Wharf Mine

Overview

Wharf Resources (USA) Inc. operates the Wharf open pit gold mine and heap-leach operation in the Bald Mountain Mining District of South Dakota. The property consists of several areas of adjoining gold mineralization amenable to open pit mining. Wharf resources holds title to the surface and mineral rights of the claims. All of the Wharf Mine's total proven and probable mineral reserves are on patented claims. In 2009, gold production from the Wharf Mine amounted to 68,000 ounces of gold. Positive exploration results have extended the mine life to approximately 2014.

The mine has been operating successfully since 1983 and has achieved major milestones in health and safety, and progressive reclamation of previously mined areas. The mine's reserves are projected to be depleted early in 2010 with leaching operations winding down over that year.

Location

The Wharf Mine is located four miles west of Lead in the Black Hills, a heavily forested, small mountain range located in western South Dakota. Annual average precipitation in Lead is 27.8 inches, with most precipitation coming between April and September. Elevations in the Black Hills range from 3,500 feet to 7,242 feet above sea level at Harney Peak. The plant site is at an elevation of about 6,140 feet.

Geology and Mineralization

The Black Hills geological setting consists of an elongated dome, about 60 miles wide by 120 miles long, that was uplifted from the surrounding plains approximately 60 million years ago.

The uplift consists of a core of Precambrian metamorphic and igneous rocks surrounded by Paleozoic and Mesozoic sedimentary rocks. Tertiary igneous rocks have intruded both the Precambrian and Paleozoic rocks in the northern part of the Black Hills and, to some extent, are responsible for their present topographic relief. The Wharf Mine is situated within the Bald Mountain mining district of the Northern Black Hills and gold mineralization occurs in both the sedimentary and intrusive rock units, adjacent to minor faults and fracture zones.

Mining & Operations

The mine has been developed as a series of open pits, most of which are now mined out. Advantageously, the pits have been progressively rehabilitated as mining development progressed thus limiting the environmental liabilities at mine closure.

Current operations are carried out in the American Eagle Pit and will supply ore until late 2012. The Foley pit was mined out in 2002 and has been backfilled, the Trojan and Deep Portland Pits are currently being backfilled and reclaimed.

Conventional open pit mining techniques using loader/truck operations are employed at the mine. The mine operates twenty-four hours per day, seven days per week. Ore and uneconomic rock is drilled and blasted before loading and transport. Drilling is conducted on a 15 feet square drill pattern. The drilled holes are loaded with an ammonium nitrate product that is blended with diesel fuel, and referred to as ANFO (ammonium nitrate/fuel oil). The ANFO is loaded to within 9 to 12 feet of the surface. The hole is then filled to the surface with crushed rock to contain the energy of the explosive within the hole.

The blasted rock is marked with color-coded flags after blasting to delineate the ore and uneconomic rock. The blasted rock is loaded into the trucks with rubber-tired front-end loaders. Ore is trucked from the pit to the crusher and uneconomic rock is transported to the waste rock depository using a fleet of 100-ton trucks.

Mining equipment includes three rubber-tired Cat 993K front-end loaders, eight Cat 777F 100-ton trucks, five D9 dozers, and two IR DM-45 drills. Support equipment includes three motor graders, two water trucks, and other miscellaneous equipment.

Processing

Crushing Facility

The crusher is comprised of a 250-ton storage hopper. The run-of-mine gold ore is transferred from the hopper via an apron feeder to a vibrating grizzly where all rock less than 6 inches is separated out. The larger material is sent through a jaw crusher. The jaw crusher product is further screened and crushed with five cone crushers and five screen decks until it reaches the 13/2 inch size. Granulated lime is added to the ore during crushing to provide control of the pH in the leach solution during processing.

Leaching

The crushed ore is hauled by the pit operations equipment fleet to one of four on-off heap leach pads and placed in 20-foot lifts to a maximum height of 150 feet over the pad liner. The four leach pads used for ore processing cover approximately 70 acres with a capacity of 9.0 million tons. The pad design includes double synthetic liners on top of 8 inches of compacted clay, with a leak detection system located between the two synthetic liners. This system is closely monitored to ensure the integrity of the liners.

A dilute alkaline cyanide solution is distributed through the crushed rock by drip emitters that are installed on the top of each lift. As the solution percolates down through the ore, the gold is leached from the ore and the gold-laden solution gravity flows through pipelines to the processing plant.

The leaching process usually is complete approximately 12 to 18 months after the pad is completely full. The current average gold recovery rate is 74.5%.

Neutralization

Once the pad has been fully leached, the heap is then rinsed with water and neutralized with hydrogen peroxide to oxidize residual cyanides. Nitrates and metals are reduced to regulated levels prior to disposal.

A bio-denitrification process is used to remove nitrate from the neutralization de-nitrifying circuit. In this process, bacteria break down the nitrate into nitrogen gas and oxygen. The bacteria consume the oxygen attached to the nitrate for respiration. The nitrogen gas by-product is vented off to the atmosphere.

Following neutralization, the spent ore is hauled to the Foley spent ore disposal site, which has been specifically approved for depositing spent ore.

Recovery Plant

Through the addition of extra carbon columns the recovery plant now has the capacity to treat 3,800 gallons/minute of pregnant solution. The adsorption circuit consists of 19 carbon columns holding a total of 39 tons of activated carbon where the gold is removed from the solution.

The activated carbon (loaded with gold) is moved to the stripping plant where it enters a closed circuit under high pressure and temperature. Gold is electro plated from the circuit and the precious metal sludge is then shipped to a third party refinery for further processing.

Environment and Community

Wharf Resources is committed to the protection and preservation of the environment and to ensuring compliance with all relevant industry standards, environmental legislation and regulations. The environmental objectives and targets involve the participation of all employees, and allow them to be part of good environmental stewardship.

Aggressive sampling programs monitor air quality (three stations both on and off site), water quality (over forty surface and groundwater sites are routinely monitored), wildlife (annual wildlife and aquatic studies) and reclamation of mined lands.

Over several years the company has implemented a number of initiatives to reduce its impact on the environment including:

• Remediation of old tailing and mining activity from the turn of the century
• Receipt of the first permit of its kind in South Dakota to allow the off-load of neutralized spent ore
• Receipt of the ABEX (Achievement in Business Excellence) Award from South Dakota Industry and Commerce Association for mine reclamation activities.
• Wharf is implementing a water treatment program, vital in determining the post closure treatment options and in reducing the post closure period.

Mine planning includes an active and very successful reclamation plan. As mining is conducted, areas are developed for reclamation as quickly as practicable. To date, approximately 475 acres have been reclaimed to final reclamation standards, with 213 of the reclaimed acres designated by the state as meeting the post mine land use of range land grazing.

The approved post mining land use is range land grazing. However, within the reclamation plan, provision has been made for the development of specific areas for wildlife habitat and recreation.

Community Development

Over its 23 year life Wharf has provided substantial benefits to the local community and the South Dakota State government. The company continues to support the community through local purchases of goods and services wherever possible and provides direct employment from the local community. The mine currently employs 130 full-time employees.

Mine closure plans were developed at the time of permitting and were reviewed by the community in public hearings at the county and state levels. The standards for closure and final reclamation are addressed in the conditions of the mine permit and specific performance criteria developed to measure compliance with the standards. Financial assurance in the amount of $10.7 million is posted with the state to ensure performance with the closure and reclamation plan. Post-closure activities, including water treatment and monitoring, are also ensured with an additional $8.1 million posted with the state.

Health and safety

Wharf is committed to achieving the highest standards of health and safety for all employees and contractors. Since operations began, the company has placed safety at the forefront of all its activities. The company's performance has been recognized by winning a number of major health and safety awards during the past several years. Some examples of safety initiatives and awards include: Sentinels of Safety Awards in 1988, 1990, 1995, and 1999, introducing job safety analysis before many other major mines, three years without a lost time injury in 1988, 1990 and 1999, played a significant role in establishing the Black Hills Safety Association which is a chapter of the National Joseph A. Holmes Safety Association, received the 2002 Large Operations Safety Award from the Black Hills Safety Association for having achieved the Lowest Total Reportable Frequency Rate during calendar year 2002.

Part of Wharf's commitment to providing its employees a safe and healthy work environment is the drug/alcohol free policy implemented in 1997. Employees exposed to noise levels greater than acceptable standards are enrolled in a Hearing Conservation Program.