YOUGA GOLD PROJECT Burkina Faso, West Africa Youga Mining Study - October 2006 Update

Transcription

1 YOUGA GOLD PROJECT Burkina Faso, West Africa Youga Mining Study - October 2006 Update Prepared by RSG Global Consulting Pty Ltd and MDM Engineering on behalf of: Etruscan Resources Inc October 2006

2 YOUGA GOLD PROJECT Burkina Faso, West Africa Youga Mining Study October 2006 Update Prepared by RSG Global Consulting Pty Ltd and MDM Engineering on behalf of: Etruscan Resources Inc Authors: RSG Global Richard Yeates Principal BSc (Geol) MAusIMM MAIG Harry Warries Senior Consultant Mining Engineer MSc (Mining) MAusIMM Brett Gossage Manager - Geology B App Sc (Geol) MAusIMM Linton Kirk Manager - Mining BSc (Mining) MAusIMM MDM Engineering David Dodd Metallurgical Consultant BSc (Chem Eng) FFAIMM Date: October 2006 Job Number: PYOU07 Copies: Etruscan Resources Inc (2) RSG Global Perth (1) MDM Engineering (1) Primary Author Harry Warries Supervising Principal Richard Yeates P:\Projects\Etruscan Resources Inc\PYOU07_Youga_ Update\Report\pr_PYOU07_Youga_43-101_Oct06.doc

3 Table of Contents 1 Summary Introduction Location Ownership Geology Mineralisation Project Status Mineral Resources Mineral Reserves Development and Operations Financial Summary Conclusions and Recommendations Introduction and Terms of Reference Scope of the Report Principal Sources of Information Qualifications and Experience Independence Abbreviations Reliance on Other Experts Property Description and Location Background Information on Burkina Faso Geography Political System Legal System Economy Transport and Communications Project Location Tenement Area Tenement Description Permits Mineral Rights Exploration Permit Industrial Scale Exploitation Permit Royalties Accessibility, Climate, Local Resources, Infrastructure and Physiography Access Climate Physiography Local Resources and Infrastructure History Ownership History Exploration History Resource History Production History Geological Setting Regional Geology Project Geology Deposit Types Mineralisation Exploration Exploration and Development Strategy Project Management Data Reliability...29 Youga Gold Project

4 10.4 Interpretation of Results Drilling Introduction Reverse Circulation Drilling Ashanti Etruscan Diamond Core Drilling Ashanti Etruscan Drilling Results Drilling Orientation Drilling Quality Ashanti Etruscan Sampling Method and Approach Soil Sampling Trench Sampling Incanore Ashanti Etruscan Reverse Circulation Drill Logging and Sampling Procedures Ashanti Etruscan Diamond Core Logging and Sampling Procedures Core Logging Core Sampling Sample Recovery Sample Quality Sample Preparation, Analysis and Security Sample Security Ashanti Etruscan Sample Preparation and Analytical Procedures Analabs/Bondar Clegg - Incanore ITS Ouagadougou Ashanti Exploration SGS Tarkwa in Ghana Ashanti Exploration SGS Tarkwa in Ghana Etruscan Exploration SGS Lakefield in Canada Etruscan Umpire Assays Adequacy of Procedures Data Verification Analytical Quality Control Standards Blanks Duplicate Data - A2 Main/East and A2 West Duplicate Data - A2 West 2 and Comparison of Data Types Trench versus Drilling Ashanti versus Etruscan Data Verification Data Quality Summary Survey Control Bulk Density Determinations Adjacent Properties Mineral Processing and Metallurgical Testing Metallurgical Testing Testwork History Ore Mineralogy Metallurgical Sampling Comminution Testwork Metallurgical Testwork...60 Youga Gold Project

5 16.2 Mineral Processing Mineral Resources and Mineral Reserves Mineral Resources Geological Modelling Statistical Analysis Variography Block Modelling Grade Estimation Resource Classification Resource Statement Mineral Reserves Additional Requirements for Reports on Development Properties and Production Properties Mining Mining Approach Geotechnical Input Hydrogeology and Hydrology Input Contract Mining Pit Optimisation Mine Design Mine Production Schedule Proposed Processing Operations Primary Crushing Secondary and Tertiary Crushing Crushed Ore Stockpile Milling Gravity Concentration Carbon in Leach Tailings Acid Wash and Elution Carbon Regeneration Electrowinning and Gold Recovery Reagents Air Supply Process Water Raw Water Supply Potable Water Supply Tailings Management Infrastructure Personnel Markets Contracts Environmental Considerations Legislative Background Organisation of the Study Baseline Survey Taxes, Duties and Royalties Inflation and Exchange Rates Capital Cost Estimates Initial Fixed Capital Costs Working Capital Deferred Capital Costs Operating Costs Economic Analysis Project Economics Sensitivity Analysis Project Implementation Critical Drivers Construction Strategy Taxes & Permits Health and Safety Risk Assessment Other Relevant Data and Information Youga Gold Project

6 20 Interpretation and Conclusions Recommendations References Date Illustrations Youga Gold Project

7 List of Tables Table 1.7_1 Resource Summary... 2 Table 1.8_1 Mineral Reserves... 3 Table 1.10_1 Life of Mine Operating Costs... 5 Table 1.10_2 Summary Base Case Cashflow Model... 6 Table 2.5_1 List of Abbreviations Table 4.3_1 Geographic co-ordinates of the Youga Exploitation Permit Table 6.2_1 Summary Previous Exploration Activities (1991 to 1999) Table 6.3_1 Ashanti 1997 Resource Estimate : Grade Tonnage Tabulation Table 10.2_1 Summary of Contractors and Consultants Table 11.1_1 Drilling Statistics by Company and Drill Method Table _1 Ashanti Submitted Gold Gannet Standards Table _2 Etruscan Submitted Gold Rocklab Standards A2 Main/East and A2 West Table _3 Etruscan Submitted Gold Rocklab Standards A2 West 2 and Table 14.1_3 Ashanti DDH Pulp Duplicates by Laboratory Table _2 Summary Statistics Ashanti versus Etruscan Assay Table _1 Summary Statistics RC Field Duplicates Table _2 Summary Statistics DDH Field Duplicates Table _3 Summary Statistics Trench Field Duplicates Table _4 Summary Statistics RC Repeats Table _5 Summary Statistics DDH Repeats Table _6 Summary Statistics Trench Repeats Table 14.2_1 A2 Main/East Deposit Composite Summary Statistics Grouped by Data Type Table 14.2_2 A2 Main/East Deposit Declustered Summary Statistics by Data Type Table 14.2_3 A2 Main/East Deposit Summary Statistics Grouped by Company and Data Type Table 14.3_1 Resource Database - Drilling Statistics by Company and Drill Method Table 14.6_1 A2 Main/East and A2 West 1 Deposit - Density by Weathering Table 14.6_2 A2 West 2 and 3 Deposits - Bulk Density by Horizon Table _1 A2 West 2 and 3 Deposits - Listing of Weathering Wireframe Coding Table _2 A2 West 2 and 3 Deposits - Listing of Mineralised Domain Wireframe Coding Table _1 A2 Main/East Deposit - Summary Statistics Grouped by Domain Table _2 A2 Main/East Deposit - Summary Statistics Grouped by Oxidation Table _3 A2 Main/East Deposit - Summary Statistics Grouped by Weathering Table _4 A2 Main/East Deposit - High Grade Cuts and Summary Statistics : 3m Composites (gold g/t) Table _5: A2 West Deposit - Summary Statistics Grouped by Domain Table _6 A2 West Deposit - Summary Statistics Grouped by Oxidation Table _7 A2 West Deposit - Summary Statistics Grouped by Weathering Table _8 A2 West Deposit - Summary of High Grade Cuts : 3m Composites (gold g/t) Table17.1.2_8 : A2 West Deposits 2 and 3 Deposits - Statistics Grouped by Mineralised Horizon Table _9 A2 West Deposits 2 and 3 Deposits - Summary Statistics Grouped by Drill Type Table _10 A2 West and 3 Deposit - Summary Statistics Grouped by Weathering Table _11 A2 West Deposits 2 and 3 Deposits - High Grade Cuts : 3m Composites (gold g/t) Table _1 A2 Main/East Deposit Domain 1 Variogram Models Table _2 A2 Main/East Deposit Domain 2 Variogram Models Table 171.3_3 A2 Main/East Deposit Domain 3 Variogram Models Youga Gold Project

8 Table _4 A2 Main/East Deposit Domain 4 Variogram Models Table _5 A2 West 1 Deposit Variogram Models Table _6 A2 West 2 and 3 Deposits Variogram Models Table _1 Youga A2 Main/East Deposit : Block Model Parameters Table _2 Youga West 1 Deposit: Block Model Parameters Table _3 A2 West 2 and 3 Deposits: Block Model Parameters Table _1 A2 Main/East Deposit - Sample of Search Parameters Table _3 A2 Mean/East Deposit Block versus Composite Grade Comparison Table _4 A2 West 1 Deposit - Sample of Search Parameters Table _5 A2 West 1 Comparison of Block Model Mean Grades with Input Composite Grades Table _6 A2 West 2 and 3 Deposits - Sample of Search Parameters Table _8 A2 West 2 and 3 Deposits Comparison Block versus Composite Grade Table _1 A2 Main/East Deposit : Confidence Levels of Key Criteria Table _2 A2 Main/East Deposit : Resource Categorisation Coding Table _3 A2 West 1 Deposit: Confidence Levels of Key Criteria Table _4 A2 West 1 Deposit: Resource Categorisation Coding Table _5 A2 West 2 and 3 Deposits: Confidence Levels of Key Criteria Table _1 Mineral Resource Summary Table 17.2_1 Mineral Reserve Summary Table 17.13_2 Reserve Classification Comparison Table _1 Summary PW Tender Contract Mining Submission Table _1 Summary Source of Main Input Parameters Table _2 Summary Mining Operating Costs Table _3 Summary Whittle Four-X Input Parameters Table _1 Summary Material Breakdown by Pit Design Table _1 A2 Main Material Breakdown by Pit Stage Table _2 Summary Mine Production Schedule Table _1 Summary Initial Capital Costs Table _1 Summary Deferred Capital Costs Table _2 Summary Deferred Capital Costs for the TSF Construction Table 18.12_1 Life of Mine Operating Costs Table _1 Summary Base Case Cashflow Model Table _1 Summary Sensitivity Analysis - Gold Price Table _2 Summary Sensitivity Analysis Capital and Operating Expenditure Youga Gold Project

9 List of Figures Figure 4.2_1 Location Plan of the Youga Gold Project Area Figure 6.3_1 Ashanti Deposit Areas Location Plan Figure 12.2_1 Photograph of a Trench at the Main/East Deposit Plate 12.4_1 Photograph of Youga Core Farm Facilities Figure 12.4_2 Photograph of Sampled Diamond Drill Core Figure _1 Ashanti Exploration Gannet Standard STD Figure _2 Ashanti Exploration Gannet Standard STD Figure _3 Etruscan Rocklab Standard OxE Figure _4 Etruscan Rocklab Standard SH Figure _5 Etruscan Rocklab Standard SJ Figure _6 Etruscan Rocklab Standard OxE Figure _1 Ashanti Blanks Control Plot Figure _1 QC Statistics - Ashanti RC Field Duplicates Figure _2 QC Statistics - Ashanti ¼ Core Field Duplicates Figure _3 QC Statistics - Ashanti ¼ Core Field Duplicates ITS Data Figure _4 QC Statistics - Ashanti Trench Field Duplicates Figure _5 QC Statistics - Etruscan DD Field Duplicates Figure _6 QC Statistics - Etruscan Trench Field Duplicates Figure _7 QC Statistics - Ashanti Pulp Duplicates Combined Dataset Figure _8 QC Statistics - Ashanti Pulp Duplicates ITS Dataset Figure _9 QC Statistics - Ashanti Pulp Duplicates SGS Dataset Figure _10 QC Statistics - Ashanti Pulp Duplicates SGS Dataset Figure _11 Ashanti versus Etruscan Assaying A Figure _12 QC Statistics Etruscan Umpire Assaying Figure 14.2_1 Plan Displaying 3m Composites Coloured by Data Type Figure 14.2_2 QQ Plot Drillhole versus Trench Data Figure 14.2_3 QQ Plot Drillhole versus Trench Data Figure 14.2_4 Plan Displaying 3m Composites Coloured by Company Figure 14.2_5 Comparative Statistics Ashanti versus Etruscan Diamond Drilling Figure 14.6_1 A2 Main Bulk Density by Elevation Figure _1 Sectional View of Oxidation Coding of Drillholes Figure _2 Typical Cross Section of the Weathering Wireframes and Drillholes Figure _3 Domains Defined - Plan View Figure _4 3D View (looking West) of the Interpreted Mineralised Domains and Drilling Figure _5 Domains Defined Typical Cross Section : N Figure _6 A2 Main/East High Grade Domain 1 Long Section of Grided Gold Grades Figure _7 Domains Defined - Plan View Figure _8 Typical Cross Section Domains Defined : E Figure _9 A2 West 2 and 3 - Typical Cross Section of the Weathering Wireframes and drillholes Figure _10 A2 West Deposits 2 and 3 - Domains Defined - Plan View Figure _11 A2 West 2 and 3 -Typical Cross Section Domains Defined : Figure _1 A2 Main/East Deposit - Domain 1 Log Probability Plot 3m Composites Au (g/t) Figure _2 A2 Main/East Deposit - Log Probability Plot - 3m Gold (g/t) Drillhole Composites Grouped by Oxidation Figure _3 A2 Main/East Deposit - Plan of Domain 1 Highlighting the Distribution of High-Grade Composites (>30g/t) Youga Gold Project

10 Figure _4 A2 Main/East Deposit - Mean Standard Deviation Plots - 3m Composites Au (g/t) : Domain Figure _5 A2 West Deposits 2 and 3 - Drilling Types - Plan View Figure _1 A2 Main/East Deposit - Domain 1 Variogram Scans for 1.66g/t Indicator Threshold Figure _1 A2 Main and A2 East; Au Price vs Mill Feed : Based on Measured and Indicated Resources only Figure _2 A2 West 1: Au Price vs Mill Feed : Based on Measured and Indicated Resources only Figure _3 A2 West 2; Au Price vs Mill Feed : Based on Measured and Indicated Resources only Figure _4 A2 West 3: Au Price vs Mill Feed : Based on Measured and Indicated Resources only Figure _1 Youga Gold Project Site Plan Figure _1 Summary Total Material Movement by Pit Figure _2 Summary Mill Feed Schedule Figure 18.5_1 Project Organisational Chart Youga Gold Project

11 List of Appendices Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Listing of Significant Mineralised Intersections for the A2 West 2, 3 and 4 Deposits A2 West 2 and 3 Quality Control Plots Statistical Plots Variogram Plots Detailed Mining Cost Summary Detailed Pit Optimisation Results : A2 Main/East Appendix 7 Detailed Pit Optimisation Results : A2 West 1 Appendix 8 Detailed Pit Optimisation Results : A2 West 2 Appendix 9 Detailed Pit Optimisation Results : A2 West 3 Youga Gold Project

12 1 SUMMARY 1.1 Introduction RSG Global Consulting Pty Ltd (RSG Global) and MDM Engineering (formerly known as MDM Ferroman) have been commissioned by Etruscan Resources Inc. (Etruscan) to prepare an update to the technical report Youga Feasibility Study Report, Youga Gold Project, Burkina Faso, West Africa dated January 2005 and submitted to SEDAR on 10 February This update pertains to the three original deposits A2 Main, A2 East and A2 West 1 as described in the abovementioned report, and two additional deposits, namely A2 West 2 and A2 West 3. This report is to comply with disclosure and reporting requirements set forth in National Instrument , Companion Policy CP, and Form F Location The Youga Exploitation Permit is situated in the province of Boulgou, Burkina Faso, West Africa, about 180 kilometres southeast of Ouagadougou, the capital city and near the border with northern Ghana. 1.3 Ownership Etruscan Resources Incorporated, of Halifax, Canada, through a wholly-owned Cayman Islands subsidiary, owns 90% of Burkina Mining Company S.A. (BMC) that has been granted an exploitation permit to develop and mine the Youga Gold Project (Youga) in southern Burkina Faso, West Africa. The remaining 10% interest in BMC is held by the government of Burkina Faso. 1.4 Geology The Youga Gold Project straddles an outlier of epiclastic Tarkwaian sediments that unconformably overly Upper Birimian Series volcanics, volcaniclastics and sediments of the Bole-Navrongo Belt, which extends across northwestern Ghana into southern Burkina Faso. The Tarkwaian outlier at Youga is dominated by a succession of arkosic sandstones, comprised of quartz and feldspar in roughly equal proportions. The arkoses are intercalated with thin subordinate polymitic matrix supported conglomerate horizons manifest as chlorite schists, often accompanied by carbonate alteration. 1.5 Mineralisation Mineralisation is preferentially developed within the arkosic sequences. Structural controls to mineralisation may superficially relate to a dextral dilational jog in a major 070º structure represented by the A2 West 2, 3 & 4 mineralised zones, continuing on the same orientation to the northeast as a structure defined by intense carbonate alteration developed within Birimian phyllites to the east of the A2 Main-A2 East deposits. The sulphide content is extremely low (usually <1%), comprising pyrite, pyrrhotite, arsenopyrite and trace galena. The style of mineralisation is distinctly brittle in character, represented by irregular fracturing, quartz veining and occasional brecciation. Youga Gold Project Page: 1

13 1.6 Project Status The total project financing requirement of US$53.0 million has been estimated, which will be funded with a mix of equity and debt. A $28.5 million debt facility is in place with FirstRand and Macquarie Bank, which was supplemented with the equity raised in the 2 nd quarter of GBM Projects Limited of London, UK has been retained to complete the detailed design engineering of the processing plant and this is currently approximately 95% complete. Site construction is currently ramping up with the earthworks and placement of the concrete foundations currently underway. GBM is also providing construction management services. PW Mining has been retained to carry out all mining work. It is anticipated that project construction will be completed in the 2 nd quarter of Mineral Resources The most recent resource estimate for A2 Main, A2 East and A2 West 1 was completed by RSG Global in January In addition, resources for A2 West 2 and 3 deposits were estimated in May The resource estimates are discussed in detail in Section 17 of this report. A summary of the Mineral Resources reported at a 1.0g/t cutoff, for all Youga deposits, is provided in Table 1.7_1 below. Table 1.7_1 Combined A2 Main/East and West Deposits Grade Tonnage Tabulation Combined Multiple Indicator Kriging and Inverse Distance Squared Estimates Measured Indicated Measured + Indicated Inferred ktonnes Au g/t kozs ktonnes Au g/t kozs ktonnes Au g/t kozs ktonnes Au g/t kozs A2 Main/East Deposit 2, , , , A2 West 1 Deposit A2 West 2 Deposit , A2 West 3 Deposit Combined 4, , , , The estimation and classification of the resources are in accordance with the criteria set out in the Canadian National Instrument Standards of Disclosure for Mineral Projects of December 2005 (the Instrument) and the classifications adopted by CIM Council in November The reported resources are also consistent with the Australasian Code for the Reporting of Identified Mineral Resources and Ore Reserves of December 2004 (the Code) as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Minerals Council of Australia (JORC). Youga Gold Project Page: 2

14 1.8 Mineral Reserves The Mineral Reserves that were determined for the Youga Project are summarised in Table 1.8_1 below. Deposit Table 1.8_1 Mineral Reserves Proven Probable Total Tonnes Grade Insitu Au Tonnes Grade Insitu Au Tonnes Grade Insitu Au [Mt] [g/t] [koz] [Mt] [g/t] [koz] [Mt] [g/t] [koz] A2 main A2 East A2 West A2 West A2 West Total This reserve estimate has been determined and reported in accordance with Canadian National Instrument , Standards of Disclosure for Mineral Projects of December 2005 (the Instrument) and the classifications adopted by CIM Council in November Furthermore, the reserve classifications are consistent with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the Code) as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Minerals Council of Australia (JORC). 1.9 Development and Operations During 2005, Etruscan financed and carried out initial mine development work at Youga, including the upgrading of the 30km main access road from the Town of Zabre to the mine site, terracing and compaction of the mine site, surveying and clearing of the 11km long water pipe line route from the site to the year round water supply at the Nakambé River and upgrading of camp and air strip infrastructure. Certain long lead items were also purchased or ordered, including an Allis Chalmers ball mill from the Louvicourt Mine in Val d'or, Quebec. In 2006, the detailed design was launched with GBM in the United Kingdom and the majority of the long-lead mechanical, electrical and structural steel orders placed. The plant site has been fully prepared and the placement of the concrete foundations is currently underway. The mine village is also advancing. It is anticipated that project construction will increase in intensity in October 2006 with Project completion estimated to be in the 2 nd quarter of The project will produce an average of 86,000 ounces of gold per annum over a 6.5 year mine life. The plant is expected to treat 1.0Mtpa of ore. All ore and waste will be mined via conventional, open pit mining methods using a mining contractor. PW Mining has been awarded the mining contract at Youga. Youga Gold Project Page: 3

15 The operation is planned to utilise selective mining techniques to separate ore and waste. The main mine production equipment selected for the Youga Project includes a 265t back hoe excavators and off-highway haul trucks with a payload capacity of 92t. Provision has been made for drilling and blasting from surface. The treatment plant flowsheet is based on a single ROM bin and three stage crushing, with a mill feed stockpile. A gravity concentration stage is required, consisting of a centrifugal gravity concentrator, with the final gravity concentrate produced on a shaking table. Milled ore will be processed in a conventional leach/cil circuit consisting of a pre-leach tank followed by a series of five CIL tanks. Testwork indicates that expected gold recoveries for the Youga deposits, based on the selected treatment route, will range from 93% to 94%. BMC will employ approximately 276 people throughout the operating phase of the project. Initially selected posts requiring specific skills or experience will be filled by expatriates. In addition to performing their job function, expatriate personnel will be expected to transfer knowledge and expertise in order to develop the capabilities of the national staff. In the longer term, it is anticipated that nationals of Burkina Faso will fill most operating and management positions within the company. In addition, the mining contractor will employ approximately 109 people for a total for the project of 385 personnel. Burkina Faso has neither the infrastructure nor the capacity to supply power to the Youga plant. This has necessitated the supply of power from the Ghanaian grid, namely the Volta River Authority. For the purposes of the study, a new 15km power line running between Zebila and the Youga site has been costed, as well as the associated transformers and switchgear to supply power to the plant. The project has a peak continuous power demand of approximately 8.5MW with an installed power capacity of 11.05MW. The primary source of raw water will be the Nakambé River. The raw water will be pumped to a raw water storage pond located close to the plant and used to supply water to the plant, as well as supplying the process water tank to supplement the tailings dam water supply when the process water dam runs low. Potable water will be supplied to the plant and camp sites from boreholes. This water will be passed through a UV light sterilization system to kill biological organisms before it is stored for distribution to the camp and plant Financial Summary Etruscan has prepared a financial model to evaluate the economics of the project. The model is presented as an equity model assuming 100% equity financing. No allowance has been made in the model for the effects and levels of debt financing available or required. Accordingly, no hedging of the gold price is assumed. Operating costs are anticipated to be $24.40/t milled as shown in Table 1.10_1. Youga Gold Project Page: 4

16 Item Table 1.10_1 Life of Mine Operating Costs Value [M$] Unit Cost [$/t milled] Mining Costs Treatment Costs On Site General and Administration Costs Total This equates to a direct operating cost of $301/oz of gold. The total cash cost, including the 3% royalty payable to the State of Burkina Faso, are estimated at $317/oz over the life of mine. The results of the model are presented in Table 1.10_2 on the basis of the assumptions applied as follows:- Gold price of US$525 per troy ounce. Discount rate of 10% Etruscan has concluded that the base case life-of-mine cashflows are completely sheltered from Burkina Faso corporate income taxes given the significant amount of sunk exploration costs, acquisition costs and capital costs. The principal results of the financial evaluation are as follows:- Internal Rate of Return 31% Net Present Value at 10% US$30.7 Million Initial Capital Investment US$46.0 Million (Including working capital) Net Cashflow US$66.7 Million Sensitivity studies have been undertaken on the financial model for the following scenarios:- Gold Price ± $50/oz, ranging from $400/oz to $1,000/oz, Operating Costs ± 20% in 10% increments. Initial Capital Costs ± 20% in 10% increments. Initial capital and opex ± 20% in 10% increments. The sensitivity analysis showed that the Project is most sensitive to a change in Au price. This is a common phenomenon where the parameters that affect the revenue will have the greatest impact on a project, with a change in the Au grade or processing recovery exhibiting a similar result as shown for the gold price. A 5% change in the Au price resulted in an approximate 28% change in the Net Present Value (NPV). Youga Gold Project Page: 5

17 Table 1.10_2 Summary Base Case Cashflow Model Item Construction Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Total Open Pit Mining Schedule: Ore Mined 66, ,000 1,015,000 1,059,000 1,909,000 1,667,000 6,620,000 Overburden & waste 1,153,000 6,080,000 7,710,000 8,222,000 7,064,000 4,110,000 34,339,000 Total Material Mined 1,219,000 6,984,000 8,725,000 9,281,000,8,973,000 5,777,000 40,959,000 Strip ratio Ore Processing Schedule: Ore milled 970,000 1,015,000 1,009,000 1,025,000 1,026,000 1,020, ,000 6,662,000 Contained grade in gm Recovered ozs 81, ,180 93,846 90,567 80,408 60,095 27, ,698 Stockpile Movement: To Stockpile Tonnes 65,871 49, , ,622 1,993,970 Grade From Stockpile Tonnes 65, ,783 1,020, ,873 1,993,970 Grade Gold Production Schedule (Ounces): Recovered gold - oz 81, ,180 93,846 90,567 80,408 60,095 27, ,698 Cumul. recovered gold - oz 81, , , , , , ,698 0 Gold Ounces Paid 99.85% 81, ,015 93,705 90,431 80,288 60,004 27, ,881 Revenue: Ounces sold forward $ Ounces sold spot $525 81, ,015 93,705 90,431 80,288 60,004 27, ,881 - Revenues 42,874,000 57,758,000 49,195,000 47,476,000 42,151,000 31,502,000 14,581, ,537,000 - Refining & Freight $ , , , , , , ,000 2,359,000 - Royalty to Government of Burkina Faso 3.00% 1,276,000 1,718,000 1,464,000 1,413,000 1,254, , ,000 8,496,000 Net Revenue: 41,244,000 55,563,000 47,324,000 45,671,000 40,549,000 30,305,000 14,026, ,682,000 Production Costs: - Mining Cost $ ,838,000 17,531,000 19,703,000 20,050,000 13,735, , ,000 86,274,000 - Process Cost $ ,212,000 8,096,000 8,068,000 8,104,000 8,084,000 8,096,000 5,186,000 53,846,000 - G&A - on site $ ,240,000 3,224,000 3,216,000 3,196,000 3,020,000 3,040,000 2,488,000 21,424,000 Total Operating Costs $ ,290,000 28,851,000 30,987,000 31,350,000 24,839,000 12,054,000 8,173, ,544,000 Unit Operating Costs Operating costs per recovered oz Royalties payable per recovered oz Cash cost per recovered oz Cash Cost (including royalties) per tonne processed Operating Profit 15,954,000 26,712,000 16,337,000 14,321,000 15,710,000 18,251,000 5,853, ,138,000 Capital Investment: Initial capital -43,900,000-43,500,000 Sustaining capital -1,944,000-1,036, , , , , ,000-6,065,000 Working Capital # of days 30-2,080,000 2,080,000 0 Salvage % Plant 20% 3,490,000 3,490,000 Total Capital Cost -45,980,000-1,944,000-1,036, , , , ,000 1,930,000 3,490,000-46,476,000 Net cashflow before income taxes and debt service -45, 980,000 14,010,000 25,676,000 15,473,000 13,489,000 15,054,000 17,667,000 7,783,000 3,490,000 66,662,000 Cumulative net cashflow before taxes and interest -45, 980,000-31,970,000-6,294,000 9,179,000 22,668,000 37,722,000 55,389,000 63,172,000 66,662,000 Youga Gold Project Page: 6

18 1.11 Conclusions and Recommendations The results of this September 2006 update to the January 2005 Feasibility Study confirm the economic viability of exploiting the Youga Gold Deposit. Based on a gold price of US$525/oz, the project returns a net cashflow of US66.7 million and a base case NPV of US$30.7 million, using a 10% real discount rate. Detailed design engineering of the processing plant is currently approximately 95% complete and the site construction phase has commenced. It is anticipated that Project construction will be completed in the 2 nd quarter of Youga Gold Project Page: 7

19 2 INTRODUCTION AND TERMS OF REFERENCE 2.1 Scope of the Report RSG Global Consulting Pty Ltd (RSG Global) and MDM Engineering (formerly known as MDM Ferroman) have been commissioned by Etruscan Resources Inc. (Etruscan) to prepare an update to the technical report Youga Feasibility Study Report, Youga Gold Project, Burkina Faso, West Africa dated January 2005 and submitted to SEDAR on 10 February This update pertains to the three original deposits A2 Main, A2 East and A2 West 1 as described in the abovementioned report, and 2 additional deposits, namely A2 West Zone 2 and A2 West Zone 3. This report is to comply with disclosure and reporting requirements set forth in National Instrument , Companion Policy CP, and Form F1. The report complies with Canadian National Instrument , for the Standards of Disclosure for Mineral Projects of December 2005 (the Instrument) and the resource and reserve classifications adopted by CIM Council in November The report is also consistent with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the Code) as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Mineral Council of Australia (JORC). Furthermore, this report has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports of 2005 (the Valmin Code) as adopted by the Australasian Institute of Mining and Metallurgy (AusIMM). The satisfaction of requirements under both the JORC and Valmin Codes is binding on the author as a Member of the Australasian Institute of Mining and Metallurgy. All monetary amounts expressed in this report are in United States of America dollars (US$) unless otherwise stated. 2.2 Principal Sources of Information In addition to site visits undertaken to the Youga Gold Project, the authors have relied extensively on information compiled as a result of the Bankable Feasibility Study (BFS) on the Youga Gold Project which was completed in January The BFS has been developed by a number of key parties with specialist competencies as follows:- MDM Engineering (MDM) has provided the overall study management and strategy. MDM for plant and infrastructure design costing and the production of the final comprehensive document. RSG Global of Australia for geologic modelling, resource and reserve estimates, mine design, scheduling and costing. Youga Gold Project Page: 8

20 Etruscan Resources of Canada for legal and permitting advice. SGS (Ghana) has updated the EIA they completed for the Ashanti study. Mintek has performed all of the metallurgical testwork on the Youga samples. Orway Mineral Consultants (OMC) has given mill sizing and selection data based on testwork done by Mintek. Digby Wells and Associates (DWA) has completed the site geotechnical investigation and the tailings dam design. Golders and Associates has completed the mine geotechnical assessment and recommended the pit slope angles for mine design. 2.3 Qualifications and Experience RSG Global is an integrated Australian-based consulting firm, which has been providing services and advice to the international mineral industry and financial institutions since RSG Global has maintained a fully operational office at Accra in Ghana since 1996, providing an operational base for consulting and contracting assignments throughout the West African region. An additional African office was established in Johannesburg, South Africa, in 1999 to support expanding activities within southern and eastern portions of the continent. In September 2006 RSG Global was purchased by Coffey International Limited (Coffey), which is a highly respected Australian-based international consulting firm specialising in the areas of geotechnical engineering, hydrogeology, hydrology, tailings disposal, environmental science and social and physical infrastructure. Coffey has offices located throughout Australia, several Southeast Asian countries, South Africa and Dubai. The primary author of this report is Mr Harry Warries, who is a professional mining engineer with 16 years experience in mine optimisation, design, scheduling, cost estimation and cashflow analysis. He is a Principal Consultant with RSG Global and a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Warries has the appropriate relevant qualifications, experience and independence to be considered an Expert as defined in the Australasian JORC Code and a Qualified Person as defined in Canadian National Instrument Mr Harry Warries prepared the mining study, including pit optimisation studies used to derive the reserve estimates stated in this report. Mr Warries has not visited the Youga Gold Project. The other primary author of this report is Mr David Dodd, who is a process engineer with 31 years experience as an extractive metallurgist, including 16 years experience throughout the West African region. Mr Dodd is a metallurgical consultant of MDM Engineering and a Fellow of the South African Institute of Mining and Metallurgy (SAIMM), and has the appropriate relevant qualifications, experience and independence to be considered a Qualified Person as defined in Canadian National Instrument Mr Dodd has visited the Youga Gold Project once in Youga Gold Project Page: 9

21 Mr Richard Yeates, is a professional geologist with 24 years experience in the exploration and evaluation of mineral properties internationally, including 12 years experience throughout the West African region. Mr Yeates is Principal of RSG Global and a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and the Australian Institute of Geosciences (AIG), and has the appropriate relevant qualifications, experience and independence to be considered a Qualified Person as defined in Canadian National Instrument Mr Yeates has visited the Youga Gold Project on two occasions, the most recent of which was in The resource estimates referred to in this report, along with an assessment of analytical data, QC and data verification, were prepared by Mr Brett Gossage, who is a professional geologist with 17 years experience in mining geology and the geostatistical estimation of mineral resources. He is Manager of the firm s Resource Division. Mr Gossage is also a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and has the appropriate relevant qualifications, experience and independence to be considered an Expert as defined in the Australasian JORC Code and a Qualified Person as defined in Canadian National Instrument Mr Gossage has not visited the Youga Gold Project. The mining study used to derive the reserve estimates stated in this report was coprepared by Mr Linton Kirk, who is a professional mining engineer with 23 years experience in mining. He is Manager of the firm s Mining Division and a Member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Kirk has the appropriate relevant qualifications, experience and independence to be considered an Expert as defined in the Australasian JORC Code and a Qualified Person as defined in Canadian National Instrument Mr Kirk has visited the Youga Gold Project in Independence Neither RSG Global or MDM, nor the authors of this report, have or have had previously any material interest in Etruscan Resources Inc or related entities or interests. Our relationship with Etruscan is solely one of professional association between client and independent consultant. This report is prepared in return for fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this report. 2.5 Abbreviations A full listing of abbreviations used in this report is provided in Table 2.5_1 below. Youga Gold Project Page: 10

22 Table 2.5_1 List of Abbreviations Description Description $ United States of America dollars kwhr/t kilowatt hours per tonne inches l/hr/m 2 litres per hour per square metre µ microns LM2 Labtechnics 2kg (nominal) pulverising mill 3D three dimensional M million AAS atomic absorption spectrometry m metres AMC Australian Mining Consultants Ma thousand years Au gold MIK Multiple Indicator Kriging bcm bank cubic metres ml millilitre mm millimetres CC correlation coefficient MMI mobile metal ion cfm cubic feet per minute Moz million ounces Mtpa million tonnes per annum CIC carbon in column N (Y) northing CIL carbon-in-leach NaCN sodium cyanide cm centimetre NATA National Association of Testing Authorities cusum cumulative sum of the deviations NPV net present value CV coefficient of variation NQ 2 size of diamond drill rod/bit/core ºC degrees centigrade DTM digital terrain model OK Ordinary Kriging E (X) easting oz troy ounce EDM electronic distance measuring P80-75µ 80% passing 75 microns EV expected value PAL pulverise and leach g gram ppb parts per billion g/m 3 grams per cubic metre ppm parts per million g/t grams per tonne of gold psi pounds per square inch HARD half the absolute relative difference PVC poly vinyl chloride HDPE high density poly ethylene QC quality control HQ 2 size of diamond drill rod/bit/core Q-Q quantile-quantile hr hours RAB rotary air blast HRD half relative difference RC reverse circulation ICP-MS inductivity coupled plasma mass spectroscopy RL (Z) reduced level ID Inverse Distance weighting ROM run of mine ID 2 Inverse Distance Squared RQD rock quality designation IPS integrated pressure stripping RSG RSG Global IRR internal rate of return SD standard deviation ISO International Standards Organisation SG Specific gravity ITS Inchcape Testing Services SGS Société Générale de Surveillance kg kilogram SMU simulated mining unit kg/t kilogram per tonne t tonnes km kilometres t/m 3 tonnes per cubic metre km 2 square kilometres tpa tonnes per annum KP Knight Piésold Pty Ltd w:o waste to ore ratio kw kilowatts Youga Gold Project Page: 11

23 3 RELIANCE ON OTHER EXPERTS Neither RSG Global, MDM nor the authors of this report are qualified to provide extensive comment on legal issues associated with the Youga Gold Project and included in Sections 1 and 4 of this report. The assessment of data pertaining to these sections relies heavily on information provided by Etruscan, which has not been independently verified by RSG Global or MDM. Similarly, RSG Global, MDM nor the authors of this report are qualified to provide extensive comment on environmental and geotechnical issues associated with the Youga Gold Project and included in Section 18 of this report. The assessment of data pertaining to these disciplines relies heavily on information provided by Etruscan, which has not been independently verified by RSG Global or MDM. Youga Gold Project Page: 12

24 4 PROPERTY DESCRIPTION AND LOCATION 4.1 Background Information on Burkina Faso Geography The country of Burkina Faso covers 274,200km 2 of land and is located in West Africa. It borders six countries: Benin (306km), Côte d ivoire (584km), Ghana (549km), Mali (1,000km), Niger (628km) and Togo (126km). Its climate is tropical with the terrain mostly flat or undulating plains. The population was estimated at 13.5 million in 2004 with a population growth rate of 2.57% per year (2004 est.) Political System Burkina Faso was a French protectorate until 1960, when it became an independent republic. Under a 1977 Constitution, executive power in the country was vested in a president who was directly elected to serve a five-year term. The Constitution was suspended when the military seized power in November After several other coups during the 1980s, a new Constitution was approved by a national referendum in June This Constitution proclaimed the 4 th Republic of Burkina Faso and made it a democratic, unitarian and secular state. The President is elected by popular vote to serve a five-year term renewable once (as per a 2000 amendment to the 1991 Constitution) and appoints the Prime Minister with the consent of the National Assembly (as per a 2000 amendment to the 1991 Constitution). The Prime Minister is the head of the Government. The Parliament is composed of two sections: the National Assembly and the Chamber of Representatives. 111 members are elected by popular votes to the National Assembly for a five-year term. The last National Assembly election was held in May The representatives to the Chamber of Representatives are elected by indirect franchise for a three-year term and fulfil an advisory role. Multi-party voting was reintroduced in 1992, after all political parties had been banned in The current President is Blaise Compaoré last elected in November 1998 with 87.5% of the vote. Burkina Faso is divided into 45 administrative divisions Legal System The legal system is based on the French civil law system and customary law. The judicial system is independent, however, the Conseil supérieur de la magistrature whose mandate is to ensure the independence of judges, is headed by the President of the country. The 2000 amendment to the Constitution modified the highest tribunal, the Supreme Court, by creating four independent entities: Cour de cassation (appeal court), Conseil d Etat, Cour des comptes and Conseil constitutionnel. Youga Gold Project Page: 13

25 4.1.4 Economy Burkina Faso was ranked 173 rd on the Human Development Index in 2003 with a fragile economy due to a large external current account deficit, heavy dependence on external assistance and few export commodities. About 90% of the population is engaged in (mainly subsistence) agriculture (peanuts, shea nuts, sesame, sorghum, millet, corn, rice, and livestock). Cotton is the key export. The main industries in Burkina Faso other than cotton are beverage, agricultural processing, soap, cigarettes, textiles, and gold. In 2003, GDP was at US14.55 billion with a growth rate of 5.2%. Inflation was 1.9% in The currency is the Communauté financière africaine franc under the authority of the Central Bank of the West African States (BCEAO) Transport and Communications Ouagadougou is linked by a railway to a deep seaport at Abidjan (Côte d Ivoire). The seaport proposed for shipping equipment and construction material to site is the port of Tema in Ghana, and from there via road to the Youga site. The roads through Ghana to the Burkina Faso Border are generally in good repair, and the road inside Burkina Faso from the border to site is unpaved, but is in very good condition. Only a small number of the nation s roads are paved, but a major improvement scheme has been announced. The national airline, Air Burkina, Ghana Airways and the French airlines regularly serve Ouagadougou and Bobo Dioulasso. Road access through Togo, Ghana and Côte d Ivoire are the main routes to coastal ports. Burkina Faso s total power generation is million kwh (2001), with the majority of power being generated and used in the major cities of Ouagadougou and Bobo Dioulasso. There is no national grid power in the Youga area. There is also no landline telephone service to the area, although there is limited cell service in the area of the exploration camp. There is no purified piped water to the Youga area. 4.2 Project Location The Youga Exploitation Permit is situated in the province of Nahouri, Burkina Faso, West Africa, about 180 kilometres southeast of Ouagadougou, the capital city. It is centred on 11º 04 North latitude and 00º 38 West longitude. 4.3 Tenement Area The Youga Exploitation Permit area is shown in Figure 4.2_1 and the geographic coordinates are presented in Table 4.3_ Tenement Description The Youga Exploitation Permit was granted to Burkina Mining Company S.A. (BMC) by Decree no \pres\pm\mce on April 8, 2003 and is valid for 20 years with fiveyear renewal periods. Burkina Mining Company S.A (BMC) is held 90% by Cayman Burkina Mines Ltd. and 10% by the State of Burkina Faso. Cayman Burkina Mines Ltd. is in turn held 100% by Etruscan Resources Inc. In Burkina Faso, exploitation permits encompass the right to enter and use the land covered by the exploitation permit and no specific surface rights agreements are required. Youga Gold Project Page: 14

26 Table 4.3_1 Geographic co-ordinates of the Youga Exploitation Permit Point A B C D E Co-Ordinate 00º West Longitude Ghana Border North Latitude 00º West Longitude 11º North Latitude 00º West Longitude 11º North Latitude West Longitude North Latitude West Longitude Ghana Border North Latitude 4.5 Permits Mineral Rights The State of Burkina Faso owns the title to all mineral rights. On May 8, 2003, the Government of Burkina Faso passed into law Order No /AN pertaining to the Mining Code of Burkina Faso (Mining Code) that is administered by the Ministry of Mines, Quarries and Energy. The Mining Code covers all aspects of mining from prospecting, exploring, mining, milling, processing and refining to the sale of mineral substances. The following permits and authorizations cover these activities:- Prospecting authorization; Traditional artisanal mining authorization; Exploration permit; Industrial scale exploitation permit; and Semi-industrial scale exploitation permit. The Mining Code provides that, prior to the issuance of an exploration or exploitation permit, the State of Burkina Faso and the future holder of the exploration or exploitation permit must sign a mining agreement (Mining Agreement) which must be approved by Cabinet and which will govern the relationship between the parties. This is accomplished by stating the rights and obligations of the parties and the legal, financial, fiscal, economic, administrative, customs and social conditions applicable to the exploration and exploitation phases of the mining project for the duration of the Mining Agreement. More particularly, the Mining Agreement for the exploitation phase states the level of participation of the State of Burkina in the exploitation company. Youga Gold Project Page: 15