Project Description

The past producing La Colorada gold-silver mine property is located approximately 40 km southeast of Hermosillo, Sonora State, Mexico. La Colorada originally operated as a high-grade underground mine, which closed at the start of the Mexican Revolution in 1914. During the period 1993-2000 Eldorado Gold Corp developed a bulk tonnage heap leach operation from several open pits; although the operation was sold in late 2000, production continued by a private Mexican owner until April 2002, yet La Colorada was never shut down for the lack of gold.



During the main historic mining period from 1876-1914 the production of more than 3 million ounces of gold was recorded. In I990 the Mexican Geological Service (SGM) measured 1.5 million tons of tailings that were utilized at the start of the open pit production by Eldorado in 1993. The last formal resource estimates for the open pit project were done by Eldorado in 2000. Eldorado published estimated bulk tonnage open pit reserves of 4,115,200 tonnes averaging 1.18 g/t gold (155,900 ounces) within an open pit resources of 21,534,300 tonnes at 0.87 g/t gold (599,300 ounces, total). Production records provided by the current owner show 3,617,340 tonnes of about 0.9 g/t gold were mined following that estimate. In early 1998 Eldorado reported an intersection of 9.4 metres of 31.27 g/t gold which included 3 metres of 80.14 g/t gold. (These estimates are not compliant with NI 43-101 and should not be relied upon, and are reproduced as historic reporting only. Pediment has not independently verified these estimates.)

Geological Background

The La Colorada gold vein deposits are hosted in a volcano-sedimentary sequence that has been locally altered to skarn by magma intrusions. Veins are focused along east-west and northeast-southwest trending structures that dip to the north and northwest at moderate angles, and cut across the skarn and intrusions. Surface mining was focused along three structures, the upper parts of which flare out into stockwork zones. Eight different structures in the La Colorada mine area appear to have older underground workings in gold bearing quartz veins. Past reports indicated the gold deposits formed under mesothermal or deep epithermal conditions, and implied a genetic relationship to the Cretaceous aged magma intrusions that created the skarn. Recent fluid-inclusion studies on veins indicate a low-temperature regime in the epithermal range, and radiometric age determinations indicate ages younger then those for the Cretaceous period of magma intrusion. In addition to this, recent investigations indicate some veins cut Miocene aged volcanic rocks, which suggests the vein forming period at La Colorada is as young as the veins of the Sierra Madre Occidental gold-silver belt located to the east of La Colorada.

Exploration & Development

Pediment has acquired nine mineral concessions with a total of 1070 hectares centered within the project. Some of the concessions cover part of the El Creston pit and adjacent ground. In 2008 the Company completed the first RC drill program consisting of 4,320 metres (please also refer to February 17, 2009 news release).

The Company is now planning a second work program to begin this summer. It will utilize both reverse circulation and diamond drilling in the two work phases, totaling approximately 8,000 metres. The RC drill program will help to define and extend known near-surface mineralization where quick-to-start open pit mineable ore can be identified and added to the leach process facility. These are the four key locations:
(Please refer to the proposed drill map below)

1. Southern and eastern extension from Creston pit areas where previous Eldorado drilling and systematic, continuous pit-wall sampling suggest extensions of gold mineralization exist.

2. North-eastern extension of vein zones outside Creston pit area including the nearby La Verde surface mineralized area where nearby drilling in 2008 returned a maximum intercept 1.5 metres of 518 g/t Au.

3. Easterly extension of La Colorada and Gran Central vein zones including the intermediate area. Pit wall sampling has identified gold values in the walls of these two vein-pit zones that account for a wide zone of near surface gold readily accessible. These areas will be tested to block out a resource and check leachability of precious metals.

4. Closer spaced drilling in the higher-grade part of the Veta Madre area. Blocking out of the mineable ore in the Veta Madre zone will allow planning for possible exploitation of the near one gram per tonne gold bearing area. During 2008, drill hole LCOL-R11 intercept 42.2 metres of 0.64 g/t gold and 7.52 g/t silver.

The objective of the diamond drill program is to confirm, over broad intervals, the existence of underground vein gold mineralization in three main areas. These areas are extensions of the vein zone within the two main blocks that contain the Creston and Gran Central veins, and a third zone west of the Gran Central block where several old shafts prospected nearly barren epithermal veins to about 25 metres depth. An example of the targeted extension is the intercept in 2008 RC drill hole (LCOL-R17) that cut 1.5 meters of 19.3 g/t Au and 447 g/t Ag in 4.6 m averaging 10.1 g/t Au and 323 g/t Ag in the extension of the Gran Central vein zone.



click to enlarge
The Company has also engaged a qualified mining engineer on a consulting basis, to evaluate the production facility at La Colorada. This work will focus on assessing the state and capability of the metallurgical facilities including pond liners, leach pads, and mechanical segments of the plant, conducting a full environmental assessment of the mine, and directing a program to test ore and stockpiled material previously mined by Eldorado Gold Corp.

Leach Pads	Processing Facility	Processing Facility
Quartz Veinlets	Quartz Veinlets	Rock Sample
Creston Pit	Grand Central Pit	Pit
El Creston	Gran Central

2008 drill hole map

2009 proposed drill hole map

GEOLOGICAL SETTING AT LA COLORADA MINE AREA

Geology of the La Colorada mine area is a complex mix of Paleozoic meta-sedimentary units and Mesozoic age coarse grained intrusions into those meta-sediments. Late Tertiary age volcanics and conglomerates lie upon the older rocks with about a 25 degree inclined tilt of the horizontal layering of the volcanics. The large set of La Colorada mine related veins cross all rock types except the youngest layered volcanics and conglomerates.

The veins are epithermal, meaning low temperature and deposited in a near surface environment. Probable depth of deposition ranges from about 300 to 1000 meters for most of the vein material at temperatures ranging from 220 to 300 degrees C. These temperature depositional conditions were determined by fluid inclusion examination from 29 samples of veins. Research, in epithermal low sulfide veins, has shown that contained precious metals and base metals are deposited in areas of the vein where boiling has occurred as the hydrothermal fluids move upward toward the surface from deeper and higher temperature sources where the fluids are not boiling due to higher pressures.

The veins are eventually filled as open fissures, often with numerous fine bands of minerals, quartz and sulfides including precious metals. The veins can be rich with bonanza grades occurring in parts of the veins. With a boiling zone occurring, a vapor rich zone usually immediately is overlying that boiling zone, but having only low grade precious metal contents, but usually contains higher volatile components including anomalous mercury content. Boiling zones develop along a general horizontal plane representing the former surface but at a depth about 200-300 meters below the surface. The entire vertical range of the quartz vein may be about 800 meters with only about 3-400 meters being productive. Commonly the top parts of an epithermal vein disperse into broad horsetail or shatter zones that may be more conducive to open pit mining.

La Colorada Geological Model Summary

The "mine trend" vein zones are oriented about north 70o east, and contain generally northerly dipping veins. After deposition of the veins, the entire area was tilted to the southwest to about 25 degrees such that the individual veins might dip at more shallow angles than when they were originally emplaced. The prospective boiling zone also now plunges with the tilting towards the southwest. Subsequently, the mine trend zones of vein mineralization were, by means of a listric dip-slip faulting and tilting episode, divided into a series of at least six discrete, en-echelon blocks by cross-faulting along about a 10 kilometer trend length. Listric faulting forms the development of the basin and range blocks that is characteristic of the SW US and NW Mexico. Five named fault blocks have been named in the La Colorada mining district that been observed to cut the vein zones.

The north-south trending post mineral listric cross-faults have juxtaposed the various blocks so that each is exposed to the current surface at different levels relative to the prospective boiling zone section. The boiling zone portions of an epithermal system are zones of gold silver mineralization within which "bonanza" grade shoots can be developed. Past mining has been conducted in the Gran Central block and the El Creston block where the boiling zones are exposed to surface. Additional potential for resource expansion is highly probable along extensions of the mineralized trends within these two blocks. There is also exploration potential within at least two other adjacent blocks, as described above, in which the surface exposures show typical features found above the boiling zone of an epithermal system. Deeper testing at the projected bonanza-level boiling zone depths outside the two main blocks has not been done. While the complex post-mineral faulting in the area has made tracing the system more difficult, it has also preserved considerable portions of the potential at relatively shallow depths for testing as underground mineable targets. Mineralized zones regarded as plunging southwesterly now were formerly horizontal boiling zones with shifting vertical levels of boiling.

Vein-bearing trends have been tilted to the southwest and then cut into a series of discrete blocks by an en-echelon series of northerly trending, dip-slip faults. The results of a recent drill program indicate a potential for at least 250 metres of high-grade trend extension beyond the open pit to the southwest. Similar potential for high grade bodies exists within the area between the Gran Central pit and the Creston pit. Similar possibilities exist in the adjacent fault blocks that have not been tested at depth.

Summary of Vein Setting

The main northeast-southwest mineralized vein trend at La Colorada consists of an epithermal vein swarm. The veins within the trend have northerly dips at various angles ranging from vertical to 45 degrees. Tilting of large fault blocks hosting the veins leaves the blocks capped with a later horizontal volcanic layer that is sub-parallel to underlying mineral zones both of which dip southwest at 25-30 degrees. Mineralization has been mined from two central blocks, Gran Central (including the La Colorada, Intermediate veins as well as the Gran Central vein) and El Creston. Both of these blocks host the "bonanza" level of mineralization that is now partly exposed to surface erosion only at the northeastern end of each block.

Modern exploration efforts at La Colorada had focused on outlining resources that could be mined by open pit while older historic mining was focused on high grade veins. Based on the structural model, exploration for the potentially underground mineable resources will continue by testing along the down-plunge extensions of the system in five fault blocks. It should be noted that historic underground resource calculations were made only for areas below the Gran Central and La Colorada open pit.

VETA MADRE
Drillhole	From	To	Length	Auppm	Agppm
08-LCOL-R09	59.44	60.96	1.52	0.59	1.38
and	76.20	85.34	9.14	0.23	8.16
and	102.11	103.63	1.52	0.40	19.45
08-LCOL-R10	19.81	25.91	6.10	1.12	1.91
and	36.58	39.62	3.05	0.73	11.66
and	47.24	50.29	3.05	0.29	2.74
08-LCOL-R11	1.52	45.72	44.20	0.64	7.52
LA VERDE DRILL RESULTS 0.2 ppm gold cut off
Drillhole	From	To	Length	Au pppm	Ag ppm
08-LCOL-R01	0.00	6.10	6.10	1.27	21.97
and	32.00	33.53	1.52	1.23	1.05
and	53.34	60.96	7.62	2.93	20.15
and	92.96	100.58	7.62	1.45	2.33
08-LCOL-R02	1.52	7.62	6.10	0.24	7.00
and	18.29	19.81	1.52	0.43	10.05
08-LCOL-R03	123.44	124.97	1.52	518.00	89.00
08-LCOL-R03	124.97	126.49	1.52	0.93	3.42
08-LCOL-R03	126.49	128.02	1.52	12.60	2.31
08-LCOL-R04	134.11	135.64	1.52	1.16	177.00
08-LCOL-R05	6.10	9.14	3.05	0.32	16.08
08-LCOL-R06	32.00	33.53	1.52	5.93	2.80
08-LCOL-R06	57.91	59.44	1.52	2.19	3.87
08-LCOL-R07	79.25	80.77	1.52	30.20	4.05
08-LCOL-R07	80.77	82.30	1.52	0.19	5.82
08-LCOL-R07	82.30	83.82	1.52	0.67	7.25
08-LCOL-R13	137.16	138.68	1.52	2.45	12.30
CRESTON NORTHWEST 0.2 ppm gold cut off
Drillhole	From	To	Length	Au pppm	Ag ppm
08-LCOL-R21	126.49	128.02	1.52	0.25	27.00
08-LCOL-R21	128.02	129.54	1.52	8.79	270.10
08-LCOL-R21	129.54	131.06	1.52	0.46	32.40