from 42 underground mines

100,000 to250,000 oz/a

250,000 to500,000 oz/a

500,000 to1,000,000 oz/a >1,000,000 oz/a

31% or 11.5 million ounces from 42 underground mines

Totals

No. Ounces No. Ounces No. Ounces No. Ounces No. OuncesUndergound 27 4,105,528 10 2,868,291 4 3,408,803 1 1,100,000 42 11,482,622 Open Pit 42 6,710,672 19 6,349,474 10 6,820,255 4 6,179,000 75 26,059,401

9.2 M oz10.2 M oz

7.3 M oz

31%

15%

33%10 8 M oz

69% 67%

31%

85%

10.8 M oz

62%38%

December 6, 2012 4

Source: Metals Economics

Glossary of Underground Terms

Adit Horizontal mine entranceBack The ceiling in an underground tunnelBrow Overhead rock at an Adit or Drawpoint

Crosscut A horizontal drive through an ore body

Drawpoint Point at which ore is extracted from a stope

Drift A horizontal drive parallel to or along an ore p gbody

Grizzly A screen or grate above a loading pocket or ore pass to catch oversized rocks

Jumbo A mobile drill used in driving tunnelsLoading Pocket Rock storage compartment

Manway A dedicated underground opening for personnel

Ore pass A vertical or inclined tunnel for ore transport

Raise bore A large drill used for vertical or inclined tunnel drilling

Round A single blast in a drift or crosscutScoop Tram (LHD) Underground loader (Load Haul Dump)

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Scoop Tram (LHD) Underground loader (Load - Haul - Dump)Skip Shaft bucket for hoisting rock

Mine Method Selection Criteria

is based on:…is based on:

Geometry Depth, shape, thickness, dip, plunge

Rock Quality Ore zone and host rock competency (structures, stress, stability)

Ore Variability Ore uniformity continuity grade distributionOre Variability Ore uniformity, continuity, grade distribution

Economics Ore recovery, ore value & mine recovery (losses), productivity, equipment selection, capital & operating costs, ore value safetyore value, safety

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Geological & Mechanical Selection Criteria of Mining Methods

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Underground Stoping Methods

Room and Pillar Flat to Shallow dip, competent ground conditions

Longwall Flat to shallow dip, narrow seam ore body

Longhole or Sublevel

Medium to Steep dip, competent ground conditions and generally regular ore-waste boundariesSublevel generally regular ore waste boundaries

Shrinkage Medium to steep dip, variable ground conditions and variable ore-waste boundaries. (Delay in delivering ore)

Cut and Fill Medium to steep dip, variable ground conditions and variable ore-waste boundaries provides maximum selectivity.

Block Cave Steep dip, massive ore body. Limited to no selectivity. Extensive development required

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Stope Design Criteria and Grade Control

Dilution and Ore Recovery Factors

Dilution Factor (%) Recovery Factor (%) Grade Control

Room and Pillar 5 - 15 90 Face mapping & sampling

L ll 5 25 85 F i & li

Dilution and Ore Recovery Factors

Longwall 5 - 25 85 Face mapping & sampling

Longhole or Sublevel 15 - 20 85 Development drift mapping & sampling with definition

drillingdrilling

Shrinkage 10 90 Face mapping & sampling

Cut and Fill 5 - 10 85 Face mapping & sampling

Block Cave 15 95 Drilling Only

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Design Vs. Actual Dilution & Ore Loss

Unplanned Dilution

Ore Loss

p

Planned Dilution

Ore Loss

Designed Stope

Ore Loss

Actual Stope

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Development Heading Dilution

Planned Dilution

Ore in ReserveBlock Model

Planned Dilution

Actual Drift

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Underground Productivity Rates

Normal High

Room and Pillar 30 - 50 50 - 70

Tonnes per man-shift

Longwall 5 - 10 10 - 15

Longhole or Sublevel 15 - 30 30 - 40

Shrinkage 5 - 10 10 - 15

Cut and Fill 10 - 20 30 - 40

Block Cave 15 - 40 40 - 50Block Cave 15 40 40 50

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Mobile Underground Mining Equipment

Scoop Tram Haulage Truck

B b Raise BoreTwo-Boom Jumbo Raise Bore

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Block Cave Stoping

Sub-Level Caving

Production Rate >7,500 tpd

Mining Cost Per Tonne $8.00 to $15.00/tonne

Development Capital High development capital

Sustaining Capital $16,000/tonne of throughput

Cut-Off Grade Low

Oth C id ti Hi h f t it l t Other Considerations High upfront capital cost Massive or disseminated ore body Rock must break and feed Surface subsistence must be ll dallowed

Examples New Afton

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Source: Techniques in Underground Mining, SME

Room and Pillar

Room and Pillar Mining

Production Rate 500 to 35,000 tpd

Mining Cost Per Tonne $10 - $30/tonne

Development Capital Low Development CapitalDevelopment Capital Low Development Capital

Cut-Off Grade Low

Other Considerations Flat or shallow dipping ore body with limited thickness with limited thickness Ground conditions - especially the back must be competent

Examples No known gold examples, common in

Source: Techniques in Underground Mining, SME

coal and potash mining

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Longwall Stoping

Production Rate 500 to 5 000tpd

Inclined Longwall stoping

Production Rate 500 to 5,000tpd

Mining Cost Per Tonne $150/tonne

Development Capital High development capital

Cut-Off Grade High

Other Considerations Thin ore zones (bedded or tabular) with regular and parallel ore contacts Variable ground conditions supported by fill In South Africa ore is mined by jackleg, small rounds are blasted and material is scraped down to draw points

Examples Witwatersrand reef ore bodies

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Source: Techniques in Underground Mining, SME

Longhole (Sublevel) Stoping

Production Rate 500 to 5,000 tpd

Sublevel Stoping

Mining Cost Per Tonne $40 to $150/tonne

Development Capital Modest

Cut Off Grade Low Cut-Off Grade Low

Other Considerations Most common method for high productivity, low cost gold mining. Ore bodies have vertical to steep dip, can vary in width down to less than 1.0m, but generally require regular ore-waste contacts and competent ground

Examples Young-Davidson, LaRonde, Kupol, Jacobina, El Penon, Musselwhite, Chelopech

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p

Source: Techniques in Underground Mining, SME

Endeavour Silver: Bolañitos –Longhole Mining Method

Longhole drilling up holes in a Longhole drilling up holes in a stope. Note remote operation of the drill improves safety

Mucking a stope remotely with a scoop (LHD) at a draw-point

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Source: Endeavour Silver (EDR-T, BUY Target C$11.00/sh)

Stoping at Björkdal Mine, Sweden

Note the narrow vein in the drift back

2.5m wide stope with sill drift highlighted at the base

Cable bolted back shows good dilution control

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Source: Elgin Mining Inc, (ELG-T, NOT RATED)

Mining – Narrow Blasthole Stope

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Cut and FillNon-captive Cut & Fill Stoping

Production Rate 200 to 2000 tpd

Mining Cost Per Tonne $100 to $200/tonne

Development Capital Modest

Cut-Off Grade High

Source: Techniques in Underground Mining, SME

Other Considerations Most common selective mining method for high grade veins and breccias with variable geometries and or poor ground and or poor ground. Classic cut-and fill used jack-leg mining in captive stopes Now far more common for mechanized cut and fill with small mechanized cut and fill with small jumbos and scoops

Examples Buckhorn, Rice Lake, Macassa, El Cubo

December 6, 2012 21Source: Endeavour Silver (EDR-T, BUY Target C$11.00/sh)

Cut-and-Fill Advance at Endeavour’s El Cubo Mine

And-BxJumbo advance on wider veins

And-Bx

VEIN

Jumbo advance on wider veins and access drifts. Increased productivity and reduced costs

ORE

Jackleg drilling on narrow and irregular veins increases selectivity reduces dilution selectivity, reduces dilution –but is slower and more labour intensive

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Source: Endeavour Silver (EDR-T, BUY Target C$11.00/sh)

Jackleg Miner In a Cut & Fill Stope

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Source: San Gold Corporation (SGR-T, BUY Target C$1.80/sh)

Scaling a Heading In a Cut & Fill Stope

December 6, 2012 24Source: San Gold Corporation (SGR-T, BUY Target C$1.80/sh)

Mining – Narrow Cut & Fill Stope

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ShrinkageNon-captive Cut & Fill Stoping

Production Rate 100 to 2,000 tpd

Mining Cost Per Tonne $125 to $200/tonne

Development Capital Relatively High Capital

Cut-Off Grade High

Other Considerations Steep dip and relatively competent rock with regular ore - waste b d Source: Techniques in Underground Mining, SMEboundaries Delayed ore mining as ore is used as a platform for drilling

Examples Rarely used - Guanajuato , p y jFrancouer

December 6, 2012 26Source: Endeavour Silver (EDR-T, BUY Target C$11.00/sh)

Mucking & Haulage

Scoop (LHD) Mucking a Stope

Ore transfer to a Haul Truck (in cases where an ore pass system is used, scoops haul ore to dump points underground)

Haul Truck to Surface (as a general rule ore can be trucked as much as 300 to 400m vertically)

December 6, 2012 27Source: Endeavour Silver (EDR-T, BUY Target C$11.00/sh)

Ore Handling and Ancillary Services

Main Ingress / Egress• Shaft, cage & skip

R

Air Cooling System at LaRonde

Ore Handling Systems• Ore passes, shoots

C

• Ramp

Ground Control• Bolting

S i

• Conveyance

Screening and Bolting at Lapa• Screening• ShotcreteVentilation• Fans

Screening and Bolting at Lapa

Fans• Heating / CoolingWater• Collection

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• PumpingSource: Agnico-Eagle (AEM-T, BUY Target C$70.00/sh)

What We Look For When We Go Underground

1. Focus on employee safety, hazards or safety risks2. Housekeeping specifically at shaft stations and work faces3. General structural geology (faults, joints, slips, orientation and

frequency of structures)4. Ground conditions (Areas screened, bolted and reinforced as

well as quantity of loose rock behind mesh)5. State of ramp, haulage drifts – (how well maintained they are)5. State of ramp, haulage drifts (how well maintained they are)6. Water ingress (amount, collection, ponding)7. Air quality (dust level, smoke, air temperature)8 General state of the equipment and age tire wear and cuts 8. General state of the equipment and age, tire wear and cuts 9. Rock fragmentation – oversize in scoops, trucks or on grizzly10. Mood and engagement of the workforce

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An Introduction to Underground Mining

Remember tag-in before you go underground T k tiTake your timeAlways make sure equipment operators can see you.Don’t shine your light directly at othersD y g yStay safe, sure footed and alert

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Source: Colossus Minerals (CSI-T, BUY Target C$8.00/sh)