Suction Dredge Economic Analysis Placer Examination Techniques

Analysis Based on Dredging Time Gold recovered per hour rather than gold recovered per cubic yard. Labor is overriding costs. Labor is overriding costs. Dredging time is precise, hole volume is hard to measure. Dredging time is precise, hole volume is hard to measure. Production rate is highly variable. Production rate is highly variable.

Working Time and Dredging Time Working time is greater than dredging time Working time is greater than dredging time Ratio of work time to dredge time is ~1.6:1 Ratio of work time to dredge time is ~1.6:1 40 hr. work week includes 25 hrs. of dredging 40 hr. work week includes 25 hrs. of dredging Revenues based on dredging time Revenues based on dredging time Labor costs based on working time Labor costs based on working time

Dredging Time Gold is only produced during dredging time Gold is only produced during dredging time

Working Time Includes In addition to dredging time includes In addition to dredging time includes Transporting supplies to dredging site Transporting supplies to dredging site Moving equipment Moving equipment Dredge site preparation Dredge site preparation Cleanup sluice Cleanup sluice Panning, sluicing, classifying or processing concentrates Panning, sluicing, classifying or processing concentrates Work breaks Work breaks Plugs Plugs Repair and maintain equipment Repair and maintain equipment

Adjustments to Dredge & Work Time Ratio Adjustments to Dredge & Work Time Ratio Observations of dredge operator Observations of dredge operator High boulder factor High boulder factor Clay - decreases visibility or needs breaking up Clay - decreases visibility or needs breaking up Deep or fast moving water Deep or fast moving water Very cold water-more breaks or dry suit Very cold water-more breaks or dry suit Murky water-decreases visibility & efficiency Murky water-decreases visibility & efficiency Difficult access-addressed as 1-time cost for season Difficult access-addressed as 1-time cost for season

Number of Workers Number generally varies from 1 to 3 workers Number generally varies from 1 to 3 workers 2 people are generally more efficient and safer 2 people are generally more efficient and safer 1 person has lower labor cost but less efficient and less safe 1 person has lower labor cost but less efficient and less safe 1 person is ~60% as efficient as 2 people 1 person is ~60% as efficient as 2 people Need to look at site specific situation Need to look at site specific situation

Role of Second Person Moving boulders Moving boulders Clearing clogs in hose, jet or box Clearing clogs in hose, jet or box Dispersing tails Dispersing tails Repositioning the dredge Repositioning the dredge Clearing the sluice Clearing the sluice Alternate on intake nozzle Alternate on intake nozzle Less fatigue Less fatigue Safety Safety

Safety Hazards Where 2 nd Person Provides Assistance Unstable highwalls or working faces Unstable highwalls or working faces Unstable boulders Unstable boulders Cold and fast moving water Cold and fast moving water Diving with supplied air Diving with supplied air Walking and carrying equipment in streams and wet, slippery rocks, deep water Walking and carrying equipment in streams and wet, slippery rocks, deep water Provide first aid or go for help Provide first aid or go for help

Wage Rates & Job Requirements Suction dredging is strenuous work Suction dredging is strenuous work Expertise from experience Expertise from experience Knowledge of gold deposition in stream deposits Knowledge of gold deposition in stream deposits Small engine repair Small engine repair Diving in deep, cold or fast moving water Diving in deep, cold or fast moving water Hazardous conditions-unstable banks or boulders Hazardous conditions-unstable banks or boulders

Wage Rate Not reasonable to work for minimum wage Not reasonable to work for minimum wage Use wage rate between minimum wage and equipment operator wage Use wage rate between minimum wage and equipment operator wage No charge for cost to employer for owner/operator, which is most suction dredge operations No charge for cost to employer for owner/operator, which is most suction dredge operations Wage rate for job requiring strenuous physical labor outdoors is generally reasonable Wage rate for job requiring strenuous physical labor outdoors is generally reasonable

Gold Prices Gold Futures – Federal Register Guidance Gold Futures – Federal Register Guidance Spot Price vs. What Local Buyers Pay Spot Price vs. What Local Buyers Pay Consider jewelry or specimen value if samples warrant Consider jewelry or specimen value if samples warrant Survey local or regional gold buyers to find criteria for specimen value Survey local or regional gold buyers to find criteria for specimen value

Dredge Production Rate Volume of material dredged is difficult to estimate due to irregularity of the size and shape of the hole Volume of material dredged is difficult to estimate due to irregularity of the size and shape of the hole No accurate way to measure dredge throughput material off of tail sluice No accurate way to measure dredge throughput material off of tail sluice Holes slough and may contain boulders or tails Holes slough and may contain boulders or tails

Rated Capacity v. Production Rate Manufacturer’s capacity do not reflect actual throughput Manufacturer’s capacity do not reflect actual throughput Manufacturer’s rated capacity assumes optimum conditions, which are not encountered in the field – minimal lift, unconsolidated material, sand or gravel, steady supply Manufacturer’s rated capacity assumes optimum conditions, which are not encountered in the field – minimal lift, unconsolidated material, sand or gravel, steady supply Most gold is recovered where conditions are not ideal-around boulders, in crevices and joints, weathered bedrock Most gold is recovered where conditions are not ideal-around boulders, in crevices and joints, weathered bedrock

Rated Capacity v. Production Rate We have estimated 1.5 to 5 cy/hr of actual production rate for 4 & 5-inch dredges We have estimated 1.5 to 5 cy/hr of actual production rate for 4 & 5-inch dredges Manufacturer’s rated capacity is 5-10 cy/hr Manufacturer’s rated capacity is 5-10 cy/hr Actual capacity less due to oversize, dredging around boulders, crevices, breaking up bedrock, moving dredge, discontinuous gravel beds Actual capacity less due to oversize, dredging around boulders, crevices, breaking up bedrock, moving dredge, discontinuous gravel beds

Production Rate Estimate Hole Volume/Dredging Time = Estimated Production Rate (cy/hr) Hole Volume/Dredging Time = Estimated Production Rate (cy/hr)

Mine Life Calculate using volume of gravel on claim from mapping & sampling, & average dredge production rate Calculate using volume of gravel on claim from mapping & sampling, & average dredge production rate Exclude portions of stream that cannot be dredged Exclude portions of stream that cannot be dredged Use information from sampling to supplement mapping information Use information from sampling to supplement mapping information Gravel volume/production rate=mine life Gravel volume/production rate=mine life

Mine Life Use actual number of dredging hours/week, not total work hours Use actual number of dredging hours/week, not total work hours Dredging season – weeks/year Dredging season – weeks/year Generally 25 hrs of dredging/40 hr work week using ~1.6 hrs work time:1.0 hr of dredging time Generally 25 hrs of dredging/40 hr work week using ~1.6 hrs work time:1.0 hr of dredging time

Gold Recharge Normally gold recharge is not significant over the life of the mine Normally gold recharge is not significant over the life of the mine Previously worked areas do not contain significant deposits of gold Previously worked areas do not contain significant deposits of gold Significant recharge may occur where source of gold is very near and is depositing significant amounts of gold into drainage on a regular basis Significant recharge may occur where source of gold is very near and is depositing significant amounts of gold into drainage on a regular basis

Gold Recharge Evidence is gold with pieces with high- character throughout unconsolidated gravel Evidence is gold with pieces with high- character throughout unconsolidated gravel Mineral examiner should stop dredging periodically to check sluice box to try to determine where gold is coming from in the gravel Mineral examiner should stop dredging periodically to check sluice box to try to determine where gold is coming from in the gravel

Sample Analysis for Each Sample Should Include Total dredging time Total dredging time Actual work time Actual work time Volume of gravel processed Volume of gravel processed Production rate –hole volume/dredge time Production rate –hole volume/dredge time Gold recovered Gold recovered Gold production rate (mg Au/hr) Gold production rate (mg Au/hr) Grade (mg Au/cy) Grade (mg Au/cy)

Sample Summary for Claim Sample No. Sample No. Dredging Hours Dredging Hours Volume Volume Gold Recovered (mg) Gold Recovered (mg) Gold Production Rate (mg/hr) Gold Production Rate (mg/hr) Grade (mg/cy) Grade (mg/cy)

Gold Production Value Sample No. Sample No. Recovery (mg) Recovery (mg) Time (hrs) Time (hrs) Recovery/Hour (mg/hr) Recovery/Hour (mg/hr) Au value/hour ($/hr) Au value/hour ($/hr)

Mining Scenario Either use operator’s or develop scenario Either use operator’s or develop scenario Base on weekly cost estimate Base on weekly cost estimate 40 hrs work & 25 hrs dredging 40 hrs work & 25 hrs dredging Weekly revenue based on 25 hrs dredging Weekly revenue based on 25 hrs dredging Weekly labor based on 40 hrs work/person Weekly labor based on 40 hrs work/person Include operating & capital costs Include operating & capital costs Mobilization & demobilization Mobilization & demobilization

Cost Analysis – Operating Costs HOURLY COST BASED ON DREDGING HOURS – (i.e. 25 hrs/week) Fuel-local rates Fuel-local rates Repair & maintenance for dredge (Cost Reference Guide Bluebook) Repair & maintenance for dredge (Cost Reference Guide Bluebook) Use hourly cost for parts, supplies & lubrication for gasoline powered pump Use hourly cost for parts, supplies & lubrication for gasoline powered pump LABOR BASED ON 40 hrs/week

Cost Analysis – Capital Costs HOURLY COSTS BASED ON DREDGING HOURS – (e.g. 25 hrs/week) Dredge Dredge Wetsuits, hoses, airlines, regulators, weight belts, ropes, pans, screens, buckets, shovels, tools, pry bars, winches Wetsuits, hoses, airlines, regulators, weight belts, ropes, pans, screens, buckets, shovels, tools, pry bars, winches Only engine, pump & wetsuit wear out over time Only engine, pump & wetsuit wear out over time Engine & pump depreciate based on hours of use Engine & pump depreciate based on hours of use

Cost Analysis Claims with difficult access from roads, or along the river may require extra time for mobilization & demobilization at beginning and end of season Claims with difficult access from roads, or along the river may require extra time for mobilization & demobilization at beginning and end of season Reclamation – disperse tailing & knock down boulder piles, accounted for in non- dredging work time Reclamation – disperse tailing & knock down boulder piles, accounted for in non- dredging work time Cleanup camp & ancillary facilities Cleanup camp & ancillary facilities

Cost Analysis Must be very careful to distinguish between dredging hours & actual work hours in the report, & specify which type of hours are being referred to in the report Must be very careful to distinguish between dredging hours & actual work hours in the report, & specify which type of hours are being referred to in the report Remainder of economic analysis is similar to other placer examinations Remainder of economic analysis is similar to other placer examinations