Dawson Section

Dawson comprises 57 contiguous unpatented lode mining claims, and eight patented lode mining claims and one patented placer claim. Dawson encompasses five gold mineralized areas which are, from east to west: the Sentinel zone, the Dawson zone, the Copper King zone, the Windy Gulch zone and the Windy Point zone. The gold resources identified to date at Dawson are confined to the Dawson and Windy Gulch zones with the remaining three zones representing gold prospective areas on the 4.2 km (2.6 miles) long geologically favourable trend, covering approximately 1,143 acres (463 hectares). The 50% of the eight patented lode mining claims not held by Zephyr is leased by Zephyr through a “Mining Lease and Agreement” which effectively gives Zephyr 100% control of these claims. Twenty-one of the 57 unpatented claims, the eight patented lode mining claims and the 50% interest in the one patented placer claim are subject to a sliding scale Net Smelter Return (“NSR”) whereby Zephyr agrees to pay up to a 3% NSR as contemplated in the Mining Lease and Agreement.


The gold mineralization at Dawson was discovered by U.S. Borax Ltd. in the early 1980’s and explored by Uranerz U.S.A. Inc. in the early 1990’s. During this period a total of 142 diamond drill holes for 27,206 metres were drilled, from which several resource estimates were completed. In 2013 Zephyr commenced a diamond drill program on the Windy Gulch zone. The 13 hole diamond drill program of approximately 580 metres was designed to expand and better define the near-surface gold resource. The drill results were incorporated with historical drill data to calculate the first independent NI 43-101 resource estimate on the Dawson and Windy Gulch zones. The resource estimates were disclosed in the technical report on Dawson entitled: “Resource Estimate Technical Report for the Dawson Property Fremont County, Colorado, USA” with an effective date of July 19, 2013.


On November 17, 2015 Zephyr filed on SEDAR a technical report entitled “Updated National Instrument 43-101 Technical Report for the Dawson Property, located in Colorado, USA”, with an effective date of August 26, 2015. This report addressed aspects pertaining to metallurgy, mine design, mine scheduling, mining method, proposed equipment, manpower, underground capital and operating cost, but did not include surface capital costs, processing, or the general and administrative costs of the proposed operation.


In 2016 the Company completed a 16 hole drilling program of approximately 745 metres on the Windy Gulch zone. The drill program was successful in further delineating the shape and trend of the deposit as well as augmenting confidence in the continuity of high grade gold mineralization in the current resource. The program demonstrated that possible future plans of development would likely be by underground mining. The drill program also defined the near surface eastern extremity of the gold mineralization at the Wind Gulch zone. Additional information regarding these drilling results can be found on the Company’s website and on SEDAR in news releases dated August 9, 2016, September 27, 2016, and October 18, 2016.


On February 7, 2017, the Company announced the results of a Preliminary Economic Assessment (“PEA”) on the Dawson Gold project. The PEA report was filed on SEDAR on March 23, 2018 and is also available on the Company’s website. The PEA provides a base case assessment of developing the Dawson zone mineral resource only. The PEA is preliminary in nature and there is no guarantee that any part of the current inferred mineral resources will be converted into a mineral reserve in the future and developed into a mine.


In 2018 the Company completed a comprehensive exploration program at Dawson comprising:

  1. detailed geological mapping and sampling, and magnetic geophysical surveying of the newly acquired Sentinel claims

  2. a core drilling program focused on expanding resources at the Dawson and Windy Gulch zones and identifying potential new resources at the Copper King  zone.


The magnetic surveying outlined a strong magnetic low anomaly that extends for 1,100 m (3,600 ft) east of the Dawson zone. This magnetic low anomaly is similar in strength to the magnetic low anomaly over the gold resource at the Dawson zone but is over double the size. The magnetic anomaly at the Dawson zone shows very good correlation with the gold bearing biotite aplite, one of the key gold host rocks of the gold resource on the Dawson zone. Reconnaissance mapping and sampling at the Sentinel zone yielded encouraging results. The continuation of gold mineralization east into the Sentinel zone was confirmed with the presence of both gossanous outcrops reflecting the massive sulphide horizon which is host to the gold-copper mineralization and located in the hanging wall to the gold resource, and biotite aplite. In addition, an old historic shaft and several small prospect pits were discovered in the Sentinel zone that are believed to date circa 1890’s. A grab sample of gossan from the massive sulphide horizon located 800 m east of the Dawson zone assayed 0.34 g/t gold and 0.18% copper. These grades are similar to those up dip from the high grade gold mineralization in the Dawson zone and as such lends strong support to the prospectivity for gold at the Sentinel zone. Zephyr is the first company to explore for gold in this area since the 1890’s era, hence the keen anticipation to drill test these prospective targets in a future drill program. For additional information on exploration results at the Sentinel zone, please see news releases dated June 27 and October 23, 2018.


The Company completed a diamond drilling program in Q3-2018 totaling 11 holes for 1,853 m principally on the Dawson and Windy Gulch zones with the goal of expanding gold resources. One hole was also drilled on the Copper King zone. The best hole, DA-18-16 on the Dawson zone intercepted 3.4 m grading 17.6 g/t gold, 5.5 m of 7.6 g/t gold and 0.9 m of 17.4 g/t.* Drill holes DA-18-12 and DA-18-13 intercepted low grade values and essentially defined the east boundary of the gold mineralization at a relatively shallow depth. Additional potential for gold mineralization in the eastern area of the Dawson zone will be at depth.


The best drill intercept at the Windy Gulch zone was WG-18-40 which intersected 6.6 m grading 4.8 g/t gold, including an interval of 2.7 m grading 9.7 g/t gold.** Future drilling at Windy Gulch will be targeted to the west and at depth. 


For additional information on the results of the drill program the reader is referred to news releases of July 17, September 10, October 23 and November 8, 2018.


*True width approx. 80% of intercept width.   

** True width approx.. 50% of intercept width.

Preliminary Economic Assessment

On February 7, 2017, the Company announced the results of a Preliminary Economic Assessment (“PEA”) on the Dawson Gold Project. The PEA provides a base case assessment of developing the Dawson segment mineral resource only.

The Technical Report containing the foregoing PEA is available on SEDAR (www.sedar.com). The report is entitled “National Instrument 43-101 Technical Report for the Dawson Property, Colorado, USA”, effective March 21, 2017 (the “Technical Report”). The Technical Report was prepared by independent engineering firm, Golder Associates Ltd., with input from a number of other specialized and experienced consulting firms, and is in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects.


Base case parameters assume a gold price of US$1,250/oz and an exchange rate (US$ to C$) of 0.76.


  • Pre-Tax IRR and NPV5% of 66% and $46.7 million (US$35.5 million) and a 2.4 year payback of initial capital;

  • After-Tax IRR and NPV5% of 46% and $29.1 million (US$22.1 million) and a payback of 2.7 years;

  • Low initial capital of $43.6 million (US$33.2 million) including contingency;

  • Life of mine (“LOM”) cash cost of US$563/oz(1);

  • LOM all in sustaining cost of US$129/oz(2);

  • LOM diluted head grade 9.2 grams per tonne (“g/t”) (0.27 ounces per short ton (“oz/st”));

  • LOM gold combined gravity and float recovery of 92%


  1. Cash cost includes mining cost, mine-level G&A, mill and refining costs.

  2. Sustaining capital cost includes underground equipment and waste development costs after the mill has been commissioned.


This PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There has been insufficient drilling to define the inferred resources as indicted or measured mineral resource; however, it is reasonable to expect that the inferred mineral resources could be upgraded to indicated and possibly measured resources with continued drilling. There is no guarantee that any part of the mineral resources discussed herein will be converted into a mineral reserve in the future.

Dawson Segment NI 43-101 Resource Estimate


  1. Tonnes and tons have been rounded to the nearest 1,000.

  2. Ounces have been calculated from reported tonnes and g/t Au grade and are rounded to the nearest 100 ounces

  3. Contributing 5 ft (1.5 m) assay composites were capped at 1.17 oz/tn (40 g/t) Au

  4. The resource statement cut-off grade of 0.15 oz/tn (5.00 g/t) Au is highlighted in Table 14-8 above through bolding and reflects underground development potential based on a Au price of $US1,200/ounce.

  5. A density value of 0.082 tn/ft3 (2.63 g/cm3) was used for the Dawson Segment

  6. Mineral resources were estimated in conformance with the Canadian Institute of Mining, Metallurgy and    Petroleum – Standards on Mineral Resources and Reserves – Definitions and Guidelines, as referenced in NI 43-101.

  7. The rounding of tonnes as required by NI 43-101 reporting guidelines may result in apparent differences between tonnes, grade and contained ounces.

  8. Mineral resources are not mineral reserves and do not have demonstrated economic viability. This estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.

  9. The quantities and grades of reported Inferred Mineral Resources are uncertain in nature and further exploration may not result in their upgrading to Indicated or Measured status.