Technical Report on the Fenelon Project by Innovexplo Inc. dated January 31, 2005
More than 300 holes have been drilled on the project from the surface and underground, with 184 holes in the area of the current development. Every hole has encountered gold mineralization or related alteration.
High-grade gold is widely distributed over the entire area of the deposit. Numerous mineable blocks have been identified and 9000 tonnes has been mined from underground as part of the mining test.
Gold occurs largely as free grains and is associated with chalcopyrite and pyrrhotite.
High-grade mineralization occurs as elongated lenses and pods in relatively continuous siliceous vein-like structures.
The project will have minimal associated environmental issues.
Excellent potential remains to increase mineable resources with additional drilling and development. The deposit is open along strike, where underground drilling has returned numerous high grade intercepts, as well as to depth, where drilling to over 250 metres has already shown that high-grade gold mineralization continues downward.
Excellent metallurgical recoveries of over 97 percent have been achieved with conventional recovery processes. There are no deleterious trace elements.
The deposit is well documented and Taurus' bulk samples and the current developments confirm previous work.
Present plans include an underground mine to develop and exploit the deposit.
There is excellent potential to develop new gold resources on the property. Production should provide substantial cash flow to Bonanza for many years.
The Fenelon Gold Project is located about 600 kilometres northwest of Montreal, Quebec in the highly productive Casa Berardi greenstone gold district. The project is 100-percent owned by American Bonanza Gold Corp. Various elements of a feasibility study have been completed, including the construction of underground workings, a mining test, commercial-scale metallurgical tests and environmental studies. Drilling is underway that will include the definition of additional gold resources sufficient for the completion of the feasibility study and for the long-term development of the project.
Cyprus Canada Inc discovered the Fenelon gold deposit in 1993. Through 1998, Cyprus and Fairstar Explorations Inc expended in excess of $8 million on the Fenelon Project. The work included extensive drilling and the preparation of an open-pit mine prefeasibility study. Cyprus withdrew from Canada and the gold business in 1998 and International Taurus Resources Inc purchased Cyprus' remaining Canadian properties, which included Fenelon and other Casa Berardi properties. Taurus re-evaluated previous work at Fenelon and determined that underground exploitation appears to offer the best potential to develop a profitable sustainable mining venture. Since 1999, Taurus and Fairstar spent more than $13 million on additional drilling, bulk sampling, underground development and resource assessment. In March 2005, Taurus merged with American Bonanza Golding Mining Corp to form American Bonanza Gold Corp. In a concurrent transaction, American Bonanza purchased the remaining Fenelon interest from Fairstar, which transferred the entire 100-percent interest in the Fenelon Project to American Bonanza Gold Corp.
To date, more than 300 diamond-drill holes have been completed at Fenelon. Every drill hole has intersected gold mineralization or related alteration. More than half of the holes intersect and define the high-grade gold deposit in the Discovery Area, which is at least 250 metres in depth, 300 metres in length and 75 metres in width. The deposit is open along strike and down dip.
An open-pit bulk-sample program has provided the direct mining experience necessary to develop an underground mining-test and feasibility program. Production from the bulk sample totaled approximately 14,000 tonnes milled, producing 4,339 ounces of gold. The metallurgical response of the bulk-sample mineralization to a conventional cyanidation mill flow-sheet was as predicted in previous tests, with an excellent gold recovery of over 97 percent. Underground development was started in October 2003. Site facilities and a full camp have been built. More than 250 metres of ramp, 550 metres of access workings and several stopes have been developed since that time. The ramp has advanced to the 5195 elevation (55 metres below surface). An 8,300-tonne bulk sample was mined from the stopes, which produced 2596 ounces of gold.
The Fenelon Gold Project comprises 454 mining claims covering approximately 7511 hectares in Quebec's Fénélon, Jérémie, Caumont and Gaudet townships (Latitude 50o 01' N, Longitude 78o 37' W). It is located on the Detour Lake Break in the Casa Berardi region of northwest Quebec, 65 kilometres east of the Detour Lake Mine and 200 kilometres north of Rouyn-Noranda. An all-weather road provides access to the property, where a camp and a full range of support facilities have been established.
The high-grade gold mineralization at Fenelon occurs in silicified, sub-parallel, east-southeast-trending, near-vertical shear zones, which range in thickness from approximately one-half metre to six metres. In the high-grade zones discovered to date, gold occurs as free grains with pyrrhotite, chalcopyrite and pyrite. Host rocks are basaltic volcanic flows and mafic to felsic intrusive rocks. The entire group of host rocks has been altered to the greenstone-facies mineral suite of sericite, chlorite, biotite, carbonate and quartz. There are no natural rock outcrops in the area of the deposit and geological interpretation relies on drilling, the Taurus bedrock exposure, underground development and bulk sampling. After removal of four to eight metres of glacial till, the mineralized zones have been exposed at the bedrock surface over an area measuring about 200 metres by 65 metres.
The Fenelon deposit lies about two kilometres north of the east-west trending "Detour Break". The deposit structure is sub-parallel to, and probably a splay off this major regional fracture system. The Detour Lake mine and the Fenelon deposit are in similar structural relationships with the Detour Break. The three Abitibi structural "Breaks" (Detour Lake, Casa Berardi, and Cadillac) have spawned many mines in the region. The Detour Lake mine produced 1.7 million ounces of gold and was mined to a depth of more than two kilometres below the surface. The deepest drilling at Fenelon extends to about 250 metres and shows that the deposit is open to continuation at depth. Many of the existing operations in the region have discovered new ore bodies at deeper extensions below existing workings. Fenelon has additionally identified potential along strike and down dip, both in the Discovery Area and elsewhere on the property.
The near-vertical, competent high-grade mineralization at Fenelon can be easily mined using established underground mining methods. The gold is easily recovered with conventional extraction methods (recoveries of over 97 percent were attained with the 14,000-tonne bulk sample). Suitable custom milling facilities are available in the area to reduce the capital costs of start-up production.
Environmental concerns are limited and all permits have been obtained for the proposed feasibility study and mining test. Fenelon ore will not generate acid mine drainage. Also, very little waste will be mined or stored above ground. If ore is custom milled off site, environmental permitting and liability will be further reduced.
Although over 300 diamond holes had been drilled on the property and a significant high-grade gold resource outlined, the deposit is a new discovery with no previous exposure at the surface or underground. In 2001, to gain direct experience with the deposit, Taurus carried out an open-pit bulk-sampling program on a portion of the Discovery Area. The goals of this program were to confirm, through open-pit mining methods, the presence of significant high-grade gold at Fenelon; and to provide details of the geology, mining engineering and metallurgy of the deposit. The program results were very positive and all aspects of these goals were achieved. The exposures in the open pit revealed more mineralization than was evident from the drilling. The gold-bearing structures are locally wider than anticipated and a new intermediate structure was located between the 1S and 2S veins.
Feasibility Study and Test-Mining Operation
In late 2002, Taurus initiated a feasibility study and test-mining program to expand the positive results of the earlier bulk-sample program. New drilling has indicated a broad, and much larger zone of rock alteration and gold mineralization, which is similar to that of the bulk-sample area. Every drill hole within this zone intersected strong gold-related rock alteration or gold mineralization.
The study includes results from 1,000 channel samples and 42 close-spaced diamond-drill holes (totaling 450 samples from 2,150 metres of drilling). The core has been carefully logged and a detailed geologic map has been compiled. A structural study conducted by SRK Consulting augments this mapping. SRK also compiled all relevant data and constructed a new mineral model and resource estimate, dated April 2003, which is used as the base case for the feasibility study and test-mining project.
The results support a simpler mineral model than originally interpreted at Fenelon. Instead of a complex series of replacement zones, the mineralization appears to be controlled by several through-going parallel shear zones, which can be traced, with drilling in the main Discovery Area, for at least 200 metres along strike and for at least 250 metres in depth. These shear zones continue, and are open along strike and to depth.
Using a statistical estimation method known as kriging, SRK has estimated that, as a conservative base case, 88,000 tonnes grading 10.9 grams of gold per tonne (0.35 oz/ton) is present in an area 120 metres long, 25 metres wide and extending 50 metres below the bedrock surface. SRK chose to limit its estimation to this restricted area, despite drill holes intersecting high-grade mineralization deeper in the zone.
Detailed analysis of the SRK study and the bulk-sampling program indicated that an underground mine is the preferred approach to selectively exploit the Fenelon deposit. The Fenelon Joint Venture (at the time, comprising Taurus and Fairstar) decided to conduct a mining test and feasibility study using underground development based on the mineral model prepared by SRK Consulting.
The design and partial construction has been completed for a decline ramp and underground workings, which provide access to the known high-grade gold resources at levels of 25 and 50 metres below bedrock surface. Costs have been established using bids from established mining contractors in the area. While the program is designed to prove up additional ore, study mining conditions and plan the long-term development of the project, the ramp can be constructed quickly and with minimum cost, which will allow early mining and shipping of an additional underground bulk sample of the known high-grade gold mineralization. The ramp is designed to allow continuous development of the deposit laterally and to depth. The underground development was started in October 2003, and site facilities and a full camp have been built. More than 250 metres of ramp and 550 metres of underground development have been accomplished since that time. The ramp has advanced to the 5195 elevation (55 metres below surface). About 8,300 tonnes of mineralized material, extracted as part of a mining-test and feasibility-study program and consisting of half stoped and half development rock, were milled as a bulk sample at the Camflo mill near Val-d'Or, Quebec. A total of 3,428 ounces of gold doré was shipped to the refinery. This produced approximately 2596 ounces of gold.
Resources in the developed area are estimated at 4,002 tonnes grading 18.36 grams of gold per tonne in the measured resources category, 51,682 tonnes grading 19.71 grams of gold per tonne in the indicated resources category and 27,245 tonnes grading 12.79 grams of gold per tonne in the inferred category. Total gold content in the measured and indicated categories amounts to 35,107 ounces. Total gold in the inferred category amounts to 11,204 ounces. These figures are estimated on the basis of a 5 g/t Au lower cut-off, with high-grade assays cut to 50 g/t Au for the measured resources and to 75 g/t Au for the indicated and inferred resources (Technical Report on the Resources Evaluation, Fenelon Project, Carl Pelletier, PGeo, Innovexplo inc, September 2004). The resource estimate is confined to a Volume of the central Discovery Zone approximately 160 metres long to a depth of 175 metres. This volume has been exposed in test-mine workings and drilled in sufficient detail to allow estimation of a measured and indicated resource. Approximately 80% of the reported resource occurs within 100 metres of the surface. The six veins that comprise this resource remain open to the east and at depth. Further drilling and development is planned to augment the current resource.
The Next Stage of Development
The evaluation of results to date is complete. The Corporation is planning to commence a substantial resource expansion drilling program.