Exploration
A total of 55,362 metres of sruface and 2,397 metres of underground exploration drilling was completed in 2011. Surface drilling collared over the existing underground Shahumyan mine comprised a three phase program of 160 metre by 160 metre, 80 metre by 80 metre and twin holes of Soviet era drilling. The drilling program has been designed to provide data for an evaluation of the potential to establish an open pit operation. The 160 metre spaced program, completed in the second quarter of 2011 has provided the framework for infill drilling. The 80 metre spaced drilling program is scheduled to be completed by the end of February 2012 and will be used as additional data for an updated Mineral Resource estimate.
Underground exploration within the Central Zone of the Shahumyan deposit on an 80 metre by 80 metre grid from the 748 mine level, which commenced in September 2011 has confirmed and extended veins down to the 500 level. The drilling also defined additional low-grade halos around the veins, which were previously missed by the Soviet drilling due to selective sampling. The additional drilling from both surface and underground has provided additional data for the current geological model and confirms the updated surface regional mapping. One underground diamond core rig is currently operating with plans to increase to three rigs by the second quarter of 2012. A NI 43-101 compliant underground resource estimate will be undertaken with completion projected in the first quarter of 2013.
Surface drilling on a spacing of 160 metres by 160 metres has discovered a new domain of mineralization called "Shahumyan East" located immediately east of the Shahumyan east fault. The mineralization is polymetallic with grades of a similar tenor to those encountered in the Shahumyan mine. The new zone covers an area of 1.5 km with veins having a strike length of 500 metres, a depth of 300 metres and an average vein width of 2 metres. Surrounding the veins are zones of disseminated mineralization up to 30 metres wide. Multiple intersetions per hole have been encountered. Meralization is located under a cover sequence of 60 to 150 metres of un-mineralized Upper Jurassic volcanic musdstones and basalts, which overlay the Shahumyan mine sequence of andesites, dacites and breccias. To date 21 holes have been drilled into this area. Infill drilling on an 80 metre by 80 metre grid is being completed with assay results pending.
Pit optimization studies will be completed to determine fi the Shahumyan East zone can be mined by open pit methods. intersections have been made with average grades above the current underground mining cut off which may result in the establishment of new underground mineable resources. As a result of the discovery of the Shahumyan East zone, the 160 metre by 160 metre drill pattern will be extended in this area to define the extents of the mineralization. Infill drilling with reverse ciruculation drilling is planned.
The regional mapping campaign resulted in a significant improvement in the understanding of the stratigraphy, structural history and regional scale mineralization controls, building on the work completed in 2007 and earlier Soviet studies. The main advances made in stratigraphic understanding came with the recognition of larger compositional packages, key sedimentary marker horizons and major unconformities and the mapping of younger units to the north of the exploration license. The majoritiy of structural work completed in 2001 was confirmed. Major advances in structural understanding have included the recognition of a second fold-thrust event to the north and the definition of north-south structural corridors, which are considered critical mineralization controls on a regional scale. In addition, the north plunging anticline proposed in 2007 is now interpreted as an open, gently northeast plunging, early regional fold. The mineralized corridors have been confirmed with EM gephysics and soil sampling to define drill-ready targets.
2012 Outlook
As a result of the disruptions in equipment availability in the third quarter of 2011, the estimated mine output at Deno has been reduced to 530,000 tonnes from 600,000 tonnes. Ore mined and milled for the year 2012 is expected to be approximately 550,000 tonnes - 610,000 tonnes. Metals in concentrate produced are expected to be as follows: 25,000 - 28,000 ounces of gold, 2.9 - 3.2 million pounds of copper, 18 - 20 million pounds of zinc and 473,000 - 526,000 ounces of silver. Total growth capital expenditures for the year 2012 at Deno Gold are expected to be approximately $15 million to further enhance underground operations and advance the proposed open pit project. Unit cash cost per tonne of ore processed, excluding royalties, at Deno Gold for the year 2012 is expected to be approximately $59.00 - $65.00.