MX GOLD CORP TSX-V: MXL

Magistral Project

MAGISTRAL DEL ORO

Magistral Del Oro Project is located 392 Km. South West of Chihuahua City, in route to Parral 220 km, from there due South on Durango Hi-way for 120 km to Santa Maria Del Oro interception, turn West to Santa Maria Del Oro for 48km, continue East for 3.5 km, then turn South for .5 km to the Magistral Del Oro Project. All paved road except for the last 0.5 kilometer.

This plant was build to 500 TPD Dynamic Cyanide counter current system, but can produce at higher rates.

The tailings that are to be processed contain approximately 1.26 million tons grading 2.06 grams gold. Kappes Cassiday & Associates performed the metallurgical studies. We have done additional work to confirm their results.

Construction began in 2010 and completed in October of 2013. Operations began in November of 2013, and were suspended in July 2014.

The suspension was related to unusual and extreme rain in the area that caused overflow of the excess pond overflow, (not tailings pond) which caused overspill into the creek for approximately 250 meters, with pregnant solution containing 4 PPM, (causing no human, animal or environmental damage)

In a reaction from Ejido officials, the event was reported to CONAGUA, (Water Commission) which in turn caused the suspension of operations to date.

To date, CONAGUA has approved a water deviation program to be implemented prior to lifting suspension. The intent is to have early suspension lifted and allow us to begin operations in conjunction with the start up of the water deviation program. This approach has been discussed with CONAGUA’s upper level officials and we have received a very positive response, but need to be finalized.

Reasons for NOT sustaining steady production through the 8 months the plant operated, as per Ramiro Trevizo and various consultants are as follows:

1) The feed to the ore bin is being taken directly from tailings pile to the ore bin with out any treatment at all, that being dirty tailings (rock, sticks and trash) which repeatedly cause the segregate tank to overload with rock, sticks, and trash, causing shut down almost every other day. The segregate tank then needed to be opened up and cleaned, then reloaded and restarted.

This is an all day job and a major cost of labor and efficiency.

Solution:

A couple of options are available and are very inexpensive;

a. hydro-mining – with hydro-mining methods, we can pump the tailings directly to segregate tank with a measured pulp percentage adequate to the system and installation capacity, eliminating hauling, various equipment, contractors, and cleaning costs.

b. The excavator that is loading the dump truck, can be fitted with a special bucket (already on the market) that has a built in attritioner. This bucket is capable of breaking upthe material and separates any rock, sticks or trash prior to loading dump trucks, thus hauling clean tailings to the ore bin.

2) Previously, the ore bin was being assisted by three men whose role was to push the feed thru, thus causing an unsteady feed to segregating tank and adding cost of production

Solution:

The ore bin needs to be retrofitted with a chain dossifier and a variable speed electric motor, thus accomplishing steady feed and reducing labor costs.

3) The IP thickener tanks are usually fitted with a discharge screen that allows for clean ore flow from tank to tank. Currently, the IP tanks are fitted with one mesh basket at discharge, requiring three to four men cleaning such baskets to maintain steady flow thru, again causing excessive labor costs and efficiency.

Solution:

The IP tanks have to be retrofitted with circular screens located around the inside perimeter of tank with a self cleaning system (already on the market) which is run by the same impeller shaft, fitted with a speed reducer, for circular screen cleaning paddle, thus lowering labor cost and increasing efficiency

4) There is excessive wear on the tailings mud pump due to inconsistent feed, that causes constant shut downs, thus lowering production and increasing costs

Solution:

Acquire  the proper mud pumps that are designed for thispurpose. For redundancy, install a secondary pump with switching manifold to avoid shutdowns. Simply switch over to second pump and repair damaged pump with no down time.

5) The electrolysis / carbon recuperating system is undersized and poorly designed.

Solution:

a) Incorporate various recommended changes and additions to the capacity for the Carbon system

b) Install a Merrill Crowe recovery system