Question: What is the status of the Lucerne mine plan, both the Phase I starter pit and the Phase II mine as described in Behre Dolbear Technical Report?
Answer: Thank you for clearly referencing in your question that our intention is to mine the Lucerne Resource Area in two phases. The first phase is identified as the “starter mine”. The starter mine is located in the Lucerne Resource Area on patented claims (located on the west side of the state route) known as the Hartford, Lucerne, Billy the Kid and Justice that completely reside on private land. Our starter mine infill drill program, summarized in our January 18th press release, was designed specifically to provide the detailed geological information needed to finalize the mine plan for this starter mine operation.
This drill program was completed with 118 RC holes totaling about 23,000 feet, primarily in the historic Hartford patent within our Lucerne Resource area. The drilling program also included drilling eight core holes, totaling over 1,500 feet using a diamond-drilling rig. The cores are being used for metallurgical testing required for final processing flow engineering and for geotechnical testing to determine final slope stability calculations for the open pit walls. We now have preliminary mine plan data and are working towards, intermediate and final mine plans for production. In addition, we have expanded the current drilling program onto certain private parcels of our land on the East-side target (that is, the east side of the state route within the Lucerne Resource Area) because of the significant potential for adding to the starter mine.
We already hold substantially all of the state and local permits for mining on private land (air quality and mercury permits are still in progress because new 2011 regulations and our plans for updating our crushing facility prompted additional filings). Because we have two phases of mining, I think there is some confusion about what federal permits are required at what time. We do not need to complete NEPA or EIS for our starter mine activities. These are only required for Phase II.
As identified in my February 1, 2011 blog, we are on track for commencing production on our starter mine in 2011. I reiterated this on the conference call on March 31, 2011, and I will provide another update on the scheduling and progress again in early May.
Phase II of mining in the Lucerne Resource Area will expand our mine (the ultimate mine plan) onto public land managed by the Bureau of Land Management (BLM). Because of the BLM’s management, a plan of operation with the ultimate mine plan must be submitted to initiate permitting under NEPA. We had intended to submit this plan of operation in 2010, as stated in our Behre Dolbear technical report. However, our successful spring 2010 drilling program deferred the required, ultimate mine plan because it identified an expansion of the Lucerne’s mineral potential. Our current East-side drilling program was designed to fill in the significant gaps in that information. Upon completion, we will write the plan of operations with an adequate scope for the life of the project.
This two-phase structure allows us to enter into production sooner and more sustainably, thereby accelerating cash generation while still allowing us to optimize the long-term extraction of gold and silver from our resource. All of these activities are consistent with our stated goal of delivering stockholder value by validating qualified resources (measured and indicated) and reserves (probable and proven) of 3,250,000 gold equivalent ounces by 2013, and commencing commercial mining and processing operations during 2011, with annual production rates of 20,000 gold equivalent ounces.
Corrado De Gasperis
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