2.1.1 Regional Geology

2.0TINTAYA AREA

2.1Resources/Reserves

2.1.1 Regional Geology

The Tintaya mining district is located near the center of the Tintaya-Ferrobamba "Copper Belt," a north-northeast trending polymetallic metallogenic belt that extends at least from the vicinity of the city of Puno through the department of Apurimac. This 500 kilometer long belt is about 50 kilometers wide and contains a variety of copper, copper-gold, gold, iron, and lead-zinc-silver ore deposits. Copper and copper-gold deposits predominate in its central part (i.e., where this belt crosses the departments of Cuzco and Apurimac (Figure 2.1.1-1). The largest copper and copper-gold deposits in this central region are of the skarn type.

The Tintaya ore deposits are of the skarn type and are located in the south-eastern end of that portion of the metallogenic belt which contains most of the copper and copper-gold ore deposits. Other mining properties of the Peruvian Government which form part of the "privatization package" reviewed in this report occur in the central part (e.g., Winicocha) and in the northern end (e.g., Ferrobamba, Chalcobamba, Charcas and Sulfobamba) of the copper-gold skarn region (Figure 2.1.1-2).

The aforementioned metallogenic belt consists of folded Jurassic and Cretaceous sediments that have been invaded by Upper Cretaceous to Lower Tertiary granodiorite and monzonite batholiths and stocks (Figure 2.1.1-3). The older Triassic and Paleozoic sediments and igneous intrusives crop out mostly to the north and east of this belt. To the south and west of the metallogenic belt and in its southeastern third, the Jurassic and Cretaceous sediments and intrusives are largely covered by

Figure 2.1.1-1

Figure 2.1.1-2

Figure 2.1.1-3

Tertiary and Quaternary volcanic rocks. Here the underlying Jurassic and Cretaceous sediments crop out only in local "windows", such as around Tintaya and in the region that extends about 75 kilometers west of the city of Puno.

The generalized regional stratigraphic sequence is shown in Table 2.1.1-1. In the region of interest, the oldest rocks cropping out on surface are the Upper Jurassic Yura sandstones and quartzite, and the only major limestone unit is the Ferrobamba formation.

The important copper-gold and iron skarn ore deposits of the region formed in the contact zones of the Upper Cretaceous granodiorite and monzonite intrusions with the Middle Cretaceous Ferrobamba limestone.

It is PAH's opinion that the Tintaya-Ferrobamba Copper Belt offers excellent potential, not only for the discovery of additional copper deposits, but also for significant gold deposits.

TABLE 2.1.1-1
Generalized Regional Stratigraphic Sequence
Cenozoic / Quarternary
Tertiary / Recent / Alluvial, morraines
Pleistocene / Barroso (volcanics)
Upper / Yauri (sandstone, volcanics
Descanso (volcanics)
Sencca (volcanics)
Lower / Tacaza (volcanics, sandstone)
Mesozoic / Cretaceous / Upper
Middle
Lower / Puno (red-beds)
Ferrobamba (limestone)
Murco/Mara (sandstone, shale)
Jurassic / Upper / Yura/Soraya/Hualhuani (sandstone, quartzite)
Lower / Pucará (limestone)
Paleozoic Permian / Mitu (sandstone, shale)

2.1.2 Deposit Geology

The Tintaya mining district is located in a part of the aforementioned polymetallic metallogenic belt where the Mesozoic sediments crop out in relatively small areas that are surrounded regionally by the overlying Tertiary and Pleistocene volcanic rocks, and by widespread alluvial sediments. In these areas, several Cretaceous-Lower Tertiary igneous intrusions invaded the Ferrobamba limestone and generated skarns with copper-gold mineralization. Presently, Tintaya is the largest, best known and most mined of these areas (Figure 2.1.2-1). However, similar skarn mineralization has been discovered nearby at Coroccohuayco (7.5 kilometers to the southeast), at Ccayo-Huinicunca (13 kilometers to the west), at Ccoyme-Fito (3 kilometers to the east), at Atalaya (10 kilometers to the southwest), and at Quechuas (5 kilometers to the east-southeast). At the latter locality, there is also evidence of porphyry copper type mineralization.

The Tintaya area is best described by referring to geographic designations that evolved as geological mapping, geophysical exploration, exploratory drilling, development and mining revealed new mineralized zones. Mining started at the site of the present open pit, referred to as "Tajo". About 1.5 kilometers to the east is a zone of abundant outcrops of Ferrobamba limestone that has been partly converted to skarn and mineralized. This zone is referred to as "Chabuca." A relatively thin band of Ferrobamba limestone and skarn outcrops known as "Chabuca Este," connect the Tajo and Chabuca zones. Both north and south of Chabuca there are extensive outcrops of Ferrobamba limestone with subordinate proportions of skarn and mineralization. These zones are referred to as "Chabuca Norte" and Chabuca Sur," respectively. To the east of Tajo there are also evidences of limestone, skarn and mineralization, which are known as "Zona Nueva Este."

Figure 2.1.2-1

In the Tintaya area the Upper Jurassic Yura sandstones and quartzites are referred to as the Hualhuani formation. The complicated igneous evolution requires separating a number of intrusive units, such as monzonite, diorite, quartz-trachyte porphyry, andesite porphyry and diorite porphyry. In addition, geological mapping has revealed a number of andesite porphyry, dacite and latite dikes. The field relations clearly indicate that the monzonite was emplaced after the diorite. The existing geological map shows the andesite cutting the monzonite and vice-versa. The relative age of the quartz-trachyte porphyry is unclear.

As a result of the hydrothermal activity accompanying and following magmatism the igneous rocks and the Ferrobamba limestone were altered by varying amounts. The alteration minerals in the igneous rocks comprise mainly sericite, kaolinite, montmorillionite, chlorite, epidote, tremolite-actinolite, calcite, and secondary quartz and orthoclase. The Ferrobamba limestone was more affected by the hydrothermal activity, being converted partially into marble and skarn. The skarn minerals are mainly garnet (andradite-grossularite), wollastonite, diopside, epidote, tremolite-actinolite, magnetite, silica, calcite and siderite. Although the skarn and ore minerals developed best in the limestone (forming an "exoskarn"), they also formed less abundantly in the border zones of the igneous rocks (forming an "endoskarn").

The hypogene mineralization consists mainly of magnetite, specularite, pyrite, pyrrhotite, chalcopyrite, and bornite. In addition, there are subordinate amounts of ilmenite, hematite, molybdenite, electrum (a gold-silver alloy), galena, sphalerite, marcasite, cubanite, mackinawite and possible bismuth sulfosalts. The supergene enrichment minerals present are bornite, chalcocite, digenite and covellite. The oxidation minerals are mostly limonite, malachite and chrysocolla; cuprite, tenorite and native copper occur in much lesser amounts. The disappearance in depth of supergene bornite may well be responsible for the observed reduction with time in the bornite to chalcopyrite ratio in the ore mined (from 60 percent bornite to 40 percent bornite relative to chalcopyrite).

Chabuca Este

The favorable Ferrobamba limestone exits the south-western edge of the Tajo forming a relatively tight anticline in the Chabuca Este zone. The axial plane of this fold strikes about east-west and dips very steeply. The limestone has been extensively invaded by the monzonite, and to a lesser extent by the diorite. Mineralized skarn formed at most intrusive-limestone contacts.

The northern flank of the Chabuca Este anticline dips 70oN and has been explored with 184 diamond drill holes totaling about 37 kilometers. The average depth of hole was about 200 meters. The oxide zone is judged to range from 30 to 60 meters in depth; the hypogene ore reaches down mostly about 200 meters below the oxide zone, although in its western end it may reach down another 200 meters. This ore zone strikes for about 1300 meters, is 25 meters wide and averages 300 meters in depth. A geologic map and cross section of Chabuca Este are shown in Figure 2.1.2-2 and 2.1.2-3.

Tintaya personnel recently drilled 61 short, horizontal holes from the adit at Chabuca Este to more accurately define the shape and grade of the orebodies. A visual examination of the new geologic interpretation of the orebody shapes suggests that the tonnage and grade estimated for the Chabuca Este deposit is a reasonable and perhaps conservative estimate of the actual reserves.

Figure 2.1.2-2

Figure 2.1.2-3

Chabuca Sur

The Chabuca Sur zone has been explored by 114 drill holes totalling 15 kilometers. Here the favorable limestone forms an open syncline that is apparently overlain conformably by the diorite. The mineralized skarn formed in the limestone immediately below the diorite. The known skarn zone is 15 to 20 meters wide over an area of about 350 to 600 meters. The northern limb of the syncline dips 35oSW and the southern limb 50oNE; the flat bottom of this structure is about 70 meters deep. The mineralization at Chabuca Sur is reported to have a somewhat higher molybdenum content than other Tintaya ores. A geologic map and cross section of Chabuca Sur are shown in Figure 2.1.2-4 and 2.1.2-5.

Chabuca

The Chabuca zone adjoins the Chabuca Este zone to the west and the Chabuca Sur zone to the north. On surface there is a large expanse of monzonite containing many isolated outcrops of Ferrobamba limestone that has been converted partially to skarn and mineralized. The structural information suggests that this zone contains the northwest extension of the northeastern limb of the Chabuca Sur syncline, although this structure is not well defined further north. A cross section of Chabuca is shown in Figure 2.1.2-6.

The Chabuca zone has been explored by 209 drill holes totalling 6 kilometers of drill holes. This has shown that the individual mineralized skarn bodies have lengths between 30 and 150 meters and widths between 10 and 30 meters. The oxidation zone goes down to about 80 meters and the sulfides to 200 meters.

Figure 2.1.2-4

Figure 2.1.2-5

Figure 2.1.2-6

Chabuca Norte

The Chabuca Norte zone adjoins the Chabuca zone to the north and consists of an area in which the Ferrobamba limestone crops out extensively. It is strongly folded into a sequence of anticlines and synclines with east-west trending axes. This area is largely surrounded by diorite and cut by some diorite apophyses and monzonite dikes. Within this zone, two mineralized skarn zones have been explored to date.

The eastern body is 450 meters long, 30 meters wide and 25 meters thick. The western body is discontinuous: over a length of 400 m there are three 50 to 100 meters long outcrops with 10 to 35 meters widths. A geologic map and cross section of Chabuca Norte are shown in Figure 2.1.2-7 and 2.1.2-8.

Coroccohuayco

The Coroccohuayco zone does not adjoin the main Tintaya area, but is located about 7 kilometers to the southeast. In this area there is a large expanse of diorite cut by dacite, by monzonite and andesite dikes, and by fault zones. Indications of skarn mineralization were minimal on surface. Geophysical and geochemical anomalies led to drilling 36 holes totalling 15 kilometers, which revealed sizeable relatively high grade copper mineralization at depth in intrusives, skarn bodies and sediments. The main ore deposit is estimated to be 500 meters long, 300 meters wide and 100 meters thick. A geologic map and cross section of Coroccohuayco are shown in Figure 2.1.2-9 and 2.1.2-10.

Figure 2.1.2-7

Figure 2.1.2-8

Figure 2.1.2-9

Figure 2.1.2-10

Prospects

The Huancarama Sur prospect is located in the Tintaya area, immediately south of the Chabuca Sur zone. It consists of a large expanse of quartz-trachyte porphyry with small bodies of diorite and monzonite, cut by small dacite dikes. Pyrite-gold mineralization grading about 0.12 grams Au per ton occurs disseminated in two areas within the quartz-trachyte porphyry. A geologic map and cross section of Huancarama Sur are shown in Figure 2.1.2-11 and 2.1.2-12.

The Ccayo-Huinicunca prospect is located 13 kilometers west of Tintaya. Exploration of this area revealed four mineralized breccia zones in fractured Soraya quartzites. These breccia zones contain stockworks of quartz veinlets with pyrite, native gold, electrum, chalcophyrite, galena and barite. These mineralized structures are 20 to 120 meters wide and up to 650 meters long. Surface sampling has indicated the following grades:

gr Ag/tgr Au/t% Pb

Ccayo 15.90.990.02

Ccayo 2Tr.0.120.24

Ccayo 33.20.11Tr.

Ccayo 47.40.170.01

A geologic map and cross section of Ccayo-Huinicunca are shown in Figure 2.1.2-13 and 2.1.2-14.

The Cacque breccia in the Ccoyme-Fito prospect is located about 3 kilometers east of the Tajo of Tintaya. This breccia is about 5 kilometers long and 10 to 60 meters wide, cutting the Soraya quartzites. It contains anglesite, cerusite, galena, malachite and barite. Reconnaissance sampling revealed in one trench 8.3 percent Pb, 1.5 grams Au per ton, 25.4 grams Ag per ton and 0.57 percent Cu over a width of 37

Figure 2.1.2-11

Figure 2.1.2-12

Figure 2.1.2-13

Figure 2.1.2-14

meters. This prospect deserves further investigation. A geologic map and cross section of Ccoyme-Fito prospect are shown in Figure 2.1.2-15 and 2.1.2-16.

2.1.3Exploration Methods

All of the exploration at Tintaya is done by core drilling. The core is divided at either one meter or logical geological intervals and logged. After logging, the core is split and one half is retained in the core library. The core library was very neat and appeared well organized. PAH was able to locate core intervals selected at random without any difficulty.

For assaying, the 1/2-split core is roll, jaw, or cone crushed to approximately one millimeter. It is then run through a Jones riffle and split down to approximately 1 kilogram. The one kilogram sample is pulverized to minus 150 microns and blended on a blending cloth. Five envelopes for assays are collected from the blending cloth by scooping, one is sent to the lab and the rest are filed.

Analyses are done by standard methods. All samples are analyzed for copper. Every fifth sample also is analyzed for gold value. If gold is detected, adjoining samples are then analyzed. As is usual with Latin American copper operations, the work done by Tintaya in core drilling, sample handling, sample logging, and sample preping procedures is very good, and in PAH's opinion meets accepted standards of engineering practice.

Figure 2.1.2-15

Figure 2.1.2-16

2.1.4Resource Modelling

General

The geologic resource and mineable reserves were evaluated by PAH for four of Tintaya's deposit areas, including 1) Tajo Tintaya/Inflexion/Zona Nueva, 2) Chabuca Este, 3) Chabuca Sur, and 4) Coroccohuayco. PAH developed four separate computer block models, one for each of these deposits. Significant overlap occurs between the Tajo and the Chabuca Este models, and between the Chabuca Este and Chabuca Sur models, due to the deposits general proximity to one another. The Coroccohuayco model occurs approximately eight kilometers southeast of the other models. Figure 2.1.4-1 shows the general location of the resource models.

The physical limits of the computer block models was determined based on deposit trends and geometry and drill hole spacing. Table 2.1.4-1 details the physical model limits of the model developed by PAH.

The Tajo mineralization continues across the Chabuca Este area. The Tajo area was combined with the eastern part of the Chabuca Este area for the creation of the resource model, in order to include the area of potential pit expansion into the Inflexion area. As these models overlap, the 1,235,900 East coordinate was used as the boundary between the resource areas.

Chabuca Sur mineralization is not continuous with that at Chabuca Este and the modelling treated it as a separate deposit, even though the models have some overlap.

Figure 2.1.4-1

TABLE 2.1.4-1
Empresa Minera Especial Tintaya, S.A.
Physical Model Limits
World Coordinates
(lower left corner of block model)
Tajo / Chabuca Este / Chabuca Sur / Corocco-huayco
Northing / 440,900 / 440,800 / 440,776.8 / 434,800
Easting / 1,235,400 / 1,234,600 / 1,234,070.0 / 1,239,000
Elevation / 3,705 / 3,605 / 3,855 / 3,600
Rotation Angle
(clockwise from north) / 0 / 0 / 20 / 21
Model Coordinates
(model blocks)
Number/
Dimension
(meters) / Number/
Dimension
(meters) / Number/
Dimension
(meters) / Number/
Dimension
(meters)
Rows / 150/10 / 120/10 / 95/10 / 125/10
Columns / 165/10 / 180/10 / 125/10 / 105/10
Levels / 51/10 / 61/10 / 32/10 / 52/10

Drill Hole Database

The drill hole data bases for the project areas were supplied by Tintaya. Sample intervals were based on geology and typically ranged from 1 to 2 meters in length, with some intervals being as short as 0.5 meters or as long as 5 meters.

The drill database for the Tajo area included 121 drill holes. Twenty-nine of these drill holes in the Inflexion area of the Tajo were removed from this database as they were duplicated in the Chabuca Este database. The remaining 92 drill holes contained 11,366 sample intervals. The Tintaya data file included values for percent total copper, percent soluble copper, specific gravity, and lithology. Figure 2.1.4-2 shows the Tajo drill hole locations and topography.

The Chabuca Este database was supplied in two data files and included a total of 184 drill holes containing 20,109 sample intervals. The Chabuca Este data file included values for percent total copper, percent oxide copper, percent soluble copper, percent molybdenite, grams of gold per tonne, grams of silver per tonne, percent recovery, rock quality data (RQD), specific gravity, lithology, and mineral zone (oxide, mixed, sulfide). Figure 2.1.4-3 shows the Chabuca Este drill hole locations and topography.