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 Overview
Project Overview In an effort to accelerate its production growth, in May 2008 Sherwood acquired 100% ownership in Western Keltic Mines Ltd., owner of the high grade Kutcho copper-zinc-gold-silver deposit in northwestern British Columbia. Western Keltic and a wholly-owned subsidiary of Sherwood have been amalgamated under the name "Kutcho Copper Corp." and the amalgamated company is now a wholly-owned subsidiary of Sherwood. The Kutcho project is a high grade copper-zinc-gold-silver deposit in the advanced development stage. The deposit is located approximately 120 km east of the community of Dease Lake, and 330 km north of Smithers in northern British Columbia. The Kutcho deposit significantly increases Sherwood's resource base and the project is currently being advanced towards a production decision. Prior operators completed a pre-feasibility study evaluating the potential development of the Kutcho Creek deposit, the results of which were announced on September 5, 2007. Subsequent to acquiring the Kutcho project, Sherwood began reassessing the development plans by focusing on the rapid development of a smaller scale, lower capital cost operation that is focused on high grade production up front. In June of 2008, Sherwood completed a preliminary economic assessment which demonstrated positive base case economics and outlined several opportunities for significant future enhancements. The most significant upside opportunities, which are currently being evaluated, include increasing the tonnes and grade of material to be processed and improving metallurgical recoveries beyond those assumed in the study. Sherwood began a drill program in May of 2008 to provide information necessary to support its objectives and intends to issue an updated preliminary economic assessment in the fall of 2008. The updated assessment would incorporate several optimization opportunities including the results of the 2008 infill drilling, results from initial metallurgical testing currently in process and incorporating some of the more than 50% of the project mineral resources not considered in this current study. In conjunction with these activities, Sherwood has re-commenced the permitting process and has engaged local First Nations and their stakeholders in the consultation process. Mineral Resources (0.75 CuEq cut-off) - Main Deposit Only
The PEA only evaluated open pit mining of a portion of one of the three known deposits comprising the Kutcho Project, known as the "Main" deposit. The Main deposit is a tabular body of high grade copper-zinc mineralization that outcrops on surface. West of the Main deposit lies the poorly drilled Sumac deposit and, beyond that, the Esso deposit, the highest grade of the three know deposits. The Main deposit is proposed to be developed as an open pit that would produce a total of 10.7 million tonnes (Mt) of mill feed and 54.3 Mt of waste over an initial 7.3-year mine operating life. Additional mineral resources remain within the Main deposit, as well as those in the Sumac and Esso deposits, that could potentially support an extended life. Sherwood is currently evaluating the possibility of extracting some or all of the remaining mineral resources in the Main deposit, Esso deposit and Sumac deposit, possibly by underground methods. These and other opportunities will be addressed in subsequent studies. Production The following sets out the copper, zinc, gold and silver in concentrates and estimated payable metal detailed in the preliminary economic assessment.
Additional smoothing of production is planned post-PEA as part of an on-going process of open pit optimization, as well as evaluating options for extending the mine life by incorporating additional mineral resources defined on the Kutcho Project but not considered in the PEA, including the balance of the Main deposit and those in the Esso and Sumac deposits. Project Opportunities The preliminary economic assessment laid out the basis for the development of an open pit mining operation based on mining of the Main deposit only, which is only one of the three identified mineral deposits at Kutcho. Several opportunities for enhanced project economics were included in the study, a number of which Sherwood is already evaluating as part of its on-going work program. The most important opportunities to improve the project are:
2008 Work Programs As a result of the recommendations in the PEA, Sherwood has an extensive work program underway to investigate the project opportunities identified and to mitigate the project risks. This work program includes:
2008 Exploration Program Sherwood Copper commenced a drill program on the Kutcho project in May of 2008. The program will consist of a minimum of 12,000m of HQ and NQ core utilizing two drills. The principal objectives of the drill program are to:
Resource Disclosure Kirkham Geosystems Ltd. prepared the mineral resource estimate for the Kutcho deposit. Mr. Kirkham has reviewed pertinent geological information in sufficient detail to support the data incorporated in the resource estimate. Garth Kirkham, P.Geo. of Kirkham Geosystems Ltd. is the Independent Qualified Person under National Instrument 43-101 responsible for the resource estimate. The estimates for copper, zinc, silver and gold were completed for the PEA Report dated June of 2008 using the MineSightTM 3-dimensional mine planning software system. The estimate was based upon a database comprised of 346 drill holes supplied by Kutcho Copper. The estimation process was constrained by a solid model based on lithological boundaries combined with grade contours. Assays were then composited into 2.5m intervals for statistical and geostatistical analysis to be performed within the constraining domains. A 5m by 5m by 5m orthogonal block model was created and Ordinary Kriging was used as the method to interpolate grades into each block within the solid domain. Bulk density measurements were supplied within the drill hole database and also interpolated into each block using Inverse Distance to the 3rd power as the interpolator. Individual blocks were then classified into indicated and inferred categories based on number of drillholes, number of composites, average distance to composite, distance to nearest composite and relative error. The grades and tonnages reported in the resource estimate represent the material contained within the mineralized portion (as a percentage) of the classified block below topography. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated mineral resource categories through further drilling, or into mineral reserves once economic considerations are applied. Back In and Off Take Rights Upon receipt of a feasibility study, Barrick and AMI, or Barrick alone, have a 120 day period to provide Western Keltic written notice of its intention to earn a 50% back in interest on the Kutcho property subject to aggregate payments equal to 300% of development expenditures on the Kutcho property. This would give Barrick and AMI, or Barrick alone, a 20% interest in the Main deposit and a 50% interest in the Esso deposit, based on the property definition per the acquisition agreements and as interpreted in the September 2007 Pre-feasibility Study. In addition, Sumitomo Metal Mining Co. Ltd. have right of first refusal on the sale of concentrates from the Kutcho property subject to a 30 day written notice period from Western Keltic. Mineralization was first discovered on what is now the Kutcho property in 1968 by a joint venture exploration operated by Imperial Oil Ltd. The joint venture allowed their claims to lapse and, Sumac Mines Ltd., who had also conducted exploration in the area, staked several claims resulting in a cruciform claim outline overlying the western part of the main Kutcho sulphide deposit. Imperial Oil, later becoming Esso Minerals Canada Ltd., returned to re-stake some of the area in 1972, which resulted in a much larger area that encompassed Sumac's claims. Beginning in 1973, both Sumac and Esso carried out exploration work, and their early successes prompted additional staking which resulted in claim boundaries roughly as they are today. Diamond drilling commenced in 1974, and by 1982 three sulphide lenses had been defined. In 1983, Esso and Sumac signed a 50/50 joint venture agreement for development work on Kutcho that culminated in a pre-feasibility study being completed in 1985. In 1989, Esso sold most of its mining assets to Homestake Canada Ltd. who optioned the property to American Reserve Mining Corporation (ARMC). ARMC conducted additional exploration and engineering studies but relinquished the option in 1993 while retaining a 20% interest in Homestake's property. Homestake optioned the property to Teck Cominco Ltd. in 1992 who carried out deep penetration EM geophysical surveys. Teck dropped their option and Homestake was purchased by Barrick Gold Corp. in 2003. Western Keltic Mines Ltd. purchased the property from Barrick and Sumitomo in early 2004. Western Keltic carried out diamond drilling within the Main and Esso deposits to confirm historical results and obtain material for metallurgical studies. The Sumac deposit was also drilled in 2005 to test for higher grade zones. In September 2007, Western Keltic completed and announced the results of a pre-feasibility study evaluating the potential development of the Kutcho Creek deposit. This study defined resources and reserves as set out in an amended and restated technical report filed on SEDAR on October 29, 2007. In November 2007 Sherwood announced that it has entered into an agreement with Western Keltic under which Sherwood has agreed to make an offer to acquire all the shares of Western Keltic through the issuance of 0.08 of a share of Sherwood for each share of Western Keltic. Prior to this announcement, Western Keltic had been advancing the project towards completion of a feasibility study by conducting geotechnical and environmental baseline studies, as well as advancing the permitting process for approval of production. Western Keltic had also been actively engaged in discussions with the Talhtan and Kaska First Nations, as well as other local communities to ensure there is broad based support for the development of a mine at Kutcho Creek, while taking into account the concerns of the First Nations and other stakeholders. In May of 2008 Sherwood successfully acquired 100% ownership in Western Keltic. Western Keltic and a wholly-owned subsidiary of Sherwood were amalgamated under the name "Kutcho Copper Corp." and the amalgamated company is now a wholly-owned subsidiary of Sherwood. Sherwood's first objective was to reassess the development options of the Kutcho project and, in March of 2008, commenced work on a preliminary assessment aimed at a re-scoped and redesigned project that is focused on a smaller, less capital intensive high grade open pit project that could be developed faster than previously planned by Western Keltic Mines. In June of 2008 Sherwood completed a preliminary economic assessment which demonstrated positive base case economics and outlined several opportunities for significant future enhancements. The most significant upside opportunities, which are currently being evaluated, include increasing the tonnes and grade of material to be processed and improving metallurgical recoveries beyond those assumed in the study. Sherwood began a drill program in May of 2008 to provide information necessary to support its objectives and intends to issue an updated preliminary economic assessment in the fall of 2008. MAP GALLERY Proposed Mine Site Proposed Project Layout Known Massive Sulphide Deposits, Drill Holes, and Surface Topography Kutcho Proposed phasing of open pit on Main deposit (looking south) Kutcho Long Section
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