Pine Grove Property

Panorama view of Pine Grove Property   Pine Grove District Geology

Location
The property is located approximately 20 miles south of the farming and mining town of Yerington in the Pine Grove Hills, Humboldt-Toiyabe National Forest, Lyon County, western Nevada. Access is excellent via paved Nevada State Highway 208 to the East Walker Road (gravel) southward to the Pine Grove drainage and then 4 miles by dirt road onto the center of the property. The property encompasses almost all of the Pine Grove (Wilson) mining district.

Land
Lincoln controls 100% interest in claims covering nearly 7 square miles. The Company has mining leases on the Wilson and Wheeler mines (patented claims) and 243 unpatented claims owned directly by Lincoln. The Company's land position covers the main gold mineralization in the district, exploration targets, and adequate land for mine and processing facilities. The patented claims (private property) are under the jurisdiction of the State of Nevada. Unpatented claims are under the jurisdiction of the U.S. Forest Service.

History
The mining district was discovered in 1866 and was originally called the Wilson mining district. The name changed over time to the Pine Grove mining district which reflects the name of the mountains in which the district is located. Gold was produced largely from two underground mines, the Wilson and the nearby Wheeler, which are separated by about 3,500 ft on either side of Pine Grove Creek. At one time the district hosted three stamp mills and reached a population of 1,000 people. Most underground mining was completed by 1887 with sporadic production to 1915. Approximately 240,000 oz gold were produced with an average grade of 1.36 oz per ton gold. Most of the old workings are shallow and are no deeper than 140 ft.

Geology & Mineralization
The Pine Gove district is dominated by Jurassic granodiorite and its variations. The granodiorite has been postassicly altered and locally displays abundant secondary biotite. Dikes and sills of various compositions (andestie, dacite, rhyolite) have intruded the granodiorite within the Pine Grove fault zone. These dikes and sills are thought to be the source of the gold mineralization. Native gold is associated with various quartz veins, stockworks, and disseminations hosted primarily in the granodiorite. Mineralized quartz veins contain pyrite with minor chalcopyrite, pyrrhotite, and native gold. Elevated copper is present. The style of mineralization appears to be of the "Shear Zone" sub-type of Plutonic-Related Gold Quartz Veins and Veinlets." The shallow-dipping, Pine Grove fault zone is approximately 600 ft wide and at least 1 mile long and appears to be the primary structural control on gold mineralization. The fault zone is an excellent exploration target. Significant gold mineralization occurs as stacked, sub-horizontal zones and pods ranging from 5 to 70 ft in thickness. Most of the mineralization drilled to date is shallow, less than 200 ft in depth. Although high-grade gold (>0.5 oz per ton) was the target in the historic past, the enclosing, lower grade gold mineralization ranging from 0.01 to >0.1 oz per gold is the present material of interest.

Previous Work
Several companies have pursued the district in recent times including Teck Resources in the early 1990s. Teck spent US$2.2 million dollars conducting geologic mapping and sampling and also drilled 188 reverse-circulation holes (67,488 ft) and two core holes (614 ft). Much of the drilling was on 100 ft centers. Although much of the district remains unexplored, Teck dropped the property. Lincoln is in possession of all of Teck's technical data, including drill hole logs and certificates of assay from ALS Chemex.

Measured and Indicated Gold Resources at Pine Grove
A positive preliminary economic assessment for the Pine Grove Property was announced on December 8, 2011 and filed on SEDAR on December 14, 2011. A link to the report is provided at the end of this section.

Total Measured and Indicated Gold Resources at Pine Grove at 0.007 opt Au cutoff (as at December 8, 2011):

Measured and Indicated Gold Resources Within Pit Shell at Pine Grove (included in Total Resources above) at 0.007 opt Au cutoff (as at December 8, 2011):

Inferred Gold Resources at Pine Grove (not included in Total Resources above) at 0.007 opt Au cutoff (as at December 8, 2011): 

Lincoln Work
In 2008, Lincoln drilled four large-diameter PQ core holes (799 ft) for metallurgical testing. Five column leach tests were conducted in 2010 by McClelland Laboratories in Sparks, Nevada. Results from the tests conducted on 3/8-inch crushed material were excellent to include 85% and 87.5% gold recovery. Additional large-diameter core for metallurgical texting was acquired in November 2010.  Also, results from 39 bottle-roll leach tests were received in 2011 with encouraging results.

In 2009, the Company acquired new aerial photography and generated new topographic base maps suitable for mine planning and engineering. The Wilson and Wheeler patented claims were professionally surveyed to insure that appropriate State of Nevada and US Forest Service jurisdictions are determined. JBR Environmental Consultants in Reno, Nevada has been contracted to expedite all stages of permitting.

In November 2009, Lincoln initiated a reverse-circulation (RC) drilling program designed to reaffirm and potentially upgrade the Inferred resources reported in NI 43-101 technical report dated December 19, 2008. Drilling ceased in February 2010 and was renewed in July through August 2010. All new RC drilling data was provided to Tetra Tech in Golden, CO for incorporation in an updated technical report (filed on March 21, 2011). In July and August 2010, 843 soil samples were collected from the western portion of the Wilson patented claims onto lode claims staked by Lincoln. Several strong gold-copper soil anomalies were identified which warrant drilling. Lincoln has completed various biological and cultural surveys and maintains a weather station on site.

In 2010, the Company contracted NVEnergy to identify an electrical power source. The closest power source is approx 13 miles northwest of the property. Ten key lode claims (Cavanaugh group) were purchased and the Wilson deposit production royalty was bought down to a fixed 2.5% NSR. 

On March 16, 2011, a new technical report was compiled by Tetra Tech, Inc. of Golden, Colorado, under the provisions of Canadian National Instrument 43-101. The technical report states that combined Indicated resources for the Wheeler and Wilson deposits are reported at 177,000 ozs gold contained in 5,316,000 tons grading 0.033 opt gold cutoff grade. In addition, An additional Inferred resources are reported at 115,000 ozs gold contained in 4,136,000 tons grading 0.028 opt gold at a 0.010 opt gold at a 0.010 opt cutoff grade (see Technical Report section).

On December 8, 2011, Lincoln announced that it has received a positive preliminary economic assessment (“PEA”) on the proposed open-pit mining and heap leach operation at its Pine Grove Gold Project. The PEA was completed by Telesto Nevada Inc. (“Telesto”) in Reno, Nevada. The PEA reports that “A detailed economic analysis was completed for the Pine Grove Project utilizing information from Cost Mine for labour rates and some capital items, quotations from vendors and Telesto experience with projects of similar size and nature. The project is relatively sound with a free cash flow of US$32 million dollars at a gold price of US$1425 (all dollars referred to herein are $US), an IRR of 31% and Net Present Value of $21 million at a 5% discount rate. These amounts include all preproduction costs, capital, operating costs and such items as royalties and the Nevada Net Proceeds Tax”.  Under the PEA, mining will be conducted by a contract miner.  Lincoln will be responsible for crushing, agglomeration, stacking and processing.  The gold will be stripped from the loaded carbon by an offsite independent refiner. 

PEA Base Case Highlights:

• The project has two potentially mineable gold deposits, the Wheeler and the nearby Wilson
• Total combined Measured and Indicated resources 6,055,000 tons
• Average combined resource grade of 0.034 opt (1.15 g/t) at a 0.007 opt cutoff grade
• Combined resources within designed pit shells are: 3,470,000 tons Measured resources (81%) and Indicated resources (19%)
• Combined average resource grade within designed pit shells of 0.042 opt (1.44 g/t) gold at a cutoff grade of 0.007 opt gold containing 145,000 ozs gold
• Significant exploration potential beyond current resources
• Two conventional open pits with overall stripping ratio of 3:1 including ramps; 50° slopes
• Total of 3.5 million tons ore and 10.7 million tons waste
• Goal of 1 million tons ore mined per year and delivered to the crusher (contract miner)
• Crush ore to 3/8-inch, agglomerate, and stack (Lincoln)
• Heap leach ultimate gold recovery of 75%
• Gold stripped from loaded carbon offsite (independent refiner)
• Offsite assay laboratory (Lincoln)
• Power generated on site
• Water from local wells

Base Case Economics:

• Mine life of 6 years of operations; first year preproduction; thereafter production of 26,200 to 28,200 ounces per year over a 4-year period followed by a final year of pad rinsing
• Base case gold price of $1425 per troy oz gold (60% 3-year previous average + 40% 2-year forward projection - Aug. 23, 2011)
• Total Direct Capital Costs are estimated at $22.9 million plus $4.5 million contingency
• Projected production cash costs are approximately $799/oz gold recovered on average
• Internal Rate of Return (“IRR”) of 31% after royalties, reclamation costs, and the Nevada Net Proceeds Tax
• Free cash flow of $32.2 million before discounting and a Net Present Value (“NPV”) of $21 million based on a 5% discount rate
• Payback on capital is expected in 32 months
• The proposed mining operation would commence with the Wheeler deposit which contains the higher grades and lower stripping ratios and then mining would shift to the Wilson deposit. 

Present Resources as outlined on the Preliminary Economic Assessment announced on December 8, 2011 are:

• Total Measured plus Indicated resources of 6,055,000 tons grading 0.034 opt (1.15 g/t) gold at cut-off grade of 0.007 opt gold (203,900 ozs gold).

• Measured and Indicated resources within designed pit shells (included in Total Resources above) of 3,470,000 tons grading 0.042 opt (1.44 g/t) gold (145,000 ozs gold).

• Total Inferred resources of 1,596,000 tons grading 0.027 opt gold at cut-off grade of 0.007 opt gold (43,100) ozs gold).

Note:  Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. 

Project Plans
Lincoln intends to put the Pine Grove district back into production with open-pit mining and heap-leach processing and work continues to advance the project towards production.  At this time there are no known environmental, regulatory, or other relevant issues that would materially affect the reported resource.

The PEA reports that significant exploration potential exists beyond current resources and the PEA recommended that infill and offset drilling be performed.  Additional exploration drilling programs are planned to increase the size of the resource base. These programs will test numerous prospective areas of the Pine Grove property. District exploration will include additional soil geochemical surveys, continued geologic mapping, and drilling on new and existing targets. Permitting for these programs is in progress and metallurgy and design work are planned as the project advances towards production.

(Click here to view the new NI 43-101 preliminary economic assessment technical report dated December 8, 2011).