Gold Hawk Resources Inc.

Transcription

1 Gold Hawk Resources Inc. A N N U A L R E P O R T2007

2 HIGHLIGHTS 2007 ECUADOR COLOMBIA N Attained commercial production on October 1, 2007 BIOX -Carbon In Leach gold recovery reached designed capacities Approached design specifications for recovery of silver, lead and zinc P E R U BRAZIL C O R I C ANCH A M I NE Processed 35,207 tonnes of ore for fi rst quarter of commercial production, yielding 765 tonnes zinc and 511 tonnes of lead concentrate Lima Pacific Ocean Completed 4,000 meters of underground development Hired/trained more than 600 personnel to operate the mine G O L D H A W K R E S O U R CES I N C. ANNU A L R E P O R T TSX VENTURE: C G K Established and maintain ongoing training programs in partnership with local educational institute Developed strong partnerships with the neighboring communities of San Mateo, San Antonio, Mayoc and Viso Created an indirect benefit to 5,000 people in the area of the mine Completed a $10 million bought deal private placement in August 2007 Discovered what may be the lower extension of the Constancia vein that is significantly wider than currently mined areas and open at depth OBJECTIVES 2008 Commission filter presses to increase mill throughput Commission Dense Media Separation plant to increase mill throughput and improve ore grades Develop and process higher grade ores Increase reserves through continued exploration of Constancia and Wellington veins Complete refinancing Develop access shaft between 3,140 meter and 3,640 meter levels to improve mine safety and productivity and reduce costs Pursue internal and external growth opportunities Permit the new tailings disposal area

3 07/08 1 Letter to Shareholders Gold Hawk Resources made a number of significant achievements in 2007 and first among these was attaining commercial production on the first of October with the revival of the historic Coricancha mine 90 kms east of Lima, Peru. The Company possesses a unique grouping of assets, with strengths in mine management, a balanced metal production base and tactical diversity with the technology the Company employs: Each member of the operating and executive team has more than 20 years of hands-on international experience in finance, operational efficiency, mine engineering and planning and government and community relations A precious metal rich polymetallic mine, Coricancha produces gold, silver, zinc and lead and thus provides some protection to commodity price fluctuations as compared to producers focused on single products The Coricancha processing facility includes flotation circuits for zinc and lead, a Pyrite/Arsenopyrite circuit, an Arsenopyrite float circuit and the only operating BIOX (bio-oxidation) circuit in the Americas to treat refractory sulphides and increase gold recovery from the Carbon In Leach circuit. In addition, the facility has a cyanide neutralization and treatment circuit for effluent and a new Dense Media Separation (DMS) plant is being readied for use Production from Coricancha reached an average of 382 tonnes per day (tpd) throughput in the fourth quarter ended December 31, 2007 Gold Hawk s first full quarter of commercial operations. A total of 35,207 tonnes of ore was processed, yielding 765 tonnes and 511 tonnes of zinc and lead concentrate, respectively. The concentrate grade of lead and zinc have been steadily improving since commercial production began, with an average zinc concentrate grade of 50.8 per cent and lead concentrate of 50.6 per cent in the fourth quarter. In the fourth quarter, 647 ounces of gold and 70,676 ounces of silver were produced at head grades of 2.66 grams per tonne of gold and 81 grams per tonne of silver. While gold recovery was below expectations for the fourth quarter, it has steadily improved. The average metallurgical recoveries for all four metals have improved since commercial production began and recoveries subsequent to the fourth quarter have improved significantly. A number of significant achievements leading up to commercial production were achieved including hiring and training 600 employees along with ongoing training to achieve productivity improvements. Strong financial support was evident in the completion of a $10 million bought deal financing in August 2007 and the solving of a number of start-up issues that arose as a result of equipment delays. In early 2008, Victor Rozon was appointed as Vice President Projects on Gold Hawk s management team. His present focus is to support the on-site management team at Coricancha in improving the performance of the BIOX circuit and final construction and commissioning of the DMS plant. The DMS plant, expected to be in operation by mid-june 2008, will reduce the waste rock (dilution) from the mine ore before it is processed, leading to increased concentration of metal-containing ore to be milled and a reduction in costs. REVENUE DISTRIBUTION BY METAL GOLD 24% SILVER 25% LEAD 24% ZINC 27% gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

4 2 GoLd hawk resources inc. annual report 2007 tsx venture: CGk Gold Hawk experienced some unforeseen challenges in 2007, with the most significant being a six-month delay in equipment delivery that shifted the production start-up to the fall of Some operational challenges in the fourth quarter resulted in a temporary delay in reaching the planned production of 600 tpd by year-end. The Company has recovered from these setbacks and rehabilitation work to allow access to higher grade production stopes is planned for completion during the second quarter of Coupled with the commissioning of the DMS plant, an increase in the mill feed grade is expected that will result in greater production of metals contained and lower overall costs. the tailings handling limitations, identified in november, temporarily constrained production in the latter part of the year and into as the plant throughput increased, the existing vacuum filter equipment used to remove water from the tailings before disposal was unable to handle the moisture content associated with the increased tonnage. the Company constructed a dyke in the tailings disposal area for short-term use and ordered two refurbished press filters for a permanent solution that are scheduled for installation in the second quarter of these timely and fiscally prudent solutions are examples of an effective management response to what could have been a two-year delay for new filters and a restriction on the Company s growth plans. in the fourth quarter of 2007, delays associated with two processes related to gold production caused some production losses as an air blower in the BioX circuit was out of service due to a mechanical failure of one of the units and the Arsenopyrite floatation circuit, used to separate Arsenopyrite and Pyrite, required new heat conditioning tanks. the BioX circuit and Arsenopyrite floatation circuit are now functioning as designed and are showing encouraging results in recovery rates. read more about the BioX (bio-organic) leaching process later in this report (see page 5). while we are proud of the many achievements of management and our employees in 2007 we continue to focus on making improvements by increasing head grades and production volume and increasing metal recovery. In 2008, the Company is investing in projects to unlock and deliver value to its shareholders: The largest planned capital expense is a vertical shaft project from the 3,140m base level to the 3,460m level of the Constancia vein to improve access for people and materials but even more importantly, reduce a number of safety risks. In addition, significant cost saving will be realized as a result of the shaft project as well as improved access to ore. Approximately 150 meters of exploration development on the 3,140m level in the Constancia vein in 2007 encountered what is believed to be its downward extension. Also, projecting this vein southward to the property boundary adds approximately 2,000 meters of potential strike length for future development. a diamond drill program is planned for the second half of 2008 to further explore this area. To date, no reserves or resources for this potential mineralized zone have been included in a Company technical report nor confirmed by a Qualified Person. There are 15 identified veins on the property and most of the mining and exploration has focused on Constancia and Wellington veins. The reported reserves are contained in only these two veins and resources are estimated for just seven veins. All the veins are open at depth and most along strike leaving potential for additional organic growth in future. Based on the current proven and probable mineral reserves and the projected production rate, the mine life is estimated to be approximately two years. However, since the mine initially commenced production in 1906, it has historically converted 100 per cent of inferred resources into proven and probable resources, which were in turn extracted. During 2008, the Company expects to mill 172,000 tonnes of ore and produce 15,000 ounces of payable gold, 600,000 ounces of payable silver, 6.1 million pounds of payable zinc and 6.0 million pounds of payable lead. These targets reflect the temporary constraints on throughput in the first half of 2008 due to tailing handling limitations as well as the expected increase during the second half of 2008 in the mill feed grade and greater production of metals contained when the DMS plant is online and the tailings handling limitations are removed. Looking beyond 2008, Gold Hawk s goal is to increase the mining rate to 900 tpd by 2009, which would increase our annual production forecast to 208,000 tonnes mill throughput annually. the growth catalysts to achieve this are increasing ore volume, improving ore grade and growing our reserves. the Company also continues to pursue acquisitions. in everything we do, our goal is to increase the efficiency of our operations to maximize shareholder returns. The Company presently employs more than 600 people, with the majority of the personnel coming from three local communities. Gold Hawk s many achievements, reached just 18 months after acquisition, are a result of these supportive communities and local and national government leaders, a noteworthy mill/mine combination that is the envy of many mining companies in the region and the efforts of the entire Gold Hawk team with their focused pursuit in making operational improvements. on behalf of the Board of directors and management, we would like to thank all of our employees for their hard work and dedication as well as our shareholders for their continued support. Colin k. Benner Chairman kevin C. drover President and Chief Executive Officer

5 3 PRODUCING IN PERU gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

6 4 Flow diagram of the BIOX Process Nutrients Concentrate BIOX reactors Cooling water Limestone Stock tank Air CCD wash thickeners Neutralization Deposit Wash water Residual Deposit GoLd hawk resources inc. annual report 2007 tsx venture: CGk Cyanidation and CIP

7 5 BIOX delivers value through improved gold recovery Gold Hawk is one of the few companies in the world licensed to use the gold recovery technology called BIOX (bio-oxidation) and the Company s circuit is the only one operating in the Americas. The BIOX process, which pre-treats refractory sulphides gold ores such as Pyrite, Arsenopyrite and Pyrrhotite, was developed to increase gold recovery rates during the metallurgical extraction process. The gold in these sulphide ores is encapsulated in sulphide minerals that prevent the gold from being leached by cyanide. The BIOX process destroys the sulphide minerals and exposes the gold for subsequent cyanidation, increasing recovery rates. Rights to the technology are currently held by Biomin Technologies SA, a subsidiary of Gold Fields Limited, the fourth largest gold producer in the world. How it works The process uses a combination of three bacteria that occur naturally, Acidithiobacillus ferroooxidans, Acidithiobacillus thiooxidans and Leptospirillum ferroxidans, to break down the sulphide mineral matrix in the ore being treated, thus freeing the occluded gold for subsequent cyanidation. The bacteria attach themselves to the metal sulphide surfaces in the ore, resulting in the accelerated oxidation of the sulphides. The BIOX process involves the continuous feeding of the Arsenopyrite/Pyrite (Aspy) flotation concentrate slurry to a series of bacterial leach tank reactors, each mechanically agitated and water cooled using cooling coils. Air is injected under the impellers for good air distribution. Low ph levels between 1.1 and 1.3, along with high slurry temperature between C, enhance the efficiency of the process. It is important that these parameters are controlled within these narrow ranges so as to maintain the right balance of bacteria in order to achieve the optimum rate of oxidation. As the oxidation reactions of sulphide minerals are exothermic, it is necessary to cool the tanks so as to maintain the slurry temperature within the optimum range. This is done by circulating cooling water and excess heat can also be removed via a cooling tower. Gold Hawk is installing a cooling tower in 2008 to enhance its process. The ph level is controlled by adding limestone or sulphuric acid to the slurry. Due to the usual nature of Gold Hawk s ore, limestone is the primary additive to achieve the correct ph level. Since direct sulphides oxidation requires high levels of oxygen, large volumes of air have to be injected and dispersed in the slurry. This is one of the main engineering challenges in the design of a full-scale bio-reactor. In addition, sufficient carbon dioxide is required for the bacteria to maintain cellular growth. This is obtained from the injected air as well as carbonate minerals. Should the latter be absent, limestone is added. The bacteria also require nutrients to sustain growth. Nitrogen, phosphorous and potassium are added to the primary reactors in various forms and quantities, depending on the composition of the concentrate being treated. The overall residence time in the bio-oxidation reactors, which is mainly a function of the mineralogy, typically varies between four to six days. Gold Hawk currently operates at a slightly longer residence time due to production throughput volume limitations. For an ore where the gold is locked mainly in Arsenopyrite, a shorter residence time is expected to achieve optimum gold liberation than with an ore where most of the gold is occluded in Pyrite. This is because the oxidation rate of Arsenopyrite is faster than that of Pyrite. Gold Hawk s feed concentrate is typically 60% Arsenopyrite and 30% Pyrite, with a minimum of four to six days needed for the latter. During the bacterial oxidation process, elements like iron, sulphur and arsenic are dissolved. After oxidation, the BIOX product is washed in a countercurrent decantation circuit and the solution is neutralized in a controlled two-stage process with limestone and/or lime. The precipitates formed meet environmental standards set in the United States and can be safely deposited onto tailings dams. The BIOX process is thus a non-polluting, environmentally clean means of treating refractory ore. To save water, the neutralized effluent can be mixed with flotation tailings and thickened and the overflow solution can be recycled as dilution water in the milling, flotation and BIOX sections of the plant. This makes the process ideally suited for arid regions. The washed BIOX product is treated in a Carbon-In-Leach (CIL) cyanidation plant from which the gold is finally recovered. Advantages While Gold Hawk had a number of challenges with its BIOX circuit during start-up in 2007, performance since has been exemplary with gold extraction from BIOX approaching 90%. The BIOX circuit has kept pace with the overall plant with a steady increase in throughput. The BIOX process has several advantages over conventional refractory processes such as roasting, pressure oxidation and nitric acid leaching. Advantages include: Improved rates of gold recovery Significantly lower capital costs Low running costs Robust technology that is suited to remote areas Environmentally friendly Ongoing process development and improvement through other licensees and Gold Fields gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

8 6 Investing in our communities gold hawk resources inc. annual REPORT 2007 TsX venture: CGK Gold Hawk and Compañía Minera San Juan are committed to assisting not only our employees and their families in reaching success but also contributing to the long-term prosperity for the culture, traditions and values of the communities in which we operate. We believe that the company, employees and the surrounding communities share responsibilities to accomplish this but also benefit directly from mutual cooperation. To this end, Gold Hawk, through Compañía Minera San Juan, has developed programs in consultation with employees, community leaders and government representatives to assist the communities to improve overall standard of living. These programs include, but are not limited to: a commitment to hire locally, to educate and train our employees for future positions of increasing authority and to purchase as many goods and services locally as is practical. Junta de Fomento One of the primary means to accomplish our goals is the creation a modern, hands-on employee relations focus through the formation of the Junta de Fomento, which is an organization to foster employee identification, longterm sustainable integration and channel funding and assistance to worthy community projects where interest and need exists. The Junta de Fomento is legally structured as a cooperative with a commercial orientation and it follows a blue print of success in other countries where this concept has been implemented. Every employee from the general manager to entry-level laborer has the equal right to be a member and each employee has the equal opportunity to contribute personal funds by payroll deduction to the fund. The company matches these funds to a pre-determined limit. At present, greater than 90% of employees participate in the Junta. This is the first project of its kind in Peru and something our Company is very proud of. The principle concepts are that: 1. While the company will provide oversight, the Junta is managed independently and its committees are elected by the membership to govern day-to-day operation. 2. The funds of the Junta are invested in projects that will return dividends to the workers. Investments will prioritize projects that are income-producing and preferably associated with ancillary support of the mining operations. 3. Additionally, funds for social programs directly contributing to the employee, family and community will be an essential component of the Junta s organization. Asociación Pro-Inversión de Huarochari An additional aspect of Gold Hawk s community support is the creation of the Asociación Pro-Inversión de Huarochari which is a non-profit association to act as a conduit for community support and assistance. This fund is financially supported by Compañía Minera San Juan and a portion of annual profits will be donated for its operation. The association has a steering committee comprised of community leaders who prioritize the projects to be undertaken. Projects are generally focused on health, education, community projects and related activities. Some of the immediate projects that will be supported by the association and Compañía Minera San Juan include: 1. Water project of the community of Viso a five kilometer irrigation project for crop creation and long-term support in the Altiplano; 2. Restoration of historic buildings (in Viso) that are recognized as national heritage structures; 3. Development of a feasibility study of a potential tourist centre and trout farm (San Antonio); 4. Development and improvement of medical outposts serving the highland communities; 5. Support and assistance to implementation of a community medical centre in San Mateo; 6. Reduce, with the goal of eradicating, illiteracy among workers and immediate family; 7. Pre-school health care for local community children; and, 8. Active participation in rehabilitation of local churches, community centres and public recreation facilities.

9 7 community gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

10 8 H E A L T H, S A F E T Y, AND THE ENVIRONMENT Health gold hawk resources inc. ANNUAL REPORT 2007 TsX venture: CGK ENVIRONMENT At Gold Hawk, the health and safety of all our employees, contractors and visitors to our operations as well as the environment in which we operate are of the highest priority. Gold Hawk is committed to providing and maintaining a safe and healthy working environment for its employees, visitors and all persons using the premises as a place of work. In 2007, the Company introduced comprehensive health and safety training programs for workers at the Coricancha mine. Our goal is to achieve safety excellence through the implementation of these programs and our adherence to the value that the safety and health of our people and sound environmental management must always come first. Our Health and Safety culture holds as a core belief that all accidents are preventable and all health hazards can be controlled with foresight, relevant training, positive attitude and sound engineering s u c c e s s e s : Implemented a 5-point Safety System 4,267 safety talks were held during the year (15-minute huddles) More than 1,000 hours of safety training conducted Continued improvement in Safety Awareness This annual was printed with environmentally friendly paper and ink, resulting in: 1,602 gal of water saved 330 lb net greenhouse emissions reduced 1,090 lb wood saved 2 trees saved 171 lb Landfill reduced 2,172,000 BTU energy reduced Safety A healthy and safe workplace benefits our Company and its employees. It is the policy of Gold Hawk to: 1) Clearly demonstrate management s full commitment to their employees health and safety; 2) Show employees that safety performance and business performance are compatible; 3) Clearly state the company s safety beliefs, principles, objectives, strategies and processes to build buy-in through all levels of the company; 4) Clearly outline employer and employee accountability and responsibility for workplace health and safety; and, 5) Set out safe work practices and procedures to be followed to prevent workplace injuries and illnesses. Gold Hawk has established a functional Health and Safety department with a mandate to promote compliance with the companies Health and Safety rules and regulations. All levels of supervision, including senior management, are held accountable for the health and safety of workers under their supervision. Responsibility includes ensuring that work areas and equipment are safe and that work practices are in compliance with established legislation, workplace practices and procedures. To protect their health and safety, workers must receive adequate specific work task training. Every employee must protect his/her health and safety and the health and safety of other workers by working in compliance with legislation and established workplace practices and procedures. Environment Gold Hawk is committed to operating its facilities in full compliance with international and local regulatory requirements through the implementation of good, sound environmental management plans. At Gold Hawk we believe that a strong environmental ethic is the cornerstone of our environmental management program.

11 9 SAFETY & HEALTH gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

12 10 reserves & Mineral Reserves & Resources gold hawk resources inc. annual REPORT 2007 TsX venture: CGK The table below summarizes the NI compliant mineral reserves and resources as at April 16, 2007 for the Coricancha mine. The methodology used in determining the mineral resource and mineral reserve estimate for the Coricancha project was reviewed by Gustavson Associates LLC and their opinion that the mineral resources and mineral reserves stated in the Technical Report are NI compliant. The metal prices assumed in the calculation are: $550 US$/oz Au, $10 US$/oz Ag, $0.40 US$/lb. Pb, $0.75 US$/lb. Zn and $0.80 US$/lb. Cu. The proven and probable reserves are sufficient for approximately two years of operations at the projected mining rates. However, like most narrow vein underground mines, the proven and probable reserves are limited due to the high development cost of drifting and raising to define new resource blocks. In most cases, a narrow vein mine would invest the capital to develop resource and/or reserve blocks two-to-three years ahead of production. Expanding the Proven and Probable reserves beyond two-to-three years is a balance between the need for increased mineral reserves and the cost of developing these reserves beyond this period. There are considerable measured, indicated and inferred resources available at this time and it is management s opinion that a mine life based solely on proven and probable reserves would result in an ultra-conservative mine life estimate. A more reasonable and prudent assumption would be to use a mine life based on a 30 to 50% conversion rate of inferred resources. This same mine life estimate has been used historically since mining at the site began in 1906, and inferred resources have consistently been converted to proven and probable at a rate of 34 tonnes per meter of exploration development. It is also management s opinion that significantly more than 50% of inferred resources will eventually be converted to reserves. Consequently, Coricancha will in all likelihood only carry two-to-four years of proven and probable reserves for the remainder of its life. However, significant potential exists below the current working level of the mine to more than double the current resource. Please note: Mr. Rodney Lamond, P. Eng. is the Qualified Person as defined by National Instrument for technical information contained in this annual report and has reviewed and approved the technical information contained herein. Reserves and Resources 1 SUMMARY Tonnes Au Ag Pb Zn Cu Au Equiv. Oz April 2007 g/t g/t % % % Contained 2 Proven And Probable 436, ,716 Measured And Indicated 3 651, ,239 Inferred Resources 3,911, ,319,800 1 Grades and tonnes taken from NI Technical Report dated April 16, Gold equivalent ounces contained includes silver at a ratio of 50:1 3 Includes proven and probable reserves but excludes inferred resources

13 11 resources gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

14 12 gold hawk resources inc. annual REPORT 2007 TsX venture: CGK Geology of the property The property is occupied by a whole sequence of the andesitic volcanics of the Rímac Formation consisting of brecciated volcanics at the lower level (in the Aruri valley) topped by andesitic flows, agglomerate and tuff located on the upper part of the Huamanjune mountain at 4,500 meters above sea level. The main mineralized veins and/or structures of the whole mineralized system of the Coricancha deposit belong to the structural domain trending N 15 E with a sub vertical to steeply SW dip. In general, they seem to be restrained to a certain tectonic corridor, with shear movements among blocks that produce the development of NE-SW trending tensional fractures of second and tertiary order. The vein system is better described as an anastamosed system where most of the secondary and tertiary veins branch off either from the main vein or the secondary ones. This has produced the necessary plumbing to be filled by hydrothermal mineralized solutions at a later stage. At the local structural scale, the three main veins, Wellington, Constancia and Animas, defined three structural dislocated blocks from which a series of secondary and tertiary tensional veins split off. The veins are quite extensive and have been recognized on surface for more than three kilometers and to a depth of 1,500 meters. The alteration observed in the footwall and the hanging wall of the veins is of an argillic type and is composed of quartz-clay-pyrite. The alteration extends up to two meters into the walls and is totally barren. There are no geological and metallogenical studies to confirm the relation between the regional framework, the dykes and the intrusive stock south of Coricancha with the general mineralized event. However, the main hydrothermal source is probably a large intrusive body located below Coricancha at an unknown depth. Deposit type The Coricancha mine is characterized as a deposit of polymetallic veins located within brittle and tensional fractures developed in the andesític rocks of the Rímac Formation. The mineralized system is a hydrothermal Low Sulfuration deposit. The veins show pinch and swell type behavior with a thickness up to two meters and an average of 0.6 meters. The veins often split into two branches generally separated by waste material. The mineralization is comprised of Pyrite, sphalerite, silver rich galena, chalcopyrite, Arsenopyrite, tennandite, tetrahedrite, native gold, native silver and quartz. Arsenopyrite is the most important gold mineral in the system. The gold is refractory, as it is closely associated and included or encapsulated inside the Arsenopyrite where it represents about 75% of the total gold content. The remainder of the gold is associated mainly with Pyrite and in minor amounts with chalcopyrite, sphalerite, galena and native gold. Nevertheless, studies (Montreuil, 1978 and 1980) indicate the existence of native visible gold only at the microscope (less than 20 microns) intermingled phases of sulphides; in 70% of the cases, it appears next to the Pyrite, 15% with the galena and 10% with the Arsenopyrite. The presence of argentiferous minerals has also been observed as pirargirite and freibergite. Mineralization Constancia Vein The Constancia vein is where most of the previous mining operations, from 1906 up to 2002, took place. It has been recognized over 11 elevation levels, from 4,015 meters to 3,460 meters, for more than 550 meters of vertical extent. The vein outcrops at an altitude of 4,540 meters and has been traced to the lowest level of the mine at 3,140 meters, for a vertical extent of more than 1,400 meters. It has a known length of more than 3,800 meters, of which 2,300 meters is within the Gold Hawk-controlled property. In the upper parts of the vertical extent, the vein widths range from 10 to 120 centimeters wide with an average width of 54 centimeters. It has been mined over an area of 1,600 meters along strike and 500 meters high. Gold is associated with the crystalline structure of the Arsenopyrite. The vein grades an average of oz Au /t, 5.96 oz Ag /t, 3.79% Zn, 3.61% Pb and 0.36% Cu. In July 2007, exploration and development work on the 3,140 meter level encountered what is believed to be the downward extension of the Constancia vein. Based on assay results, geological projections and matching mineralization characteristics, there is a high probability that the Constancia vein extends at least 315 meters below the 3,460 meter level, which is currently the lowest working level of the mine. No development or mining has yet been conducted on the Constancia vein between the 3,460 meter level and the 3,140 meter level and no reserves or resources for this potential mineralized zone have been included in the Company s most recent NI Technical Report in April The vein width at the 3,140 meter level is significantly wider than at the upper levels of the currently mined area. Approximately 150 meters of development was completed and sampled on the main 3,140 level and a sub-level located three meters above the main 3,140 meter level during the second half of The average vein grades of the 150 meters of development on the 3,140 meter level are as follows: 2.31 grams per tonne gold, 169 grams per tonne silver, 3.49% zinc, 0.55% lead and 0.81% copper over an average vein width of 0.92 meters. The average grades reported over the 150 meters of development have been taken from channel samples across the vein every two meters along strike. Included in the above average for the main 3,140 meter level are number of higher grade sections including an 18-meter section grading 2.75 grams per tonne of gold, 274 grams per tonne of silver,

15 g o l d h a w k r e s o u r c e s i n c. ANNUA L RE P ORT longitudinal section Ts X v e n t u r e : C G K Constancia vein 13 www. goldhaw k resources. com

16 14 gold hawk resources inc. annual REPORT 2007 TsX venture: CGK 5.21% zinc, 0.61% lead and 1.04% copper over a 1.02 meter true vein width. Similarly values of 4.91 grams per tonne of gold, 232 grams per tonne of silver, 5.66% zinc, 0.25% lead and 1.24% copper over a true vein width of 0.70 meters in the sub level have been encountered over the same 18-meter section. Results of 41 duplicated samples sent to ALS Chemex Laboratory show a good correlation and fall within an acceptable level of accuracy for the samples analyzed and reported above. Development on the 3,140 meter level is expected to continue to expose more of the vein in the near term and is a priority project. Projecting this vein southward to the property boundary gives approximately 2,000 additional meters of potential strike length to be developed. With a vertical extent of 320 meters and the potential strike length of 2,000 meters, there is the potential to significantly increase the total resources in the Constancia vein between the 3,140 and 3,460 meter levels. In addition, the vein is open at depth below the 3,140 meter level. As part of the Company s capital expenditure budget for 2008, an internal shaft is planned to allow access to develop between the 3,140 meter level and the upper mine levels. This shaft will allow access for additional exploration and development as well as improve mine efficiencies. In addition, Gold Hawk plans to drill exploration holes to test the down dip extension of the Constancia vein below the 3,140 meter level. These developments are key to the possible expansion of the Coricancha mine. Wellington Vein This is the most important under-developed mineralized structure on the property. The vein measures two kilometers along strike, of which 1,500 meters is located within the limit of the property. During 1999 through 2002, the vein was developed and mined over five levels. It is currently open along strike for 600 meters and extends over 200 meters in height. The vein widths range is similar to the Constancia with an average width of 64 centimeters. The vein frequently splits into two branches and vein widths up to 1.40 meters wide have been seen at these intersections. The vein grades an average of oz Au /t, 7.36 oz Ag /t, 3.94% Zn, 2.39% Pb and 0.58% Cu. The polymetallic mineralization consists of quartz fractures filled with sulphide bands of Arsenopyrite, Pyrite, galena, sphalerite, tetrahedrite mineralized vein. The wall rocks are generally sericitized (mix of clay-silica- Pyrite) and often characterized with some longitudinal fault gouge. The Arsenopyrite content increases, along with associated higher grade gold values, at the higher altitudes. This area should be adequately targeted for future mine development. Exploration projects Gold Hawk s exploration focus is on its Coricancha mine operations and the Company wrote-off the costs of two exploration properties in The Company continues to seek joint venture partners to further explore and develop both the properties and does not plan further investment at this time. MACHACALA GOLD-SILVER PROPERTY The Machacala property covers an area of 5,306 hectares 42 kilometers east of the coastal city of Trujillo in northern Peru. The Company acquired the property in 1996, through a fixed term renewable lease. In 2007, a nonrenewable lease was negotiated for $800,000, including a five-year option to purchase. Mining activities at Machacala date back to On the basis of the exploration work carried out prior to 2004, an inferred resource of 635,000 tonnes averaging 7.63 g/t gold and g/t silver has been estimated in four of the ore shoots. These four ore shoots are included within an overall estimated inferred mineral resource of 1,560,000 tonnes. In addition, approximately 200,000 tonnes of tailings that grade 1.26 g/t gold and 74 g/t silver remain on site. Drilling results in 2004 did not meet the Company s threshold of suitability and the Company focused its resources on acquiring and developing other more advanced stage projects. The result of this change in strategy was the acquisition of the Corincancha Mine. BARRY-SOUART PROPERTY The Barry-Souart project 90 kilometers east of Quevillon in northwestern Quebec is wholly owned by Gold Hawk. The property is located in the highly prospective Urban-Barry belt and consists of a total of 40 mining claims covering an area of 640 hectares. Gold Hawk completed a 12 hole, 2,000-metre diamond drilling program on the property in 2004 that successfully proved the continuity of the mineralized zones identified during a drill program. Drilling led to the discovery of several new zones, some of which corresponded with IP/ Mag coincident anomalies. The main auriferous showing and associated new sheared zones represent important discoveries and require additional work to fully evaluate their extent and grade.

17 15 exploration gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

18 16 FINANCIAL INFORMATION gold hawk resources inc. annual REPORT 2007 TsX venture: CGK

19 Management s Discussion and Analysis For the Year Ended December 31, The following Management s Discussion and Analysis ( MD&A ) of the financial condition and results of the operations of Gold Hawk Resources Inc. ( Gold Hawk or the Company ) and its wholly owned subsidiaries constitutes management s review of the factors that affected the Company s financial and operating performance for the year ended December 31, This discussion dated April 29, 2008 should be read in conjunction with the Company s audited consolidated Financial Statements and associated Notes for the year ended December 31, Please also refer to the cautionary statement of forward-looking information at the end of the MD&A. The Company's audited consolidated Financial Statements are prepared in accordance with Canadian generally accepted accounting principles ( Canadian GAAP ) as fully described in Note 2 of the December 31, 2007 audited consolidated financial statements and reported in Canadian dollars unless otherwise noted. Further information regarding the Company and its operations are filed electronically on the System for Electronic Document Analysis and Retrieval (SEDAR) in Canada and can be obtained from OVERVIEW Gold Hawk is a Canadian based precious and base metals producer with reserves and resources containing gold, silver, lead, zinc and copper. Since the acquisition of the wholly owned Coricancha Mine in Peru in March 2006, the mine and concentrator have been refurbished and commercial production status was achieved on October 1, The rated capacity of the processing facility is approximately 600 tonnes of ore per day, with potential for expansion to 900 tonnes per day by the end of The Company, through its subsidiary, Compania Minera San Juan (Peru) S.A., has approximately 600 employees. The Company also has exploration properties in Peru and Canada (Quebec), and although these properties have been previously written off, management continues to pursue joint venture partners to continue exploration and development of the properties. Gold Hawk Resources Inc. is listed on the TSX Venture Exchange under the symbol CGK.

20 18 ManageMent s Discussion and analysis For the year ended DeceMber 31, HIGHLIGHTS Major highlights and developments during the year ended 2007 included the: Completion of an independent National Instrument reserve report for the Coricancha Mine; Exploration and development results on the 3140 meter level of the Coricancha Mine, encountering what is believed to be the downward extension of the Constancia Vein; Completed a $10 million bought deal private placement in August 2007; gold hawk resources inc. annual report 2007 tsx venture: cgk Commencement of production at the Company s Coricancha Mine, culminating in the achievement of production milestones in late September, and the declaration of commercial production on October 1, 2007; and, Completion of the Company s first full quarter of commercial production, with over 35,000 tonnes of ore processed in the quarter ended December 31, 2007 and production of 647 ounces of gold, 70,676 ounces of silver, 561,076 pounds of lead and 814,828 pounds of zinc. During the year ended December 31, 2007, the Company released its mineral reserve and mineral resource estimates as at January 31, 2007 for the Coricancha Mine. The estimates were independently reviewed and verified by Mr. John W. Rozelle, of Gustavson Associates, LLC ( Gustavson ) of Boulder Colorado in accordance with National Instrument Standards of Disclosure for Mineral Projects ( NI ). A summary of the results are included in the following table and a copy of the full Technical Report was filed on SEDAR ( on April 20, During the year ended December 31, 2007, exploration and development work by the Company on the 3140 meter level of the Coricancha Mine, encountered what is believed to be the downward extension of the Constancia Vein. Based on assay results, geological projections and mineralization characteristics, there is a high probability that the Constancia Vein extends at least 320 meters below the 3460 level, which is currently the lowest working level of the mine. No development or mining has yet been conducted on the Constancia Vein between the 3460 level and the 3140 level and no reserves or resources have been included in the Company s above noted Technical Report. Since this discovery in July of 2007, development of the 3140 level has continued on two levels, the main 3140 level and a sub-level located three meters above the main 3140 level. To December 31, 2007, approximately 190 meters of development has been completed and sampled on these two levels. Mineralogical comparisons between the

21 Management s Discussion and Analysis For the Year Ended December 31, Constancia Vein in the higher levels of the mine and the 3140 level vein appear to correlate both geologically and physically and thus there is a high probability that the 3140 meter level vein is in fact the downward extension of the Constancia Vein. The average vein grades of the 150 meters of development on the 3140 meter level are as follows: 0.81% copper, 0.55% lead, 3.49%, zinc, 169 grams per tonne silver and 2.31 grams per tonne gold over an average vein width of 0.92 meters. The average grades reported over the 150 meters of development have been taken from channel samples across the vein every 2 meters along strike. Included in the above average for the main 3140 level are a number of higher grade sections including a 18 meter section grading 1.04% copper. 0.61% lead, 5.21% zinc, 274 grams per tonne of silver and 2.75 grams per tonne of gold over a 1.02 meter true vein width. Similarly values of 1.24% copper, 0.25% lead, 5.66% zinc, 232 grams per tonne of silver and 4.91 grams per tonne of gold over a true vein width of 0.70 meters in the sub-level have been encountered over the same 18 meter section. Results of 41 duplicated samples sent to ALS Chemex Laboratory show a good correlation and fall within an acceptable level of accuracy for the samples analyzed and reported above. Projecting this vein southward to the property boundary gives approximately an additional 2,000 meters of potential strike length to be developed. With a vertical extent of 320 meters and the strike length of 2,000 meters, there is the potential to significantly increase the total resources in the Constancia Vein between the 3140 and 3460 meter levels. In addition, the vein is open at depth below the 3140 meter level. Mr. Rodney Lamond, P. Eng. is the Qualified Person as defined by National Instrument for technical information contained in this MD&A, and Mr. Lamond has reviewed and approved all technical information contained in the MD&A. In August 2007, the Company closed a brokered private placement for 16,761,100 common shares at a price of $0.60 per share, for gross proceeds of $10,056,660. The Company paid the underwriter a cash fee on closing of $703,966 equal to 7% of the gross proceeds and issued them 1,508,499 broker warrants, equal to 9% of the number of common shares sold pursuant to the private placement. Each broker warrant entitles the underwriter to purchase one common share of the Company at $0.60 per share until August 16, Net proceeds of the private placement were used for expenditures related to ongoing development of the Coricancha Mine, general working capital purposes, and to repay a bridge loan from one of the Company s lenders. During the year ended December 31, 2007 the Company successfully undertook an employee recruiting and training campaign, and increased the number of direct on-site employees to more than 550. Consistent with the corporate objectives, approximately 50% of the Company s employees are from local communities surrounding the mine while the remainder from other parts of Peru. Regretfully, during the second quarter of 2007, a fatal accident occurred at the mine when a supervisor entered an abandoned raise and died due to a loss of oxygen. An extensive program to limit access into abandoned areas of the mine was immediately implemented along with safety awareness training for all underground personnel. Production of lead and zinc concentrates began at the Coricancha Mine during the second quarter of 2007, and the first full gold pour occurred in June with dore bars prepared for July shipment to a refinery. Full production ra mp-up was slower than anticipated due primarily to delays in the delivery of new mobile mining equipment originally expected to arrive in March 2007, but not received until late August. As a consequence of the late equipment arrival, development of sufficient production stopes to allow for achieving the rated capacity of 600 tonnes per day ( tpd ) was also delayed. With the equipment fully operational by September, daily mined tonnage continually improved

22 20 Management s Discussion and Analysis For the Year Ended December 31, 2007 towards 600 tpd, and Commercial Production (based on attaining 66% of the 600 tpd rated mill capacity in any 18 consecutive days within a 30 day period) was achieved during the 30 day period ending September 25th, Commercial Production, for accounting purposes, became effective October 1, Attaining commercial production was a major milestone for the Company as the sales and operating costs were then to be reported on Gold Hawk s income statement. Prior to October 1, 2007, sales and operating costs had been capitalized for financial reporting purposes. The results for the three months ended December 31, 2007, which is the first full quarter of operation of the Coricancha mine (see Results of Operations below) were affected by the equipment delivery delays, as well as by temporary tailings handling limitations encountered in the fourth quarter of The impact on the mine plan of the 2007 equipment delivery delays prior to attaining commercial production, resulted in less than planned mine ore grades due to limited access to the higher grade areas of the mine. Rehabilitation work to allow access to higher grade production stopes is presently in process and planned for completion during the second quarter of Coupled with the expected commissioning of the Dense Media Separation ( DMS ) plant, which removes waste rock (dilution) from the mine ore before processing, result in an increase in the mill feed grade. After achieving commercial production and as the plant throughput increased, it was determined that the existing vacuum filtering equipment used to remove water from the tailings before disposal, was unable to handle the moisture content associated with higher tonnage. The Company immediately constructed a dyke in the tailings pond for short-term use and ordered two refurbished press filters for a permanent solution. The press filters were inspected and ordered, and are scheduled for delivery and installation in the second quarter of As a result of the present dyke and vacuum filter capacity, as well as the Company s commitment to long-term stewardship of the environment, mill throughput has been temporarily limited to approximately 450 tpd until the press filters are placed into service. Recent Developments subsequent to December 31, 2007 The Company has just recently completed its second full quarter of commercial production on March 31, Significant progress was made in mine operations since the year end, and results have improved in the plant and in all the mill circuits. Concentrate production for the first quarter of 2008 were 781 tonnes and 666 tonnes of zinc and lead concentrate, respectively. Concentrate grades for lead and zinc have been improving as well as compared to fourth quarter 2007 results, with an average zinc concentrate grade of 51.4% and lead concentrate of 54.8% in the first quarter. Average mill head grades for gold and silver also improved quarter-over-quarter, with gold improving from 2.66 grams per tonne in the fourth quarter to 3.13 grams per tonne in the first quarter and silver improving from 81.0 grams per tonne to 94.5 grams per tonne. Subsequent to year end, mill throughput remained temporarily below capacity of 600 tpd due to the tailings handling limitations and will remain so until the arrival and commissioning of at least one of two filter presses. The mine achieved an average of 405 tpd in the first quarter of 2008 with 36,908 tonnes processed in total. Tonnes of ore milled improved throughout the period, from an average of 387 tpd in January, to 402 tpd in February and 427 tpd in March of The first of the two filter presses has just arrived at the Lima port, and after customs clearance will be transported to the mine site. The Company has prepared the installation site, and will be installi and commission the new filters upon their arrival. Once the first filter is in operation, it is expected that production of 600 tpd will be reached. The second filter, to be used as a maintenance backup unit is on schedule to arrive in June. The construction of the DMS plant is well advanced with all component parts on site. Commissioning is scheduled