Dawson
Management continues to hold the view that the Dawson section has the potential for an economic, near-term, low capex, low opex, high grade underground gold mine. Subject to receiving a mining permit and funding, the Company intends to construct a ramp to access the Dawson gold deposit and conduct underground infill drilling to raise the confidence level of the inferred gold resource and deep drilling with the objective of growing resources. In order to undertake this program, the Company is required to first obtain the mining permit amongst other regulatory approvals. The deficiencies to the original application for the mining permit remain outstanding at this juncture. The principal deficiency is the requirement to drill an additional 6 water monitoring wells and data collection from these over a 15-month period. Funding for this work is presently not in hand, and although efforts continue to address this issue, there is no assurance the Company will be successful in raising the necessary funds to undertake the water well drilling program and the 15 months of water well data collection. The planned underground program can not commence without the mining permit and certain industrial approvals, and would also be subject to securing the necessary funding.
While there is no certainty Zephyr will receive a mining permit to develop the Dawson gold deposit, based on the benign environmental characteristics of the project the Company remains optimistic of ultimate success in this regard. As such, the Company plans to continue in its efforts to undertake the necessary steps, subject to funding, to gain a mining permit. Once the mining permit is in hand along with certain industrial approvals, and subject to funding, an underground program is planned to further develop the deposit. In addition, targets with potential to add gold resources at the Windy Gulch and Windy Point areas of the Dawson section will be reviewed in the context of recommencing surface drilling once a mining permit has been granted or if favourable market conditions support funding for exploration drilling in the interim.
Dawson - Background
Dawson is comprised of 57 contiguous unpatented lode mining claims, eight patented lode mining claims and two patented placer claims covering approximately 505 hectares (1,249 acres). Dawson encompasses five contiguous gold mineralized areas over a strike length of 3.8 km which are, from east to west: Sentinel, Dawson, Copper King, Windy Gulch and the Windy Point zones. The inferred 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 geologically favourable trend. Surface rights total 301 acres and are sufficient for the current mine development plans. The 50% of the eight patented lode mining claims not held by Zephyr is leased by Zephyr through a “Mining Lease and Agreement”, and the 50% interest in the placer claim not held by Zephyr is leased through a property lease agreement, which effectively gives Zephyr 100% control of these claims. Twenty-one of the 51 unpatented claims and the eight patented lode mining claims 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 NI 43-101 compliant resource estimate was completed on the Dawson and Windy Gulch zones at the Dawson section in 2013. The resource estimates were disclosed in the technical reports on Dawson entitled “Resource Estimate Technical Report for the Dawson Property Fremont County, Colorado, USA” with an effective date of July 19, 2013 and “Updated National Instrument 43-101 Technical Report for the Dawson Property, Colorado, USA” with an effective date of August 26, 2015. The Dawson zone resource estimate was utilized in the completion of a Preliminary Economic Assessment in 2017 entitled “National Instrument 43-101 Technical Report for the Dawson Property, Colorado, USA” with an effective date of March 21, 2017.
The potential for increasing resources at the Dawson section is considered very good with identified drill targets below the current inferred gold resource at the Dawson zone, at the Sentinel zone to the east and the Windy Gulch and Windy Point zones to the west. If the Company is successful in obtaining the mining permit for Dawson, the next step, subject to funding, is the construction of a ramp to access the Dawson gold deposit and to establish underground drill stations from which to conduct infill drilling on the current inferred gold resource and to test deeper targets for additional gold mineralization.
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.
The qualified person for this page for the purposes of National Instrument 43-101 is Terry Coughlan, P.Geo.. He has read and approved the scientific and technical information that forms the basis for the disclosure contained herein.