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Halfmile Mine

Technical Report

Location

The Halfmile Mine is located in northern New Brunswick, Canada, approximately 60 kilometres southwest of Bathurst and 40 kilometres from the Brunswick 12 Mine in the Bathurst Mining Camp. The property consists of 73 claims and covers an area of 1,104 hectares.

Property Agreement

In 2008, Kria Resources (a wholly-owned subsidiary of Trevali) entered into an agreement with Xstrata Canada Corporation -- Xstrata Zinc Canada Division whereby Kria has the right to gain 100% ownership of the Stratmat and Halfmile projects by paying US$18,000,000 (completed) and issuing units worth a total of Cdn$7,000,000 (completed). Xstrata has the first right and option to purchase all or any portion of the concentrate off-take, as well as a 2% Net Smelter Return (NSR) royalty. Kria has a 61.51% interest on certain claims in the north portion of the Halfmile Property (outside of the current mine plan) due to underlying ownership rights.

History and Resources

The property was heavily explored by Xstrata Zinc and its predecessor companies at intervals since the 1960s. In particular, extensive exploration activity occurred during the 1980s and 1990s when the Heath Steele and Stratmat Mines were in production. Trevali believes that its Halfmile and Stratmat properties represent the largest and highest-grade undeveloped deposits in the Bathurst Mining Camp.

A NI 43-101 compliant mineral resource estimate was completed on the Halfmile property by Tetra Tech Wardrop in February 2009, which estimated:
  • Indicated Mineral Resource of 6.26 million tonnes grading 8.13% zinc, 2.58% lead, 0.22% copper and 30.78 g/t silver using a 5.0% capped zinc equivalent cut-off grade
  • Inferred Mineral Resource of 6.08 million tonnes grading 6.69% zinc, 1.83% lead, 0.14% copper and 20.51 g/t silver using a 5.0% capped zinc equivalent cut-off grade
Table 1. Halfmile Resource Estimates - 5% Zn EQ Cut-Off
Indicated
Zone Tonnes ZnEq % Zn % Pb % Cu Ag (g/t)
Upper 1,192,700 7.96 6.72 2.31 0.43 16.95
Lower 4,472,200 9.65 8.68 2.81 0.12 37.94
North 597,200 7.56 6.78 1.40 0.49 4.84
Total 6,262,100 9.13 8.13 2.58 0.22 30.78

Inferred
Zone Tonnes ZnEq % Zn % Pb % Cu Ag (g/t)
Upper 156,100 8.08 7.20 2.64 0.17 6.19
Lower 1,071,000 9.01 8.06 2.76 0.08 38.55
Deep 4,825,700 6.86 6.37 1.60 0.15 17.04
North 25,400 7.46 6.19 1.55 0.73 6.19
Total 6,078,200 7.27 6.69 1.83 0.14 20.51

A Preliminary Economic Assessment (PEA) on the Halfmile Property was completed by Tetra Tech Wardrop in October 2010 and assumes a newly constructed mill/processing facility, not the recently acquired Caribou Mill Complex (The PEA is based only on Indicated and Inferred Mineral Resources and not Mineral Reserves and do not have demonstrated economic viability. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is therefore no certainty that the conclusions of the PEA will be realized). The estimates from the PEA are outlined in the table below:

Summary of PEA Estimates
Rate of Return (IRR) 16.24%
Net Present Value (NPV) CAD$587 million (at a 0% discount rate)
CAD $139 million (at an 8% discount rate)
Mineable Recovery Rate 90%
Dilution Rate 10%
Operating Costs $62.49 per tonne milled (includes mining $43.89, processing $14.90 and general & administration $3.70)
Total Cash Flow (life-of-mine) $587 million, before taxes from metal sales

The estimated diluted mineral resources used in the PEA are outlined below:
Tonnes ZnEQ Zn% Cu% Pb% Ag gm/t
Upper Zone





Indicated 1,180,773 7.24 6.1 0.4 2.1 15.4
Inferred 153,931 7.37 6.6 0.2 2.4 5.6
Lower Zone





Indicated 4,427,478 8.77 7.9 0.1 2.6 34.5
Inferred 1,055,732 8.23 7.4 0.1 2.5 35.2
Deep Zone





Inferred 4,779,941 6.24 5.8 0.1 1.5 15.5

The PEA is based only on Indicated and Inferred Mineral Resources and not Mineral Reserves and do not have demonstrated economic viability. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is therefore no certainty that the conclusions of the PEA will be realized.

Calculated using a 5% zinc equivalent cut-off. Please refer to the Kria Resources Information Circular of February 26, 2009 filed on SEDAR (under Trevali Mining's filings) for the NI 43-101 compliant resource estimate on Halfmile. This resource was the basis for the PEA, however mining dilution and mining recovery rates were factored into the resource estimate used in the PEA.


The PEA estimates pre-production capital expenditure requirements of CAD$123 million and capital expenditures of CAD$215 million to achieve full production (assumes a newly constructed mill/processing facility and not the recently acquired Caribou Mill Complex). Total projected capital expenditure required over the life of mine is CAD$324 million. A provision of 25% contingency is included in the capital cost estimate. The PEA estimates that a 2,000 tonnes per day underground mining operation utilizing 75% mechanized cut and fill along with 25% longhole methods would be employed.

Mine life in the PEA study is estimated at over 20 years with payback being achieved in the eighth year of operation from commencement of mine startup.

Life-of-mine average metal prices and metal recoveries used in the PEA are outlined below:

Average metal prices Metal recoveries
Zinc US$ 0.80/lb 89.72%
Copper US$ 1.91/lb 60.00%
Lead US$ 0.56/lb 72.07%
Silver US$ 10.59/oz 48.56%

A US:CDN dollar exchange rate of 0.846 was used.

In addition to the results from the Halfmile PEA, there is potential to create a Halfmile/Stratmat project with a potential rate of return of 22% if the inferred mineral resource from the nearby Stratmat property, also owned by Trevali, is combined with the resource estimate from Halfmile. This potential reflects utilizing Stratmat tonnage to maximize mill productivity during the initial three years and last five years of the mine life. Further studies are required to determine the economics of combining production from the two deposits, Halfmile and Stratmat. (Please review Disclaimer)

Geology

The Halfmile Property contains 4 sulphide zones: Upper, Lower, Deep and North. The deposit is a volcanic-sediment-hosted massive sulphide deposit and is one of over 45 massive sulphide deposits in the Bathurst Mining Camp. Rocks are of Ordovician age and have undergone a complex history of polyphase folding and faulting. The deposit is structurally overlain by rhyolitic and dacitic rocks as well as disconformable quartz-wackes and pelites. To the footwall of the massive sulphide package are alkali basalts and thin bedded feldspathic wacke/shales. Rocks have been metamorphosed to the greenschist facies. The entire package of rocks has been stratigraphically over turned.

Property Potential

The upper sections of the deposits have been well covered with diamond drilling. There are three areas of interest for immediate exploration:
  • Along strike, especially to the south of the Upper / Lower zones, diamond drill holes have intersected mineralization that needs follow up.
  • The Deep Zone is a large massive sulphide body. To date, only 15 diamond drill holes have crossed this sulphide horizon. This zone is open in three directions: along strike and down dip.
  • Down dip of the North Zone requires investigation. A couple high grade narrow diamond drill hole intercepts suggests high potential for discovery in this area.

Where Trevali discusses exploration/expansion potential, any potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

Production and Development Plan

Initial Trial Mining Production was undertaken from January to July 2012 from the Upper Zone of the Halfmile deposit with the material being toll-processed through the Brunswick 12 mill facility and produced good quality, saleable metal concentrates of zinc, lead-silver and copper-gold.  

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