NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES NOR FOR DISTRIBUTION IN THE
UNITED STATES
Arian Silver Corporation ("Arian" or the "Company") (TSX
VENTURE:AGQ)(AIM:AGQ)(PLUS:AGQ)(FRANKFURT:I3A), a silver exploration,
development and production company with a focus on projects in the silver belt
of Mexico, today announced the release of its Management's Discussion and
Analysis ("MD&A") and audited Financial Statements ("Financials") for the year
ended 31 December 2011.
The MD&A and Financials are available at SEDAR at www.sedar.com and on the
Company's website at www.ariansilver.com. These documents can also be obtained
on application to the Company. The following information has been extracted from
the MD&A and Financials. The financial information in this announcement does not
constitute full statutory accounts.
Arian's Chief Executive Officer, Jim Williams, commented today: "As detailed in
the financial statements and MD&A, 2011 has been a year of significant progress
for the Company towards our stated objective of becoming a large scale
commercial silver producer, initially from Arian's flagship San Jose property.
Our initial pilot scale mining and toll milling operations, which currently
exploit only a very small portion of the San Jose Vein ("SJV"), showed steady
improvement during the year. Despite reduced silver prices for much of the
latter part of 2011 and the much publicised initial teething problems at the
mill as previously reported, we have been able to report an overall gross profit
for the financial year. Notwithstanding the various operational start-up issues,
Arian increased production to over 75,000 ounces of silver during Q4 of 2011,
improving annual production for 2011 to circa 250,000 ounces; a credible
performance for the first full year of production. However, I must once again
remind shareholders that the existing mill, although now exclusively leased by
Arian until mid-2013, is not designed specifically for our ore. Despite a number
of improvements to the mill circuit during the year, silver recoveries are still
less than 60% and we receive no financial benefits for base metal credits. On a
more positive note, the cash flow from operations continues to support short
term funding requirements and more importantly, we are gaining essential
processing information for our on-going economic evaluation for an eventual
larger scale SJV operation, which we will conclude once our test-work is
complete.
As reported during the year, exploration drilling along the SJV has been
extremely successful. Arian announced a significant increase in JORC and NI
43-101 compliant resources in July 2011 and since then results have continued to
reflect management's opinion that the SJV hosts very significant silver and base
metal resources. The team is now working on a further independent estimate of
current resources and hope to report on results soon.
We have strengthened our UK-based management team during the year and welcome
our new Chief Financial Officer and new Company Secretary to the team. In
Mexico, our teams continue to perform exceptionally well and contract mining
operations also continue to meet expectations.
Funding for all our immediate operations will be satisfied by working capital
and cash flow from production and the Company remains in a financially robust
position.
Following an abrupt collapse during the second half of 2011 from a midyear high
of over $48/oz, silver prices have recovered strongly in recent weeks and once
again, most industry commentators are bullish on silver prices in the medium
term.
Arian looks forward to continued progress on all fronts during the rest of 2012
and once again, I'd like to thank shareholders, employees and all those
associated with supporting the Company."
OVERVIEW OF 2011 AND SUBSEQUENT EVENTS
Financial
-- Revenue: $7.5 million for the year ended 31 December 2011
-- Gross profit: $0.8 million for the year ended 31 December 2011
-- Total assets: $16.3 million as at 31 December 2011
-- Working capital: $5.9 million as at 31 December 2011
Operation
-- Independent laboratory commenced operation in April 2011
-- Phase 3 drill campaign completed in June 2011
-- Lease of mill extended up to July 2013
Production
Year 2011 Q4 2011
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Tonnes mined 100,223 24,433
Tonnes milled 83,959 22,971
Silver concentrate tonnes produced 750 256
Silver ounces produced 248,226 76,618
Silver ounces per concentrate tonne produced 331 300
Silver ounces sold 235,965 77,738
Silver concentrate tonnes sold 706 242
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Exploration
-- Updated independent resource estimate published in July 2011,
confirming:
-- 88.45 million contained silver ounces, an increase of 105%
-- 30.03 million ounces in the "indicated" resource category, an
increase of 233%
-- 58.42 million ounces in the "inferred" resource category, an
increase of 74%
-- plus lead and zinc credits
-- Phase 4 drilling programme 94% complete at 31 December 2011
Geologix Explorations, Inc.
In February 2011 Geologix Explorations, Inc. ("Geologix") exercised the Tepal
option and the final instalment of $1.55 million was paid $775,000 in cash and
$775,000 in Geologix shares.
Subsequent events
-- Interim drilling and geophysical IP survey results published in January
2012, evidencing the continuity of vein thickness, silver mineralisation
and grade, and providing details of drill hole targets
-- Phase 4 drilling completed in February 2012
REVIEW OF FINANCIAL PERFORMANCE
In the financial year ended 31 December 2011, the Company incurred a pre-tax
loss of $11.0 million (2010: $1.7 million) primarily on account of the IFRS
accounting requirement for the recognition of the fair value non-cash expense of
vesting share purchase options of $8.5 million (2010: $15,000) and other
administrative expenses of $2.8 million (2010: $2.1 million).
The San Jose operation generated gross profit of $812,000 (2010: $9,000), which
reflects the increase in the mining and milling operations.
As at 31 December 2011 the Company had working capital of approximately $5.9
million (31 December 2010: $10.2 million). See Liquidity, Capital Resources and
Working Capital for further detail on the Company's working capital.
Intangible assets amounted to $1.1 million (31 December 2010: $1.2 million)
which relate to deferred exploration and evaluation costs in respect of the
Company's Mexican projects.
During 2011, Arian invested some $2.7 million on the phase 3 and 4 drill
programmes and $0.8 million on mining development to provide access to further
stopes.
The exercise of share options and warrants during 2011 increased share capital
by $1.9 million to $47.3 million (31 December 2010: $45.4 million).
Investment income was $0.4 million loss (2010: $0.4 million profit).
Interest income was $44,000 (2010: $11,000).
REVIEW OF OPERATIONS
The Company currently owns 32 mineral concessions in Mexico totalling 8,038
hectares ("ha").
San Jose Project, Zacatecas State
The 100%-owned San Jose property lies 55 kilometres to the southeast of
Zacatecas City and covers 11 mining concessions totalling approximately 6,300
ha. The property has significant infrastructure, including a 4x5 metre ("m")
main haulage ramp ("SJ Ramp") extending nearly 4.0km along the footwall of the
San Jose Vein ("SJV") system, and a 350m deep, 500 tonne per day ("tpd")
vertical shaft with operational hoist. In addition, a number of shallower
vertical shafts are located in a westerly direction along the SJV.
Production Information
Production information summary for San Jose mine is as follows:
----------------------------------------------------------------------------
Year Q4 Q3 Q2 Q1
2011 2011 2011 2011 2011
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Head grade - Ag grams per tonne 190 201 199 178 178
Tonnes mined 100,223 24,433 33,941 22,387 19,462
Tonnes milled 83,959 22,971 21,512 18,348 21,128
Ag concentrate tonnes produced 750 256 204 144 146
Recovery % 48.43 51.68 47.76 56.66 38.08
Ag ounces produced 248,226 76,618 65,804 59,568 46,236
Ag ounces per concentrate tonne
produced 331 300 323 412 316
Ag ounces sold 235,965 77,738 77,587 41,868 38,772
Ag concentrate tonnes sold 706 242 221 117 126
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Mining Operations
The initial mining operation is limited to the Ramal Norte/Sur, San Jose 75m
Level Central Zone, and Santa Ana resource blocks. These were selected from
several delineated resource blocks to support the initial pilot scale mining
operation with the potential, subject to available milling capacity, to increase
the mining rate to circa 1,500 tpd.
From January to the end of December 2011, approximately 400m have been developed
along the main westerly strike of the SJ Ramp, in a combination of Run-Of-Mine
("ROM") and waste material. A substantial amount of ore has been intersected
within the ramp, which continues to advance in a westerly direction, and a new
parallel, but steeper, decline ramp was being developed in largely waste
material to maximise the amount of sulphide-rich ore that could be extracted
from the resource blocks. The drilling information indicated the sulphide-rich
ore is located deeper within the Santa Ana resource block.
Contract mining expectations are unchanged at up to 500 tpd. Mining is planned
to operate 20 days per month.
Total costs to mine and deliver ore to the mill are estimated at approximately
$26/tonne.
Milling Operations
Although the mill has a maximum rating of 400 tpd, it is not designed for the
hardness and abrasiveness of the San Jose ROM material. Arian therefore started
with a daily throughput of just 120 tonnes but has now increased this to around
250 following on-going fine-tuning of the operation. A reconditioned impact
crusher was installed within the circuit to partly mitigate this issue by
grinding the ROM material more finely before it enters the flotation stage of
the plant.
This continuing phase of pilot-scale milling has, and continues, to allow Arian
to review all key data providing Arian essential information to potentially
build an optimised/bespoke plant, should it decide to pursue this route after
all the test work and economic parameters have been evaluated. Arian is also
currently reviewing other alternatives as well as continuing to work to improve
the current mill design and recoveries.
The lease with the mill and plant owner was extended in July 2011 for a period
of up to two years at a cost of MXP 6 million (approx. US$ 0.45 million) per
month. There is an early break provision in favour of Arian giving it the right
to terminate the lease after twelve months.
The increase in the new lease cost is due to the installation and operation of
an additional in-line 200 tpd ball mill which, when commissioned, should allow
Arian to meet its expected milling target of 400 tpd (for 30 days) with up to
125 tonnes of concentrate to be produced per month and with an anticipated
silver content of between 370 and 440 ounces per tonne ("opt").
Based on a contained silver content of 405 opt at a spot price of $30/oz silver,
a concentrate value of $11,000/tonne, after deductions, is forecast. Although,
the higher the silver price, calculated on a quotation period paying the average
of the second month after delivery, the greater the return.
A 2% net smelter royalty ("NSR") on SJV revenue is payable to the vendor of the
San Jose property.
Plant/Mill Study
Arian has engaged an independent metallurgical and mill consultant to conduct a
study for a bespoke milling plant for the San Jose project. The study will
evaluate, amongst other things, the viability of such a plant with proposed
future mining operations. Such a plant is expected to significantly increase
efficiencies, including recoveries, of silver, lead and zinc at a significantly
reduced cost.
Exploration Drilling
In May 2011, Arian completed the Phase 3 10,000m diamond/core drilling
programme, which commenced in November 2010. The purpose of the drill programme
was to delineate additional areas of mineralisation and to upgrade existing
resources, between the Santa Ana and Guanajuatillo resource areas along the SJV.
The drill programme had also started to explore in detail the SJV system that
lies to the west of the village of Guanajuatillo. The results of Phase 3, which
met expectations, are included in the resource table below, under the heading
'Exploration Resource'.
In April and June 2011, the drill results from the Phase 3 drilling programme
were released (see the Company's press releases dated 4 April 2011 entitled
"Arian Silver's Continuing Exploration Drilling Intercepts High-Grade Silver at
San Jose" and 27 June 2011 entitled "Arian Silver Reports Wide High-Grade Silver
and Base Metal Intercepts").
In June 2011, the Phase 4 drilling programme, commenced and at the end of
December 2011, 9,400 m had been drilled. The purpose of that drilling phase was
to drill a large proportion of the SJV, combining both infill and step-out
drilling with the objectives to: (1) increase inferred resources by step-out
drilling in a westerly and easterly direction and, (2) upgrade existing inferred
resources into the Indicated category.
On 20 July 2011 an Independent Resource Update which took into account all the
Phase 1, 2 and 3 drilling programmes was released, refer under section heading
Exploration Resource.
In October 2011, Arian released interim drill results relating to the Phase 4
drilling programme. These show the continuity of the vein thickness, silver
mineralisation and grade along the SJV (see the Company's press release dated 24
October 2011 entitled "Arian Silver Reports Encouraging Progress on Phase 4
Drilling at San Jose").
In January 2012, Arian released further interim drill results relating to the
Phase 4 drilling programme which continues to show continuity of the vein
thickness, silver mineralisation and grade along the SJV. Also announced were
the results of the Geophysical IP survey which successfully identified the areas
of vein displacements which provided targets for the last holes to be drilled in
the Phase 4 Drill programme (see the Company's press release dated 16 January
2012 entitled "Arian Silver Reports Further Encouraging Exploration Progress at
San Jose").
Exploration Resource
On 20 July 2011, Arian reported a significant resource estimate upgrade
conducted by CSA Global (UK) Ltd (see the Company's press release entitled
"Arian Silver Announces Significant Increase in Mineral Resources at San Jose").
The highlights of this announcement were:
-- 86% increase in resource tonnage along the SJV over the August 2008
mineral resource estimate
-- 10% higher average silver grade;
-- 105% increase in contained silver; and
-- 34% of gross silver mineral content now in the "indicated" category.
-- Mineral resource estimates based on all Phase 1, 2 and 3 drill holes
(152 drill holes totalling over 28,000 m); and
-- Mineralisation remained completely open along the western strike and to
depth.
Arian's resource estimate included all drill programmes from 2006 along the SJV
which has a delineated NI 43-101 and a JORC-compliant resource estimate of
approximately 30.03 million ounces of silver, 69.9 million pounds of lead and
126.6 million pounds of zinc in the "indicated" mineral resource category, and
58.42 million ounces of silver, 140.1 million pounds of lead and 291.1 million
pounds of zinc in the "inferred" mineral resource category. These NI 43-101 and
JORC-compliant mineral resources are summarised in the table below:
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Average Grade Contained Metal
------------------------------------------------------
Resource
Category Tonnes Ag Pb Zn Ag Pb Zn
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(g/t) % % (Moz) (t) (t)
----------------------------------------------------------------------------
Indicated 8,000,000 117 0.40 0.72 30.03 31,706 57,425
----------------------------------------------------------------------------
Inferred 17,000,000 107 0.37 0.78 58.42 63,548 132,041
----------------------------------------------------------------------------
1. Geological characteristics and +30 ppm grade envelopes used to define
resource volumes.
2. Each mineral resource estimate is in accordance with CIM standards.
3. The effective date of each mineral resource estimate is 15th July 2011.
4. The estimates are based on geological, statistical and geostatistical
data assessment and computerised IDW(3), Ag grade wireframe restricted,
linear block modelling.
5. The resource was estimated using 152 drill holes and more than 28,000
metres.
6. Resource figures were prepared under the supervision of Malcolm Titley
who is a Qualified Person (as defined in Canadian National Instrument
43-101).
7. Tonnage figures have been rounded to reflect this as an estimate.
8. Ag (silver) ounces have been calculated using 31.1035 g = 1oz.
9. Pb (lead) and Zn (zinc) tonnes have been calculated using 2204.622 lbs =
1 tonne.
10. The mineral resource is 100% owned by Arian.
The following reports prepared by A.C.A. Howe International Limited relating to
the San Jose project are available on the Company's website www.ariansilver.com
or on SEDAR at www.sedar.com:
a) Report dated 22 June, 2009 and entitled "Preliminary Economic
Assessment Report (PEAR) on the San Jose Silver-Lead-Zinc Deposit,
Zacatecas, Mexico"; and
b) Report dated 15 August, 2008 and entitled "Resource Estimation
Update for the San Jose Silver-Lead-Zinc Deposit, Zacatecas,
Mexico".
Readers are reminded that mineral "resources" are not mineral "reserves" as they
have not yet demonstrated economic viability. There is no certainty that mineral
resources can be upgraded to mineral reserves through continued exploration.
Laboratory Update
The mobile laboratory, purchased in November 2010 from Stewart Group's
Geochemical & Assay Division ("Stewart Group"), became fully operational in
April 2011. It comprises a comprehensive sample preparation facility and fire
assay and wet chemistry facilities with Atomic Absorption Spectrometry ("AAS").
It is operated under the sole control and management of professional personnel
from the Stewart Group in order that results are fully compliant with Arian's
quality assurance and quality control (QA/QC) programme. The laboratory has
significantly increased the turnaround times for analysis of Arian's sampled
drill cores. During Q3 2011, the "Stewart Group" was acquired by the ALS Group;
at the time of reporting there has been no change in (or with) our on-site
laboratory personnel.
Calicanto Project, Zacatecas State
Arian owns 100% of the Calicanto Project which consists of seven adjacent mining
concessions and at least four main mineralised vein systems, over a 75.5ha area,
namely: Calicanto, Vicochea I, Vicochea II, Misie 1 and Misie 2, and Missie 1
and Missie 2 properties, collectively known as the "Calicanto Group". These
concessions are located in the historic mining district of Zacatecas.
Arian will commence further underground evaluation of the deeper levels of the
Calicanto Vein once the water has receded to the appropriate level; this will
include but not be limited to, mapping and underground sampling and subsequent
analyses. There has been no significant expenditure on the Calicanto Project
during the past two years.
Additional information in respect of the Calicanto Project is contained in a
technical report prepared by A.C.A. Howe International Limited dated 20 March,
2006 and entitled "Technical Report on the Calicanto and San Celso Projects,
Zacatecas, Mexico". A copy of this report is available on the Company's website
www.ariansilver.com or on SEDAR at www.sedar.com.
LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL
In management's view, the most meaningful information concerning the Company
relates to its current liquidity and solvency.
During the year the Company received new funding from:-
-- the exercise of 1,400,000 share purchase options and 17,342,000 "F"
share purchase warrants which generated GBP 90,000 and Cdn$1,734,200
respectively, and
-- the exercise of the Tepal option by Geologix which resulted in the
receipt of a final instalment of $1.55 million, satisfied as to $775,000
in cash and the issue of to the Company of 1,089,318 common shares of
Geologix at a price of approximately Cdn$0.70. The Geologix shares were
subject to a four month hold period which expired in June 2011.
Since the year end the Company has received further funding from:-
-- the exercise of 500,000 share purchase options which generated GBP
60,000.
Since the year end 3,000,000 share purchase options have lapsed.
The following share purchase options are currently outstanding, each entitling
the holder to acquire one common share of the Company:
-- 14,985,000 share purchase options with exercise prices in the range GBP
0.055/GBP 0.12/GBP 0.30/GBP 0.4925 or
Cdn$0.10/Cdn$0.25/Cdn$0.48/Cdn$0.79 expiring on various dates up to July
2016.
Working Capital - 31 December, 2011
As at 31 December, 2011, the Company had working capital of approximately $5.9
million (31 December, 2010: $10.2 million). The items of working capital and
changes compared to 31 December 2010 are as follows:
Current assets
-- cash and cash equivalents $4.0 million (2010: $8.3 million) - decrease
has largely arisen due to investment in the development of and working
capital requirements of the San Jose mine, offset by funds from the
exercise of share purchase warrants and options and funds received from
the second part of the sale of Tepal
-- trade and other receivables $1.9 million (2010: $0.9 million) - this
increase of $1.0 million is due to $1.0 million increase in monies owed
for the sale of silver concentrate, $0.3 million increase for monies
owed for IVA (Mexican good sales tax), offset by $0.3 million for
deposit for assay laboratory which has been acquired during 2011
-- inventories $0.9 million (2010: $0.1 million) - relates to production at
the San Jose mine
-- other financial assets held at fair value through the profit and loss
account $0.3 million - (2010: $nil) - relates to the Geologix shares
held, received as part payment for the final instalment for the sale of
the Tepal project. Geologix shares received for the first instalment in
the year ended 31 December 2010 were all disposed of during the 2010.
-- non-current assets held for sale $nil - (2010: $2.9 million) - relate to
intangible assets identified as relating to the Tepal project, the sale
of which although highly probable at 31 December 2010, was not completed
until February 2011.
Current liabilities
-- deferred income $nil (2010: $1.5 million) - the reduction of $1.5
million relates to the value of the non-refundable first instalment of
the Tepal option consideration which was exercised in February 2011
-- trade payables $1.2 million (2010: $0.5 million) - the increase of $0.7
million relates to an increase in monies owed for operating costs at the
San Jose mine
In relation to funding the Company's future operations, it is currently
anticipated that this will be largely financed from existing working capital as
well as from cash flow from the mining operation at the San Jose project.
Qualified Person
Mr Jim Williams, Eur Ing, Eur Geol, BSc, MSc, D.I.C., FIMMM, the Chief Executive
Officer of Arian, a "Qualified Person" as defined in the AIM guidelines of the
London Stock Exchange, and a "Qualified Person" as such term is defined in
Canadian National Instrument 43-101 ("NI 43-101"), has reviewed and approved the
technical information in the Review of Operations other than the mineral
resource estimates.
About the Company
Arian is a silver exploration and development company and is listed on London's
AIM; trades on London's "PLUS" market; is listed on Toronto's TSX Venture
Exchange and on the Frankfurt Stock Exchange. Arian is active in Mexico, the
world's second largest silver producing country. The Company's main project is
the San Jose project in Zacatecas State. Part of Arian's forward-looking
strategy lies in the envisaged use of large scale mechanized mining techniques
over wider mineralized structures, which reduces the overall unit operating cost
of metals, and to build up NI 43-101 compliant resources.
Further information can be found by visiting Arian's website:
www.ariansilver.com or the Company's publicly available records at
www.sedar.com.
THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES
NOR FOR DISSEMINATION IN THE UNITED STATES.
This press release does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities of the Company in the United Sates. The
securities of the Company have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within the United
States or to U.S. persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such registration is
available.
Forward-Looking Statements
This press release contains certain "forward-looking statements". All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will or
may occur in the future (including, without limitation, statements relating to
the mineral resource estimates, statements regarding the contract mining and
milling operation at the San Jose Project (the "SJ Mining Operation"), the
ability of the Company to achieve, maintain and possibly increase planned levels
of production from the SJ Mining Operation, the ability of the Company to
generate positive cash flow from the SJ Mining Operation, the ability to
continue or implement proposed drilling programmes on the SJV system and the
Company's exploration, development and production plans and objectives) are
forward-looking statements. These forward-looking statements reflect the current
expectations or beliefs of the Company based on information currently available
to the Company. Forward-looking statements are subject to a number of risks and
uncertainties that may cause the actual results of the Company to differ
materially from those discussed in the forward-looking statements, and even if
such actual results are realised or substantially realised, there can be no
assurance that they will have the expected consequences to, or effects on the
Company. Factors that could cause actual results or events to differ materially
from current expectations include, among other things, the performance of the
contractors and plant and equipment engaged in relation to the SJ Mining
Operation, failure to achieve anticipated production levels and mineral grades
for ore from the SJ Mining Operation, failure to establish estimated mineral
reserves, the possibility that future exploration results will not be consistent
with the Company's expectations, uncertainties relating to the availability and
costs of financing needed in the future, changes in the silver commodity price,
changes in equity markets, political developments in Mexico, changes to
regulations affecting the Company's activities, delays in obtaining or failures
to obtain required regulatory approvals, the uncertainties involved in
interpreting exploration results and other geological data, and the other risks
involved in the mineral exploration and development industry. Any
forward-looking statement speaks only as of the date on which it is made and,
except as may be required by applicable securities laws, the Company disclaims
any intent or obligation to update any forward-looking statement, whether as a
result of new information, future events or results or otherwise. Although the
Company believes that the assumptions inherent in the forward-looking statements
are reasonable, forward-looking statements are not guarantees of future
performance and accordingly undue reliance should not be put on such statements
due to the inherent uncertainty therein.
The mineral resource figures disclosed in this press release are estimates and
no assurances can be given that the indicated levels of minerals will be
produced. Such estimates are expressions of judgment based on knowledge, mining
experience, analysis of drilling results and industry practices. Valid estimates
made at a given time may significantly change when new information becomes
available. While the Company believes that the resource estimates included in
this press release are well established, by their nature resource estimates are
imprecise and depend, to a certain extent, upon statistical inferences, which
may ultimately prove unreliable. If such estimates are inaccurate or are reduced
in the future, this could have a material adverse impact on the Company.
Mineral resources are not mineral reserves and do not have demonstrated economic
viability. There is no certainty that mineral resources can be upgraded to
mineral reserves through continued exploration.