SAN ANTON RESOURCE

CERRO DEL GALLO – UNDERSTANDING THE DEPOSIT
Investors unfamiliar with resource project business case development may find it useful to note the following regarding the Cerro del Gallo deposit:
1) a massive 627Mt lower grade gold/silver/copper deposit
2) very low ‘strip’ ratio
3) benign, lower cost operating environment.
Of the 627Mt total resource, 120Mt of higher gold grade material has been identified, of which more than 30Mt is potentially ‘heap leachable’. The average grade in this zone is:
- 0.6g/t Au (Gold), and
- 12 g/t Ag (Silver).

OUTPUT POTENTIAL
Given a target processing rate of 4mtpa throughput, we would be looking at a possible 90,000 to 100,000oz gold equivalent per annum production output. At today’s metal prices that clearly represents significant revenue potential. However, it needs to be stressed that the calculations above are purely a theoretical ‘what if’ – and should not be taken as forecasting the eventual mining outcomes. They also do not factor in the various economic interests that would apply to any revenues. That is in fact the purpose of the studies that have just commenced – to calculate and test the many intricate scenarios, not just about potential production output – but about costs, future metal prices and so on – to determine economic likelihoods

LOW STRIP RATIO & “FREE DIG”

One aspect of Cerro del Gallo worth noting now, however, is the fact that the area of mineralisation is essentially a hill of quite diffuse but metal-bearing ore with low quantities of waste material. This is reflected by the low ‘strip ratio’ of the deposit – which indicates the ratio between waste rock and recoverable metal-bearing rock, or ‘ore’. E.g. a 2:1 strip ratio would indicate 2 tonnes of waste must be ‘stripped’ for each 1 tonne of ore that could then be processed. A previous engineering study of a potential open cut pit at Cerro del Gallo identified a strip ratio of only 0.87:1.
In addition, the first stage of pit development should involve minimal waste mining because the weathered heap leach material is actually at the surface. This enables processing of ore immediately upon commencement of mining, without having a period of expensive waste rock removal prior to generating saleable metal production. In the industry this is referred to as ‘free dig’.
Having both ‘free dig’ and low ongoing strip ratio are significant benefits in that they reduce upfront capital requirement, time to start-up and operating costs..

INPUT COSTS MUST BE FACTORED IN Likewise, business costs – power, water, labour and so on – all play a part in determining economic feasibility. The Cerro del Gallo project in many respects looks positively placed in this regard. So – while good metal grades are absolutely desirable – grade cannot be the sole determining factor of commercial feasibility.

STUDY DUE BY NOVEMBER
As outlined in the 3 September 2009 ASX announcement, greater certainty should emerge regarding all these economic inputs, when San Anton Resource Corporation receives the completed studies, due within 2 months.

The result: as per our 3 September ASX statement, advanced studies have commenced to confirm the economics for a 4Mtpa, 8-10 year heap leach mine, which would process weathered and oxidised near-surface ore from the previously defined gold/silver domain. Naturally, the driver of the project’s outlook remains the metal prices. With gold continuing to trade steadily above $US900/oz and having recently breached the $US1000/ounce mark, the economics for the project look potentially highly appealing. For investors unfamiliar with gold/silver mine processing techniques, heap leach treatment has several key merits, including: - lower start-up capital costs compared to most other techniques - being a long-established technology, which lowers the performance and production risk, and - being relatively uncomplicated – so it is simple to manage/ operate. Those observations derive in part from my own experience in the building and/or operation of several gold mines globally, including the permitting and construction of two mines in Mexico. Additionally, the fact freehold title applies to the project area - with some titles already purchased, the strong support of regional authorities, and the commencement of environmental permitting, all mean the project construction could begin within 12 months– assuming viability and permitting approval, and financing occur in good order.

Best Regards
John Skeet,
Chief Operating Officer