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Mount Hamilton Project

Overview

Location Map
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The Mt. Hamilton property is a 5277 acre property located at the southern end of the Battle Mountain Trend. The property is located in the western flank of the White Pine Mountains, about 40 miles west of Ely, Nevada. Significant mineralization is located thorughout the property that occurs within a gently folded sequence of Cambrian Age sedimentary rocks. Mineralization at Mt. Hamilton consist of skarn-hosted gold, silver, tungsten, molybdenum, and local copper occurrences.

Ely Gold and Solitario Exploration & Royalty Corp. (NYSE Amex: XPL, TSX: SLR) have formed the Mt. Hamilton LLC ("MH-LLC"), a limited liability company which now holds 100% of the Mt. Hamilton project assets under an Operating Agreement. Solitario can earn up to an 80% interest in the MH-LLC by completing a feasibility study, making future property payments, advanced royalty/royalty reduction payments, making cash and stock payments to DHI-US, and arranging project financing. Solitario also will fund all bonding obligations to place the Mt. Hamilton project into commercial production.

Solitario - Mt. Hamilton Earn-in Terms:
  Adv Royalty/
Reduction

Property*

Exploration
Cash to
DHI(US)
Shares to
DHI(US)
Initial (for 10%)  
2010 $300,000        
Phase 1 (for 41%)  
2011 $300,000 $525,000   $200,000 50,000
2012   $750,000 $1,000,000 $300,000 50,000
Phase 2 (for 19%)  
2013 $300,000     $500,000 100,000
Phase 3 (for 10%)  
2013 $3,800,000 $750,000      
2014 $1,800,000 $750,000   $500,000 100,000
2015   $1,000,000      
Totals: $6,500,000 $3,775,000 $1,000,000 $1,500,000 300,000


Bankable Feasilbility Study
A NI 43-101 compliant Bankable Feasibility Study (BFS) of project economics was completed by SRK Consulting (US) Inc. in Feb 2012. Based on recent cost and commodity pricing, the BFS demonstrates robust economics with excellent potential for developing additonal resources. With the completion of the Feasibility Study, Solitario will hold an 80% interest in Mt. Hamilton LLC subject to certain "continuing payment obligations" reflected in the table above. Should Solitario default, Ely Gold's interest in Mt. Hamilton LLC will revert to 51% and Ely Gold will become the operator of the project.

Click here to download Feasibility Study (PDF)

Project Economics
All currency figures in U.S. $'s; Economic base case in bold; M=millions


Item Pre-Tax After Tax  (Federal=35%, State=5%)
Gold US$/oz. $1,323 $1,500 $1,700 $1,900 $1,323 $1,500 $1,700 $1,900
Silver US$/oz. $25.34 $29.00 $33.00 $37.00 $25.34 $29.00 $33.00 $37.00
Cash Flow (US$M) $226.4 $284.9 $389.9 $476.1 $136.4 $183.9 $237.5 $290.8
NPV @ 8% (US$M) $111.1 $154.4 $207.0 $259.3 $60.7 $87.3 $120.0 $152.3
NPV @ 5% (US$M) $145.3 $198.5 $261.5 $324.1 $83.1 $116.0 $155.0 $193.7
IRR 35.0% 41.3% 51.2% 60.6% 25.4% 30.5% 37.9% 44.9%
Payback (Years) 2.7 2.5 2.2 1.9 3.2 2.9 2.6 2.3

Life-of-mine cash operating costs on a gold equivalent basis (at a 52:1 silver to gold ratio) are estimated at $535 per gold-equivalent ounce recovered, well below world-average industry cash costs. The economic base case assumes a $1,323 life-of-mine gold price and a $25.34 silver price, generating approximately $226 million in cash flow (operating margin -- EBITDA) on a pre-tax basis over the mine's currently anticipated eight-year mine-life. At gold and silver prices of $1,700 and $33 per ounce, respectively, the project will generate nearly $390 million in life-of-mine cash flow. Initial capital costs are estimated at $71.9 million, including a contingency of $6.3 million. On average, silver production contributes approximately 11% to the overall project revenues.

The Mt. Hamilton gold project will be an open pit mining operation with heap leach processing and projected gold recoveries of 79%. The reserves are contained within a well-defined ore body displaying excellent continuity of mineralization that will be mined within a single open pit. Processing is straight-forward with two-stage crushing to minus ¾-inch, no agglomeration and rapid gold leach rates, followed by conventional ADR (adsorption-desorption-recovery) metal extraction. The project also incorporates several innovative design concepts to minimize surface disturbance and environmental impacts, such as a vertical ore pass and underground conveying system to reduce surface disturbance and improve air quality. In addition, there are mineral resources adjacent to the reserves reported in the Feasibility Study that have the potential to significantly extend the mine life.

Feasilbility Study Highlights

Base Case: Gold Price-$1,323; Silver Price- $25.34

Production Rate: 8,500 tons ore per day
Mine Life: 8.0 years
Average Gold Recovery: 79% (70% of recoverable gold in the first 30 days )
Average Silver Recovery: 90% of soluble silver (~ 36% of total contained silver)
Life of mine strip ratio: 2.4:1.0 (waste:ore)
Initial Capital Cost: $71.9 M (including $6.3 M contingency)
Sustaining Capital: $35.3 M (including $4.3 M contingency and $10.3 M end-of-mine closure costs)
Working Capital: $7.1 M
Underlying NSR-Royalty: 1%
Cash Costs per Gold-Equivalent Ounce Recovered: $535
Average Annual Gold Production: 48,000 ounces
Average Annual Silver Production: 330,000 ounces
Average Annual Gold-Equivalent Production: 54,000 ounces (at a 52:1 silver to gold ratio)

The economic analysis in the Feasibility Study assumed a declining price curve for gold and silver. Realized gold/silver prices were set at $1,600/$35.45 per ounce for the first year of production, $1,420/$28.25 for the second year, and $1,280/$23.90 per ounce for all subsequent years. These prices are based on the 12-month, 24-month and 36-month trailing average of gold and silver prices, respectively. This declining gold price scenario results in an average life-of-mine price of $1,323 per ounce for gold and $25.34 per ounce for silver.

Mineral Reserves Statement, Centennial Gold-Silver Deposit,
White Pine County, Nevada, SRK Consulting (Inc.)

Reserve Category Tons
(millions)
Gold Grade Silver Grade* Contained
Gold (oz)
Contained
Silver (oz)
Oz/Ton g/Tonne Oz/Ton g/Tonne
Proven 0.923 0.032 1.10 0.155 5.31 29,300 142,700
Probable 21.604 0.021 0.72 0.134 4.59 457,800 2,884,300
Prov.+Probable 22.527 0.022 0.75 0.136 4.66 487,100 3,028,200
*Reported silver grade is cyanide soluble.

Mineral reserves were estimated from a pit design based on $1,200/oz. gold and $20/oz. silver prices. The cutoff grade used to estimate reserves was 0.006 oz/t gold equivalent (0.20 grams/tonne) and is the internal cutoff grade. Multiple pit scenarios were evaluated using these criteria under a range of gold prices to determine the most favorable pit design for both optimal resource extraction and cash flow.


Mineral Resource Statement Centennial Gold-Silver Deposit,
White Pine County, Nevada, SRK Consulting (Inc.)

Resource Category Tons
(000's)
Gold Grade
(oz/t)
Contained
Gold(oz)
Silver Grade
(oz/t)
Recoverable
Silver(oz)*
Measured 918 0.032 29,524 0.155 142,152
Indicated 22,732 0.022 497,330 0.132 3,010,471
Measured and Indicated 23,650 0.022 526,854 0.133 3,152,624
Inferred 3,454 0.018 60,859 0.079 273,457
  • Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves estimate;
  • Resources stated as contained within a potentially economically minable open pit above a 0.006 oz/t AuEq CoG;
  • Pit optimization is based on assumed gold and silver prices of US$1,600/oz and US$40.00/oz, respectively, effective heap leach recoveries of 75% and 30% for gold and silver, respectively, a mining, processing and G&A cost of US$5.81/t; Net Smelter Return 1% and pit slopes of 50.
  • Reported Au ounces are contained metal subject to process recovery which will result in a reduced number of payable ounces;
  • * Reported Ag ounces have already received a recovery discount during resource modeling; therefore, there will be minimal further reduction of payable Ag ounces after processing; and
  • Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.
The Feasibility Study resource and reserve estimations demonstrate a potential to increase the size of the existing Centennial deposit through step-out exploration drilling around the east and southeast margins of the current pit configuration. This mineralization falls entirely within a pit design based on $1,600/oz. gold and $40/oz. silver and is situated immediately adjacent to the reserve pit. Approximately 2.6 million tons of Indicated Resources grading 0.017 oz/t gold (45.3 koz of gold) and 0.153 oz/t silver (397.6 koz of silver) and 2.8 million tons of Inferred Resource grading 0.018 oz/t gold (50.2 koz of gold) and 0.080 oz/t silver (223.5 oz of silver) above a 0.006 oz/t gold cut-off have been identified outside of the reserve pit, but within the resource envelope (Whittle(tm) shell). Drilling is planned in these areas with the objective to upgrade the mineralization to Measured and Indicated Resources.

Mt. Hamilton LLC has initiated an aggressive 2012 drilling program to convert inferred resources to reserves at the Centennial pit as well as upgrade mineralization around the nearby historic NE Seligman pit area. The Seligman deposit, situated approximately 2,000 feet north of the planned Centennial pit, was partially mined by Rea Gold Corp. from 1995-1997. About 310 drill holes define a well mineralized near surface gold deposit that was abandoned due to low gold prices. A 1994 Feasibility Study for Rea Gold identified 9.04 million tons with an average grade of .052 ounces (1.78 grams) gold per the ton, containing 470,000 mineable ounces in the Seligman Deposits (non 43-101 compliant). The Nevada Department of Minerals and Nevada Bureau of Mines reported total production of 124,000 ounces of gold and 310,250 ounces of silver by Rea Gold. Mineralization at Seligman is hosted mainly in intrusive granodiorite and hornfels along the northern portion of the Seligman Stock while the Centennial deposit is an epithermal overprint in skarn-altered sediments along the southern contact of the Seligman stock. While both deposits are spatially close, the style and nature of mineralization are very. Rea Gold ceased operations prior to mining out the Seligman deposits and MH-LLC is assessing any remaining potential mineable resources for inclusion in the current mine plan. Metallurgical testing is also being conducted on the Seligman deposit samples. The goal of the 2012 drill program and metallurgical testing is to add reserves in these two resources which may have the potential to extend mining for three to four years.

In June 2012, Sandstorm Gold purchased a 2.4% net smelter returns royalty ("NSR") on the Mt. Hamilton gold project for US$10.0 million. As part of the agreement, MH-LLC will have the option, for a period of 30 months, to repurchase up to 100% of the NSR for US$12 million, provided that MH-LLC enters into a gold stream agreement with Sandstorm that has an upfront deposit of no less than US$30 million. In addition, MH-LLC has provided Sandstorm with a right of first refusal on any future royalty or gold stream financing for the Mt. Hamilton project. The proceeds from Sandstorm will be used to fully fund the 2012 drill program, other project development, and all permitting for mine contruction.


ADDITIONAL EXPLORATION TARGETS
Drilling of the Centennial Gold Deposit encountered precious metal mineralization along thrusts that appear to be increasing in thickness and grade to the east along these low angle faults. It was concluded that the faults control precious metal mineralization extending the Centennial Gold Deposit eastward, and resulting in mineralization at the NE Seligman Deposits, and the Chester and Five Way Prospects.

Centennial Extension
Centennial-Seligman Area

Mt. Hamilton Targets
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Seligman Area, NES-5 Pit, showing un-mined ore
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Centennial Drill Plan
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Centennial Drill Section A
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Centennial Drill Section B
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This zone is the easterly, down-dip extension of the near-surface Centennial Gold Deposit. This mineralization is excluded from the current "in-pit" resource estimate. A number of drill holes encountered significant gold mineralization in this zone, including hole 96-092, intersecting 33.5 meters grading 0.067 opt Au (2.3 grams) roughly 600 feet east of the Centennial resource. The Ely Gold/Solitario joint venture will drill-test the Centennial Extension in 2011.

Chester Prospect
The Chester area is a geochemical anomaly identified by REA Gold Corp. in the mid 1990's and is located about one half mile south of the Centennial Deposit. The surface area of this target, defined by its 100 ppb gold in soil anomaly, is roughly four times larger in area than the Centennial Deposit. Forty reverse circulation drill holes by REA Gold in the 1990's encountered mineralization along two flat lying faults similar to Centennial with intercepts up to 40 feet grading 0.04 opt Au (1.37 grams). Outcrops in this area have returned values to .06 opt Au (2.06 grams). Near the northern end of the Chester target, nearest the Centennial deposit, an 800 ppb gold in soil anomaly remains entirely untested, largely because there were no existing drill roads there. The Chester area is quite possibly an extension of the Centennial mineralization along the same or similar structures that control the Centennial deposit.

Five Way Prospect
The Five Way area is located between and slightly east of the Centennial and NE Seligman deposits. This prospect is represented by a 500 ppb gold in soil anomaly measuring about 500 metres by 500 metres as well as rock chip sampling that returned values up to 1.26 ounces per ton gold.

MOLYBDENUM-TUNGSTEN PROSPECTS
Westside and Eastside Tungsten-Molybdenum Historical Resources
Two historical non 43-101 compliant mineralized tungsten and molybdenum resources are located below and on the flanks of the Centennial Gold Deposit. A prefeasibility study performed by Philips Petroleum in June of 1978 contained historical non-NI 43-101 Resources for the Westside deposit, consisting of 4,200,000 tons grading 0.52% MoS2, 0.37% WO3, and 0.60% copper and for the Eastside deposit, which contains 2,000,000 tons grading 0.28% WO3. The Company is not treating the historical estimate as current mineral resources or mineral reserves and the historical estimate should not be relied upon or understood to indicate the existence of reserves or resources.

Shell Zone
The Shell deposit is located to the southwest of the Centennial Zone and lies on claims that are contiguous with the entire land position. Historic exploration on this target yielded medium to high grade gold and base metal sulphide replacement style of mineralization. The molybdenum-tungsten mineralization is partially coincident with gold mineralization but also surrounds and lies under it. An historical non-NI 43-101 compliant mineralized resource of 500,000 tons, done by prior operator Union Carbide Corporation, averages 0.24 ounces (8.23 grams) of gold per ton. In addition to the gold mineralization, Union Carbide also reported an additional historical non-NI 43-101 compliant resource of 1.15 million tons of molybdenum-tungsten mineralization averaging 1.20% MoS2 and 0.12% tungsten.
The Company is not treating these historical estimates as current mineral resources or mineral reserves and the historical estimates should not be relied upon or understood to indicate the existence of reserves or resources.

After Union Carbide, WR Grace explored the property, and drilled additional holes east of the Shell deposit. These holes encountered mineralization up to 16 feet grading 0.201 ounces per ton gold (6.89 grams) and have never been modeled or included in a resource estimated for the Shell deposit. The current historical resource is open in most directions and although relatively deep, there is potential for this project to become a stand-alone project.