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Independent Technical and Economic Analysis of the Chieftain Metals Inc. Tulsequah Chief Mine Feasibility Study

Performed for Rivers Without Borders Performed by James R. Kuipers, P.E. Kuipers & Associates Montana, USA March 18, 2013


Kuipers & Associates Page i

Contents1 Executive Summary ............................................................................................................................... 1

2 Introduction .......................................................................................................................................... 2

3 Summary of Key Topics ......................................................................................................................... 3

3.1 Mineral Reserve Estimate ............................................................................................................. 3

3.2 Mine Production and Metallurgical Balance ................................................................................. 3

3.3 Metallurgical Balance and Payables .............................................................................................. 3

3.4 Revenues ....................................................................................................................................... 3

3.5 Capital Costs .................................................................................................................................. 5

3.6 Operating Costs ............................................................................................................................. 5

3.7 Economic Results .......................................................................................................................... 5

3.8 Sensitivity ...................................................................................................................................... 5

3.9 Development Schedule ................................................................................................................. 6

3.10 Recommendations ........................................................................................................................ 7

4 Discussion and Analysis of Results ........................................................................................................ 8

4.1 Mineral Reserve Estimate ............................................................................................................. 8

4.2 Mine Production and Metallurgical Balance ................................................................................. 8

4.3 Metallurgical Balance and Payables .............................................................................................. 9

4.4 Revenues ....................................................................................................................................... 9

4.5 Capital Costs ................................................................................................................................ 10

4.6 Operating Costs ........................................................................................................................... 11

4.7 Economic Results ........................................................................................................................ 11

4.8 Sensitivity .................................................................................................................................... 11

5 Verification of Results and Additional Sensitivity Analysis ................................................................. 13

5.1 Duplication of Economic Analysis Results ................................................................................... 13

5.2 Additional Sensitivity Analysis .................................................................................................... 14

6 Conclusions and Recommendations ................................................................................................... 16

Appendix A – J Kuipers Professional Résumé

Appendix B – TCM Base Case Economic Analysis Spreadsheet


Kuipers & Associates Page 1

1 Executive Summary

The Tulsequah Chief Mine Feasibility Study is based on an ideal scenario and depends on expert project execution. The past history of the Tulsequah Chief Mine together with associated environmental problems suggests anything but an ideal situation, and the ability of Chieftain Metals, a junior mining company with no other operating mines and an unproven track record, to execute the project suggests a high likelihood that actual results will not reflect the projected results in the study.

The Tulsequah Chief Mine Feasibility Study’s forecast of ore reserves, metallurgical recoveries, smelter terms, operating costs and capital costs are all based on optimal results. Actual likely results more reflective of local conditions and actual operating results could significantly impact the profitability of the mine. Our independent analysis indicates a combination of these factors would be likely to render the project infeasible.

Scenarios portraying higher capital costs together with other likely factors such as decreased and/or delayed revenues show that the Tulsequah Chief Mine is highly likely to fail to produce a positive cash‐flow and equally highly subject to financial failure within the first few years of operations. In this event it is probable that existing long‐term environmental liabilities, which could exceed $100M or more, will not have been adequately addressed or financial security obtained for their ongoing mitigation. Not only would investors lose their funds, but the company would be liable for cleanup costs.

While the Tulsequah Chief Mine Feasibility Study suggests a relatively good rate of return compared to most other commercial sectors, this analysis shows that from a mining investment standpoint it is not a robust project when the level of risk is more accurately portrayed such as significantly decreased metals prices, decreases in projected reserves or recoveries, and increased costs, as well as delays in revenue. For these reasons we would suggest this project is extremely high risk given the significant downside potential.



2 Introduction The purpose of this analysis is to conduct a technical and economic review of the Technical Report dated January 22, 2013 summarizing the results of the Tulsequah Chief Mine (TCM) Feasibility Study (FS) to determine the following:

1. Is the technical and economic analysis provided by the TCM FS consistent with the data provided and standard engineering economic practice and can the analysis be reasonably duplicated?

2. Has a sensitivity analysis been conducted that considers realistic changes which could possibly occur over the life of the project?

3. Has a “hard look” been applied to any of the project variables to ensure they are conservative rather than speculative?

4. Has a “worst case” scenario been analyzed and assessed for its relative probability and risk? Where the TCM FS does not address these issues an independent analysis has been performed as part of this evaluation to provide the information necessary to answer these questions. This analysis is based on professional engineering and standard engineering economic practice. It is also based on over 30 years of specific professional experience involving development and/or similar analysis of numerous mining project feasibility study evaluations. This experience includes working as an acquisitions analyst for a subsidiary of one of the largest mining firms in the world. The basis of the analysis performed is consistent with the type of internal critical evaluation typically conducted by mining companies and prudent investors before considering acquisition of other mining properties for development. The author of this report, Jim Kuipers, is a mining environmental consultant, and the principal consulting engineer with Kuipers and Associates based in Wisdom, Montana, USA. He received a B.S. from Montana College of Mineral Science and Technology in mineral process engineering, and is a registered professional engineer in the states of Colorado and Montana. He has worked on mining and environmental projects including project acquisitions and development, engineering design, permitting, operations, reclamation and closure, water treatment, cost estimation and financial assurance for over 30 years. Since 1996, his primary work has been as a consultant providing engineering and other technical expertise to governmental and non‐governmental organizations relative to hardrock mining and related economic and environmental issues. A current resume is attached as Appendix A.



3 Summary of Key Topics The following sections summarize the key topics and information on those topics contained in the TCM FS.

3.1 Mineral Reserve Estimate The mineral reserve estimate from the TCM FS is shown below in Table 3.1 Table 3.1 From Table 15‐4: Mineral Reserve Estimate TCM FS

Category Tonnes Cu (%) Pb (%) Zn (%) Au (g/t) Ag (g/t

Probable 6,447,098 1.13 1.04 5.59 2.3 81.39 According to the TCM FS these results demonstrate that economic extraction is justified (p. 15‐4).

3.2 Mine Production and Metallurgical Balance According to the TCM FS full mine production is achieved in Q3 2016 with an annual production rate of 730,000 tons per annum (t/a). The mine production rate together with corresponding metals grades for each year is provided in Table 16‐11 of the TCM FS.

3.3 Metallurgical Balance and Payables The recoveries and concentrate grades used in the TCM FS are shown in Table 13‐19 (p. 13‐26) of the report. The report suggests the following:

89.0% recovery of copper with a copper concentrate grade of 21%

66.2% recovery of lead with a lead concentrate grade of 60%

89.0% recovery of zinc with a zinc concentrate grade of 62%

70% recovery of gold as doré

The copper concentrate is also reported to contain 1.45% arsenic (As), 0.6% antimony (Sb) and the zinc concentrate is reported to contain 171 ppm mercury (Hg) (Table 13‐20, p. 13‐26).

3.4 Revenues Concentrate Sales According to the TCM FS (p. 19‐1), “A study on the Tulsequah Chief copper concentrate revealed that due to the elevated arsenic level, the concentrate could not be sold in China and suggests alternatives in India, Europe, or the Far East. The copper concentrate is also low in terms of copper content; however, the high levels of gold and silver compensate for this. In addition, the study suggests that the marketing of the copper concentrate should focus on spreading the material concentrates among a number of smelters with each smelter taking only a portion of the tonnage in any one year. It is recommended that rather than selling the concentrates in the spot market, Chieftain should market the concentrates on a long‐term basis with fixed annual terms in order to avoid market demand fluctuations. A penalty for



deleterious elements in the copper concentrate has been incorporated in the economic analysis based on estimated average values.” The TCM FS goes on to say that “Smelter terms were identified for both zinc and lead concentrates and the terms are considered to be in line with the current market conditions and have been considered in the economic analysis” but “No contractual arrangements for concentrate trucking, port usage, shipping, smelting or refining exists at this time.” Royal Gold Streaming Contract According to the TCM FS (p. 19‐6), “In December 2011, Chieftain entered into a gold and silver purchase transaction with Royal Gold to sell a portion of the precious metals expected to be produced at the Tulsequah Chief mine. Chieftain received a US$10 M up‐front payment upon the signing of the contract, and will receive an additional US$50 M for the project build (upon certain conditions being met) that will be prorated during the development of the project. The advance payments and future proceeds will allow Royal Gold to purchase, upon production of the Tulsequah Chief mine:

• 12.50% of payable gold at US$450/oz for the first 48 k oz delivered, decreasing to 7.50% thereafter at US$500/oz • 22.50% of payable silver at US$5.00/oz up to 2.8 M oz, decreasing to 9.75% thereafter at US$7.50/oz.

This contract has been included in the economic analysis of the project. Total silver and gold ounces expected to be sold to Royal Gold Inc. under this contract total 2.7 M oz and 49.5 k oz, respectively.” MOU with China Engineering (CAMCE) According to the TCM FS (p. 19‐7): “As at September 2012, Chieftain signed a non‐binding memorandum of understanding with China CAMC Engineering Co. Ltd. (CAMCE) and its majority owned subsidiary Procon Holdings (Alberta) Inc. (Procon) for a comprehensive collaboration to build and operate Chieftain’s Tulsequah Chief Mine. The principal features of the proposed collaboration are:

CAMCE proposes to acquire a 30% interest in the project for a cash contribution equal to 30% of the project’s net asset value. Chieftain will own the remaining 70%.

Chieftain will enter into an engineering, procurement and construction contract with CAMCE to develop the project on market terms and upon completion of development, an underground mining contract with Procon renewable for successive three‐year terms for the “life of mine.”

CAMCE will seek to arrange senior long‐term debt for the development of the project from a Chinese financial institution for 70% of the agreed upon project development costs (Senior Debt Loan).

The project entity will enter into long‐term, arm’s length off‐take commitments with CAMCE for 30% of the zinc, copper and lead concentrates produced by the project.”

This information in the TCM FS (p. 19‐7) does not materially affect the feasibility study or its results because the TCM FS does not specifically or materially reflect any aspect of the project relative to project financing by China CAMC Engineering Co. Ltd.



3.5 Capital Costs According to the TCM FS (p. 21‐2) initial capital costs are estimated at $439.5 M with direct costs of 57%, indirect costs of 28%, owners cost of 4% and contingency of 11% of the total of direct, indirect and owners costs. Sustaining capital costs were estimated at $64.0 M (p. 21‐10). The TCM FS (p. 21‐14) estimate for reclamation and closure capital costs assumes all new Potentially Acid Generating (PAG) material will have been backfilled into underground workings and flooded, the historic workings will be backfilled with neutral paste backfill, and that the remaining reclamation work will consist of decommissioning and surface reclamation. The estimated cost is $13.8 M of which $1.8 M is for post‐closure activities until year 2034 (Table 21‐8). The reclamation and closure cost estimate also includes a salvage value credit of $7.6 M or 12% of the residual value. The capital cost estimate does not include:

Certain costs (p. 21‐18) o GST/PST sales taxes o Development fees and approval costs o Foreign currency changes from project exchange rates o Financing costs o Working capital requirements

Potential costs o Costs associated with schedule delays o Costs associated with third party delays o Costs of disruption to normal operations o Commodity specific and general cost escalation o Economy factors/labour productivity o Event risk

3.6 Operating Costs According to the TCM FS (p. 21‐19), the total operating unit cost is $125.70/tonne processed with the following cost distribution: Underground Mining 24%, Processing 18%, Power Plant 18%, General and Administration 18%, and Concentrate Transportation 22%. No separate operating contingency was applied to the operating cost estimates (p. 21‐39).

3.7 Economic Results The TCM FS (p. 22‐15) Life‐of‐Mine Base Case analysis indicates the economic results summarized in Table 3‐2 below.

3.8 Sensitivity The TCM FS (p. 22‐18) sensitivity analysis considered +/‐ 15% cases for singular changes in capital costs, operating costs and metals prices. Results for the downside cases of +15% for capital and operating costs and ‐15% for metals prices are summarized in Table 3.3 below.



According to the TCM FS (p. 22‐17) the results show that the project is most sensitive to metal prices and least sensitive to changes in operating costs for all three scenarios considered.

Table 3‐2 Summary of TCM FS Base Case Economic Results

Category TCM LOM Base Case

CDN$M

Net Revenue $1,713.0

Operating Costs $632.6

Capital Costs $509.8

Net Profit $570.7

Pre‐Tax IRR% 16.5%

Pre‐Tax NPV8% $192.7

Pre‐Tax Payback Period 4.3 years

This analysis was only performed for pre‐tax scenarios. The ability to determine tax implications requires company specific information that was not provided in the feasibility study. Table 3.3 Summary of TCM FS Sensitivity Analysis Results on Base Case

Category

TCM Base Case

TCM Cap +15%

TCM Op +15%

TCM Metals ‐15%

CDN$M CDN$M CDN$M CDN$M

Net Revenue $1,713.00 $1,713.00 $1,713.00 $1,456.05

Operating Costs $632.60 $632.60 $727.49 $632.60

Capital Costs $509.80 $586.27 $509.80 $509.80

Net Profit $570.70 $494.23 $475.81 $313.75

Pre‐Tax IRR% 16.50% 13.00% 14.10% 9.1%

Pre‐Tax NPV8% $192.70 $125.40 $135.90 $22.10

Pre‐Tax Payback Period 4.3 years

3.9 Development Schedule According to the TCM FS (p. 24‐8), “The construction execution schedule is driven initially by the spring barging transportation windows, followed by the timely completion of the all‐weather access road from Atlin to the mine site…. This scheduling exercise indicates that mechanical completion and wet commissioning can be accomplished by the end of Q4 2015, providing that the construction of the access road is achieved by end of Q3 2014. ” The TCM FS (p. 1‐16) also notes that “The project schedule is extremely sensitive to the timing of project funding due to the short annual barging season in May/June.”



3.10 Recommendations According to the TCM FS (p. 26‐1), “Based on the results of this study, the project is economic, and a decision whether or not to proceed with construction should be taken.”



4 Discussion and Analysis of Results The TCM FS was reviewed for conformance with fundamental standard engineering economics practice and NI 43‐101.1 In addition it was evaluated for consistency with typical industry and investor practice in terms of consideration of relative financial risk and consequences. The approach used is based on the professional experience of the author.

4.1 Mineral Reserve Estimate The mineral reserve estimate is entirely based on less certain “probable” rather than more certain “proven” reserves. Mineral reserves are classified as either proven or probable. Both classifications are considered to be part of the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. The term proven implies the highest degree of confidence in the estimate with the consequent expectation in the minds of readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect potential economic viability.2 Because the TCM FS relies on probable rather than proven mineral reserve estimates, it implies that readers should view its results with something less than a high degree of confidence. In addition, it implies that variation in the probable reserve estimate could significantly affect potential economic viability. For this reason the TCM FS reserves should be viewed as not being of the highest degree of confidence, underscored by the potential downside of changes in production, cost and revenue factors.

4.2 Mine Production and Metallurgical Balance The production rate and metals grades are based on a dilution approach that assumes fill dilution of 0.15 m over the entire length and width of the stopes. It is unclear from the TCM FS what the overall impact of dilution is on the resulting ore grades. As noted in the TCM FS (p. 25‐2), “Excessive dilution is one of the most critical internal risks at most underground mines and can lead to excessive milling costs, lower head grades, lower metal recoveries…, increased tailings requirements, etc.” While the TCM FS suggests that this risk can be mitigated by planning, this has typically been accomplished only after significant effort over time and in many other cases excessive dilution has remained a constant of mining operations. The assumption in the TCM FS is based on an ideal situation and depends on expert project execution which is not likely to occur given the lack of track record by the company and extreme competition within the industry for experienced reputable professional staff capable of such efforts. It is the author’s opinion that the most likely outcome will be a period of lower than projected production rate and metals grades for at least the initial three years and that any offsetting mitigation will most likely be offset by a proportionate increase in costs.

1 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) classification of NI 43‐101 resource and reserve definitions and Companion Policy 43‐101CP 2 Ibid and TCM FS p. 15‐1



4.3 Metallurgical Balance and Payables The recovery methods will be based on a relatively conventional approach using gravity and flotation; however because of the polymetallic nature of the ore deposit, four different payable products will be produced (doré, copper concentrate, lead concentrate, and zinc concentrate) together with a pyrite concentrate intended for mine backfill. This results in a complex metallurgical process plant requiring a relatively high‐level of expertise in terms of management, technical staff and operators. While these types of operations are common at mining projects, experience suggests that optimization of multiple‐stream recovery methods is challenging and rarely is every stream produced at optimal recoveries or grades. As noted in the TCM FS (p. 25‐2), “The metallurgical recoveries in this study are based on numerous tests but results may vary when the actual orebody is mined. A drop in recoveries would have a direct impact on the project economics.” While the TCM FS proposes to reduce this risk with continued testwork and optimization, it is not uncommon for actual metallurgical results to be below optimal results and therefore it is common practice to discount recovery significantly, particularly where complex processes are concerned. It is the author’s opinion that the metallurgical recoveries and concentrate grades utilized in the TCM FS are optimistic. A reduction in metallurgical recovery of from 3‐5% should have been applied to the estimate and further justification should have been provided for the concentrate grades used without benefit of additional metallurgical testing. An additional concern is the relatively high concentration of impurities such as arsenic, antimony and mercury in the copper and zinc concentrates. These are considered to be particularly deleterious to smelting processes and could present problems with both concentrate marketing as well as incur significant smelter penalties increasing smelting costs by 50% or more. The proposed mitigation in terms of marketing would not provide any actual means of addressing potential issues in finding smelters willing to accept TCM concentrates and the likelihood of additional penalties beyond those suggested in the TCM FS.

4.4 Revenues Concentrate Sales The lack of an identifiable smelting facility, and indication that the copper concentrates would be rejected by Chinese smelters, suggests that marketing of the concentrate altogether might be questionable and at the very least difficult. It is highly likely that the result will be additional penalties and/or limits on the amount of concentrate which can be effectively marketed on an annual basis. The author has extensive experience in the marketing of sulphide concentrates containing arsenic and antimony and has first‐hand knowledge as to the difficulty in finding smelters willing to accept such materials, the costs which are involved, and the limitations which are present. Many smelters are not able to accept these materials due to lack of environmental controls and/or stringent environmental controls. Those that do so typically have highly advanced control systems and must recover the costs of those systems, or alternatively are located in countries with extremely lax regulations and no environmental controls. Given the overall situation, it is clearly not desirable to produce or receive



materials containing significant quantities of arsenic, antimony or mercury and production of materials with those characteristics carries inherent and significant environmental and financial risks and liabilities. It is the author’s opinion that the TCM FS does not adequately address these risks or liabilities.

4.5 Capital Costs The capital costs estimated in the TCM FS are based on relatively ideal circumstances and despite showing significant increases from past capital cost estimates for this project, are still likely to be under‐estimated. At the very least contingency costs more reflective of regional experience, on the order of a minimum of 20% of the total of direct, indirect and owners cost, should have been used. Given other project attributes such as the location and project owner’s lack of project development experience, a downside of 50% higher capital costs should not be unexpected. The TCM FS estimate for reclamation and closure costs of $13.8 M assumes complete resolution of all existing and future environmental issues and a walk‐away scenario five years after reclamation is completed. However, long‐term environmental costs may be incurred by the project as the TCM FS (p. 20‐1) states, “The long‐term solution for managing AMD is to backfill the historic stopes early during mine operations to stop the acidic underground flow by mine closure. If this mitigation strategy is unsuccessful, there could be the need for the long‐term treatment of AMD at this site.” It is the author’s opinion that the TCM FS estimate for reclamation and closure is a gross‐misstatement of the potential liabilities which are present at the site.3 From a financial standpoint a cost for financial security should have been provided in the TCM FS. Given that an adequate financial security amount of $100M or more should be required and that Chieftain would most likely not be able to obtain surety bonding and instead have to post a “cash” form of security, this could add an equivalent amount ($100M) to the amount required for initial cash flow. This amount would correspondingly have a significant impact on the economic analysis. It is highly unusual in the author’s experience for a feasibility study to exclude local, provincial and general sales taxes as they are costs which are certain to be incurred by the project and are typically touted for reasons of public relations. Typically an allowance is included for development fees and approval costs including any remaining research, development, exploration or other required costs related to project completion. Given the importance of the US and Canadian market exchange to this project and the recently changing rate of exchange this also would typically be addressed in the capital cost estimate as well. The exclusion of financing costs for project development capital costs and working capital costs is also highly unusual in the author’s experience.

3 The TCM FS makes no mention of the cost of providing financial security which the company is required to post for reclamation and closure prior to beginning operations. In the author’s experience the company would assume responsibility for any water treatment plant capital and operating costs and be required, until it is determined they are no longer necessary, to provide adequate financial security to the regulatory authorities for operation of the water treatment plant. In the case of TCM the financial security should be required prior to operations beginning based on an assumption that the company goes bankrupt prior to finishing operations and that water treatment is required in that event thereafter. Based on $2M/year in operating costs, 32% in general and administrative costs, over a 100‐yr period applying a net discount rate of 3% a financial security trust fund amount of $84M would be required. Given that this does not include replacement costs or other reclamation and closure costs a total financial security of at least $100M should be expected for this project. The actual requirements under current British Columbia regulations may be different.



Sales taxes and financing costs could easily impact the overall project economics by as much as 10% or more and should have been included in the analysis. Failure to include these costs is the most significant breach of standard conduct identified in the TCM FS and constitutes a major omission of substance from the analysis conducted. Potential costs related to delays, disruptions, cost escalation and economic factors are typically intended to be addressed in the sensitivity analysis.

4.6 Operating Costs Operating costs are subject to similar uncertainties as capital costs and given the nature of the cost estimate, a contingency of at least 10% and as much as 20% should have been applied as standard practice. The estimated costs appear to be highly optimistic based on the author’s experience and given the location, dependency on petroleum‐based fuel, competition for labor and other factors, an increase in operating costs of as much as 25% over the life of this project would not be unreasonable were a more conservative case to be projected.

4.7 Economic Results The Base Case economic results indicating a pre‐tax internal rate of return (IRR) of 16.5% and net present value (NPV) based on an 8% discount rate of $192.7 M might appear impressive to a naïve reviewer. However, as identified in the previous sections the Base Case portrays ideal conditions in terms of ore reserve and grade, metallurgical recoveries and concentrate grades, smelting market, revenue stream, capital and operating costs. At the same time the Base Case excludes significantly critical items such as applicable sales taxes and financing costs. It is the author’s recommendation that a more conservative evaluation of this project should be conducted as contained in the following section on sensitivity analysis. Based on the author’s experience the recommended approach is consistent with that routinely undertaken by mining firms interested in acquiring mining projects, or by prudent and experienced investors considering providing project financing. This approach is particularly suitable for a project of this technical and economic nature given the demonstrated risks specific and unique to this project such as the associated environmental liabilities.

4.8 Sensitivity Sensitivity analyses are intended to demonstrate the degree of confidence in the estimate particularly with respect to the potential production, cost and revenue factors. The TCM FS analysis does not address potential production factors such as reduced rates of mine or mill production and/or lower head grades ‐ significant cost factors as discussed further in these comments. The TCM FS analysis also does not address delays in revenue which might occur if concentrate cannot be sold at the rate it is produced due to limited smelters being available to accept the copper concentrate, which generates the primary project revenue stream, given its significant deleterious constituents. To the extent the TCM FS addresses downside costs and revenues it limits the sensitivity analysis to +/‐15% for singular circumstances affecting capital costs, operating costs or metals prices and does not consider combinations of downside events.



The approach taken by the TCM FS sensitivity analysis using +/‐ 15% cases for singular changes in capital costs, operating costs and metals prices does little to reflect the actual project sensitivity to likely or potential conditions identified in the previous discussion. According to Mackenzie and Cusworth, the “…principal purpose of a ‘feasibility study’ is to determine whether a development opportunity makes good business sense, not just whether it is technically possible.”4 The author recommends that sensitivity analysis be performed which considers the following conditions:

reduced rates of mine or mill production and/or lower head grades and/or concentrate grades (5% reduction overall)

delays in revenue which might occur for example if copper concentrate cannot be sold at the rate it is produced (50% delay in concentrate sales)

more significant increases in capital and operating costs of 25‐50%

more significant decreases in metals prices of 25% “Both the Gypton (2002) and McCarthy (2004) studies indicate that only about half of projects meet expectations – be that of cost and time to build the project or be that overall business outcome. With a rather fatalistic outlook, Gypton concludes: “… we need to acknowledge the fact that feasibility studies, and their estimates, are flawed documents by necessity. We should be prepared to test the economics of our projects at capital levels of say +20‐25 per cent over the base estimate, including the contingency, and honestly ask ourselves if the project can withstand this risk.”5 In addition the author recommends that particular high risk and reasonable probability scenarios involving the convergence of multiple costs and associated factors must be considered. In the author’s professional experience the most likely scenarios are:

For all scenarios o a 5% decrease in metallurgical recovery to represent a more overall conservative

assessment of actual mine production related to dilution, head grade, recovery and concentrate grades

Scenario One ‐ A one‐year delay in project development accompanied by a 50% increase in project development capital costs and a 25% increase in operating costs and concentrate sales restrictions of 50% of annual production

Scenario Two – In addition to the conditions in Scenario One a decrease at time of initial production and average basis thereafter of 25% for all metals prices.

4 The Use and Abuse of Feasibility Studies, W Mackenzie and N Cusworth, Project Evaluation Conference Melbourne, Vic, 19 ‐ 20 June 2007. 5 Ibid.



5 Verification of Results and Additional Sensitivity Analysis Each section within the TCM FS was reviewed and the presented information entered into an Excel project economic pro forma spreadsheet. That information was then compared to the economic analysis information contained in the TCM FS. Our findings are presented in the following sections.

5.1 Duplication of Economic Analysis Results The development of the Excel spreadsheet model required some additional effort to replicate both the production rates and payable metals together with contract sales. This was complicated by the TCM FS containing only an abbreviated summary spreadsheet which contained numerous internal inputs which required verification. In addition, some specific cost scheduling information contained in the TCM FS spreadsheet was not otherwise available in the information provided in the sections and therefore was not incorporated. The Excel spreadsheet duplicated the TCM FS results as shown in Table 5.1. The detailed spreadsheet for the TCM Base Case is attached as Appendix B. The revenue was within 0.5% while costs were within 0.1% resulting in a net profit of 1.4% higher in the K&A Base Case. The result is the K&A Base Case shows an internal rate of return of 0.2% greater and a pre‐tax NPV of $9.5 M less than the TCM FS Base Case. Table 5.1 TCM FS Base Case and K&A Base Case Comparison

Category TCM Base Case K&A Base Case

CDN$M CDN$M

Net Revenue $ 1,713.0 $ 1,721.7

Operating Costs $ 632.6 $ 632.9

Capital Costs $ 509.8 $ 509.9

Net Profit $ 570.7 $ 578.9

Pre‐Tax IRR% 16.5% 16.7%

Pre‐Tax NPV8% $ 192.7 $ 183.2

Pre‐Tax Payback Period 4.3 4.3

This suggests that on a purely technical basis the data provided was consistent with standard practice by a project proponent in that it was apparently based on information available at the time of preparation, data supplied by outside sources, and the assumptions, conditions and qualifications set forth in the report consistent with NI 43‐101. An IRR within 0.2% for the duplicated results estimated in the original spreadsheet is relatively accurate for this type of comparative exercise based on the given information in the original FS. Therefore it is our opinion the K&A model can be used to draw similarly comparative distinctions for the cost scenarios depicted in the following sections of this report.



5.2 Additional Sensitivity Analysis The following additional sensitivity analyses were conducted:

K&A Case 1 ‐ 5% reduction in each metals recovery K&A Case 2 ‐ 50% delay in copper concentrate sales K&A Case 3 ‐ 50% increase in capital costs K&A Case 4 ‐ 25% increase in operating costs K&A Case 5 ‐ 25% decrease in metals prices

The results are shown in Table 5.2. A decrease in recovery of 5% applied as a conservative measure to represent mining and process inefficiencies resulted in a decreased IRR to 15.4% and an NPV (8% discount rate) of $154.1 M. A decrease in the delay of payment for copper concentrate depicting only 50% of sales during operations and the remainder post‐operations decreased the IRR to 5.2% and resulted in an NPV (8%) of minus $49.5 M. An increase in capital costs of 50% had a similar impact decreasing the rate of return to 7.8% and resulting in an NPV (8%) of minus $4.3M. A 25% increase in operating cost decreased the IRR to 12.8% and the NPV (8%) to $96.8 M. And, a 25% decrease in metals prices resulted in an IRR of 3% and a NPV (8%) of minus $86.1 M. Table 5.2 TCM FS Additional Sensitivity Analysis

The results show that a significant increase in capital costs, a delay in payment for copper concentrates, or a similarly significant decrease in metals prices, would all be likely to have significant impacts on the project’s economic feasibility were they to happen as singular events. The following scenarios were evaluated to test the project in the event of multiple events:

For all scenarios ‐ 5% reduction in each metals recovery Scenario One ‐ One‐year delay in project development, 50% delay in copper concentrate sales, 50% increase in capital costs, 25% increase in operating costs Scenario Two – In addition to the conditions in Scenario One a 25% decrease in metals prices.

The results are shown in Table 5.3. Scenario One results in a negative IRR of 8.1% and NPV (8%) of minus $344.3 M. Scenario Two results in a negative IRR that is not calculable (or meaningful) and net losses of over $300 M.

TCM Base Case

K&A Base Case

K&A Case 1 -5% Recovery

K&A Case 2 50% CuDelay

K&A Case 3 +50% Capex

K&A Case 4 +25% Opex

K&A Case 5 -25% Metals

CDN$M CDN$M CDN$M CDN$M CDN$M CDN$M CDN$M

Net Revenue $1,713.0 $1,721.7 $1,668.2 $1,721.7 $1,721.7 $1,721.7 $1,225.8

Operating Costs $632.6 $632.9 $632.9 $632.9 $632.9 $791.1 $632.9

Capital Costs $509.8 $509.9 $509.9 $509.9 $751.9 $509.9 $509.9

Net Profit $570.7 $578.9 $525.4 $578.9 $336.8 $420.7 $83.1

Pre-Tax IRR% 16.5% 16.7% 15.4% 5.2% 7.8% 12.8% 3.0%

Pre-Tax NPV8% $192.7 $183.2 $154.1 ($49.5) ($4.3) $96.8 ($86.1)

Pre-Tax Payback Period 4.3 years 4.3 years 4.4 years 6.1 years 5.6 years 4.7 years 6.6 years

Category



Table 5.3 TCM FS Multiple Event Scenarios

Category TCM Base

Case K&A

Scenario 1 K&A

Scenario 2

CDN$M CDN$M CDN$M Net Revenue $1,713.0 $1,668.2 $1,190.4 Operating Costs $632.6 $791.1 $791.1

Capital Costs $509.8 $729.7 $729.7

Net Profit $570.7 $147.4 ($330.4)Pre-Tax IRR% 16.5% -8.1% Pre-Tax NPV8% $192.7 ($344.3) ($538.1)Pre-Tax Payback Period 4.3 years 10.7 years



6 Conclusions and Recommendations

The reliance upon probable rather than proven mineral reserves suggests a lack of confidence in the ore reserves due to high sensitivity to potential production, cost and revenue factors.

It is uncertain if the TCM FS adequately accounts for dilution which is a critical risk at underground mines, significantly impacting costs, grades, recoveries and tailings requirements.

The TCM FS relies upon relatively optimistic metallurgical grades and recoveries which may not reflect actual conditions which would have a direct impact on project economics.

The TCM FS identifies potential marketing and penalties issues with respect to deleterious elements such as arsenic, antimony and mercury in the concentrates but does not meaningfully address this issue which could have significant impacts both in terms of cost and in terms of cash flow from sale of concentrates.

The TCM FS identifies, in addition to an existing streaming contract for $50M in capital funds, a need for at least another $450M in capital but does not include any cost associated with obtaining or borrowing additional project capital funding.

The TCM FS estimates capital costs of $510M but excludes anything other than a 15% sensitivity analysis despite evidence that mining projects are currently typically 25‐50% over budget.

The TCM FS estimates operating costs of $125.70 per ton but does not include any type of contingency and excludes anything other than a 15% sensitivity analysis despite evidence that the estimated costs are optimistic and mining project operating costs are undergoing significant cost escalation pressure compared to other industries.

The project costs apparently do not include sales taxes and capital funding finance costs which could increase costs by 10‐15%. While the TCM FS conforms with industry technical standards and requirements it does not adequately address risk from an economic standpoint and instead relies upon a proposed set of mitigation measures which like the project portrayal itself depend on near ideal conditions to achieve. The proposal is highly dependent on management‐dependent solutions suggesting a high level of expertise will be available to deal with actual project site‐specific locational and physical features, socioeconomic conditions and environmental issues. However, the present management team does not have the level of expertise suggested which results in a high likelihood that the proposed mitigation measures will not be effective.

Independent sensitivity analysis indicates that if singular factors such as increases in operating or capital costs, decreases in metals prices, or delays in revenue, are portrayed on more realistic terms based on current economic indicators, project economics are decreased to IRRs of less than 10% and in the case of metals prices decreasing by 25% to a IRR of only 3%. This is not surprising given the initial IRR of 16.5% contained in the TCM FS is based on relatively ideal conditions and other robust mining projects which are able to withstand similar tests of economic risk would be expected to have a comparative “Base Case” IRR of 30‐40% or higher.



The sensitivity scenarios conducted in the K&A analysis show the relatively high risk that the TCM has of experiencing significant cash‐flow problems and at some point in its history, becoming uneconomic resulting in premature project closure and potentially the bankruptcy of the operator. In this event not only should investors expect to lose the investment in its entirety, but the company would remain liable for significant environmental cleanup costs which are estimated at $100 M over the next 100‐years in NPV (3% NDR) if those funds were placed in a trust fund for environmental cleanup of the site in its existing condition.


Kuipers & Associates

Appendix A – J Kuipers Professional Résumé

JAMES R. KUIPERS, PE (Page 1)

JAMES R. KUIPERS, P.E. P.O. Box 641, Butte, MT 59703

Phone (406) 782-3441 E-mail [email protected]

SUMMARY OF EXPERIENCE Over 30 years experience in mining and environmental process engineering design, operations management, regulatory compliance, waste remediation, reclamation and closure, and financial assurance. Over 15 years experience providing technical assistance to public interest groups and tribal, local, state and federal governments on technical aspects of mining and environmental issues. EDUCATION Montana College of Mineral Science and Technology, B.S. Mineral Process Engineering, 1983. PROFESSIONAL REGISTRATION Professional Engineer (PE Mining/Minerals): Colorado (No. 30262), Montana (No. 7809 & Corp. No. 197) PROFESSIONAL EXPERIENCE 1996 to Present Kuipers & Associates/J. Kuipers Engineering, Butte, MT. ABN AMRO Bank, Netherlands: Consulting Engineer, confidential mine evaluation. Amigos Bravos, Taos, NM: Consulting Engineer, Molycorp Questa Mine, technical review committee

and working group member in reclamation and closure/closeout permitting and bonding process. Anaconda Deer Lodge County, MT: Consulting Engineer/Project Manager, Anaconda Superfund Site,

provide technical services related to institutional controls, property conveyance and redevelopment, property and facility operation and maintenance, review of regulatory documents, renewable energy development , air and water monitoring and other tasks related to county involvement in Superfund activities.

Bannock Technologies, Pocatello, ID: Consulting Engineer, Shoshone Bannock Tribe mining oversight

project studies. Blackfoot Legacy, Lincoln, MT: Consulting Engineer, McDonald Project, review of project feasibility and

environmental issues. Border Ecology Project, Santa Fe, NM: Consulting Engineer, Cananea Project (Mexico), consulting

engineer mine reclamation and closure planning. Cabinet Resource Group, Noxon, MT: Consulting Engineer, Rock Creek Project, review of proposed

tailing impoundment. Clark Fork River Technical Advisory Committee, Missoula, MT: Technical Advisor, Clark Fork River

and Milltown Reservoir Operable Units, Upper Clark Fork Basin Superfund Sites.


Center for Science in Public Participation, Bozeman, MT: See separate description below. Citizens’ Technical Environmental Committee, Butte, MT: Technical Advisor, Butte-Silver Bow Site

Operable Units, Upper Clark Fork Basin Superfund Sites. Cottonwood Resource Council, Big Timber, MT: Consulting Engineer, Lodestar Mine and Mill, review

of operating and MPDES permits, financial assurance and operations data. Earthjustice, Bozeman, MT: Consulting Engineer, Montanore and Rock Creek Projects permitting

process. Earthworks, Washington, D.C.: Project Manager and co-author, Water Quality Predictions and

NEPA/EIS Studies.

Environmental Defender Law Center, Bozeman, MT: Expert Witness and Consulting Engineer, Boliden Promel, Chile arsenic waste disposal.

Gila Resources Information Project, Silver City, NM: Consulting Engineer, Phelps Dodge Chino, Cobre

and Tyrone Mines, reclamation and closure/closeout permitting and bonding process. Great Basin Mine Watch, Reno, NV: Expert Witness and Consulting Engineer, various NV projects,

permitting and reclamation and closure/closeout permitting and bonding process.

ICF International, Stafford, VA: Consulting Engineer, 108(b) rulemaking technical support contract including financial assurance cost estimation model evaluations.

Johnson County, KS: Consulting Engineer, Sunflower Limestone Mine reclamation plan and financial

assurance.

Little Salmon Carmacks First Nation, Yukon Territory, Canada: Expert Witness and Consulting Engineer, Carmacks Copper Project.

Montana Attorney Generals Office, Helena, MT: Consulting Engineer, assist in defense of I-137 Open

Pit Cyanide Mine Ban appeals. Montana Department of Environmental Quality, Helena, MT: General Contractor, Pony Mill Site

Reclamation. Montana Environmental Information Center, Helena, MT and National Wildlife Federation, Missoula,

MT: Expert Witness and Consulting Engineer, Golden Sunlight Mine, EIS Review and assist appeal of State operating permit.

Montana Environmental Information Center, Helena, MT: Expert Witness, Bull Mountain Coal Mine

appeal. Montana Trout Unlimited, Missoula, MT: Consulting Engineer, Trout Unlimited’s Four Mines Campaign,

review and provide technical assistance on McDonald, Crandon, New World and Rock Creek Mines.

Natural Resources Defense Council; New York State: Consulting Engineer, review of Oil & Gas Draft EIS.


New Mexico Environmental Law Center, Santa Fe, NM: Consulting Engineer, Oglebay Norton Mica

Mine reclamation and financial assurance; New Mexico Environment Department Copper Rules Stakeholder Process.

Northern Plains Resource Council, Cottonwood Resource Council, Stillwater Protective Association,

Billings. MT: Consulting Engineer, Stillwater Mining Company Nye and East Boulder Mines, facilitate and perform technical aspects of Good Neighbor Agreement.

Northern Plains Resouce Council, Billings, MT; Wyoming Outdoor Council, Sheridan, WY: Consulting

Engineer, Montana Statewide and Wyoming Powder River Basin Coal Bed Methane EIS. Northern Plains Resouce Council, Billings, MT: Project Manager and co-author, Coal Bed Methane

Produced Water Studies. Northern Alaska Environmental Council, Fairbanks, AK: Consulting Engineer, Pogo Mine NPDES

permit negotiations. Picuris Pueblo, Penasco, NM: US Hill Mica Mine Reclamation Plan and financial assurance cost

estimate and site reclamation project management. Powder River Basin Resource Council, Sheridan, WY/Steven Adami, Buffalo, WY: Expert Witness,

Kennedy Oil IMADA POD appeals. Rock Creek Alliance, Missoula, MT: Expert Witness and Consulting Engineer, Rock Creek and

Montanore Mines permitting.

Selkirk First Nation, Yukon Territory, Canada: Expert Witness and Consulting Engineer, Minto Mine Project reclamation and closure and financial assurance.

Sheep Mountain Alliance, Telluride, CO: Expert Witness and Consulting Engineer, Silver Bell Tailings

remediation. Shoshone-Paiute Tribes of the Duck Valley Reservation, NV: Consulting Engineer, Rio Tinto Mine

Reclamation and Closure. Sierra Club and Mineral Policy Center: Expert Witness, Cripple Creek and Victor Mining Company

Clean Water Act case.

SKEO, Charlottesville, VA: Consulting Engineer, 108(b) rulemaking technical support contract and EPA Region NEPA review and financial assurance support.

Southern Environmental Law Center, Charleston, SC: Consulting Engineer, Haile Gold Mine

permitting. Systems Research and Applications Corporation, Fairfax, VA: Consulting Engineer, mine cleanup and

financial assurance guidelines subcontract to EPA. Montana Trout Unlimited, Missoula, MT: Consulting Engineer, I-147 initiative campaign.


Tohono O’odham Nation, San Xavier District, AZ: Consulting Engineer, Mission Mine reclamation plan and financial assurance.

Trust for Public Lands, San Francisco, CA: Consulting Engineer, Viceroy Castle Mountain Mine,

evaluated pit backfill and reclamation alternatives for settlement agreement trust fund determination. Walz and Associates, Albuquerque, NM: Expert Witness and Consulting Engineer, assist in defense of

New Mexico Environment Department and Mining and Minerals Division permitting and takings case (Manning v. NM).

Western Organization of Resource Councils, Billings, MT: Oil and gas reclamation and financial

assurance guide.

Western Resource Advocates, Salt Lake City, UT: Expert Witness and Consulting Engineer, Red Leaf Resources oil shale project permitting.

1997 to 2005 Center for Science in Public Participation, Bozeman, MT. Canadian Earthcare Society, Vancouver, BC: Consulting Engineer, Brenda Mine, assist appeal of

reclamation and closure permit. CEE Bankwatch, Budapest, Hungary: Consulting Engineer, Rosario Montana Mine (Romania),

economic feasibility study of mine proposal. Friends of the Similkameen, Hedley, BC: Consulting Engineer, Candorado Mine, assist appeal of

reclamation and closure permit. Fort Belknap Tribal Council and Environment Department, Fort Belknap,MT: Consulting Engineer,

Zortman and Landusky Mines, Alternative Reclamation and Closure Plan, multiple accounts analysis working group member and technical advisor during supplemental environmental impact statement.

Guardians of the Rural Environment, Yarnell, AZ: Consulting Engineer, Yarnell Project, EIS review and

assist appeal of State operating permit. Mineral Policy Center, Washington, D.C.: Technical Advisor on general mining issues and Author of

MPC Issue Paper. National Wildlife Federation, Boulder, CO: Consulting Engineer authoring report on Hardrock Mining

Reclamation and Closure Bonding Practices in the Western United States. Sakoagan Chippewa Tribes, Mole Lake Reservation, Wisconsin. Consulting Engineer, Crandon

Project, permitting process review. 1993 - 1995 Denver Mineral Engineers, Inc., Littleton, CO. Manager, Process Engineering Department. Manager, Mining and Environmental Wastewater Treatment Program


Arrowhead Industrial Water Co., San Jose, CA: Project Manager, evaluation of reverse osmosis for mine wastewater treatment.

Barrick Goldstrike, USA, Elko, NV: Project Engineer, engineering design, construction and installation

of 1.5 M oz/year stainless steel electrowinning system. Battle Mountain Gold, Co., Battle Mountain, NV: Project Manager, evaluation, pilot testing, and

preliminary feasibility study of wastewater treatment options for groundwater remediation of Fortitude Mine tailings area.

Commerce Group Corporation, Milwaukee, WI: Project Manager, San Sebastian Gold Project, El

Salvador. Independence Mining Corp, Jerritt Canyon, NV: Project Manager, technical evaluation and feasibility

study of column flotation for beneficiation of refractory ores. Kennecott Utah Copper, Bingham Canyon, UT: Project Manager, design and construct stainless steel

solvent extraction mixer settlers for prototype SX/EW plant. Israeli Chemical Corp., Beersheeba, Israel: Project Manager, evaluation of bromine as an alternative to

cyanide gold leaching and prototype design. Marston and Marston, St Louis, MO: Project Manager, Kommunar Gold Mill Modernization Project,

Kommunar, Siberia, Russia (CIS) and Suzak Polymetal Leach Circuit Evaluation and Feasibility Study, Kazakhstan (CIS).

Nevada Goldfields Mining Co., Denver, CO: Project Manager, Nixon Fork Mine Preliminary

Engineering Design and Feasibility Study, Concentrate Marketing Study, and environmental permitting studies.

Southern Pacific Railroad, Denver, CO: Project Manager, design, construction and installation of

dissolved air flotation wastewater treatment system. 1991 - 1992 Western States Minerals Corp. Project Manager, Northumberland Gold Mine, Round Mountain, NV. Corporate Senior Metallurgist, Wheat Ridge, CO. Engineering design and feasibility evaluations. 1986 - 1991 Western Gold Exploration and Mining Co. (WESTGOLD)/Minorco Corporate Senior Metallurgist / Project Manager, WESTGOLD, Golden, CO. Acquisitions and

engineering design and feasibility evaluations, corporate acquisitions and business development group. Project Manager, Shamrock Resources (WESTGOLD Subs.), Reno, NV. Evaluation, engineering

design and feasibility study, and prototype plant operation of refractory gold ore bioleaching technology program.

Project Manager, Balmerton Mine, Ontario: Refractory gold ore bioleaching project and feasibility

evaluation.


Project Engineer, Johannesburg South Africa: Evaluation of Anglo American Corp. Pumpcell

Technology. Mill Superintendent, Austin Gold Venture (WESTGOLD), Austin, NV. Shift Foreman, Inspiration Consolidated Copper Co, Globe, AZ. 1984 - 1985 Canyonlands 21st Century Corporation Director of Metallurgy, Blanding, UT. Project Manager, Jarbidge, NV. 1983 - 1984 Cumberland Mining Corporation Mill Superintendent / Head Metallurgist, Basin and Virginia City, MT. 1974 – 1980 Huckaba Construction Summer employment as Underground and Surface Miner, Millwright, Mill Operator, Fire Assayer,

Whitehall and Cooke City, MT. Family owned small mining operation. PRESENTATIONS and PUBLICATIONS Financial Assurance Regulations and Cost Estimation at US Hardrock Mines, U.S. Chile Mining

Financial Assurance Seminar, US Office of Surface Mining and Environmental Protection agency and Chilean Ministry of Mining, Santiago, Chile, May 2012.

Mining Reclamation and Closure Regulations and Best Practices, 2012 International Conference on Mining in Mindanao, Ateneo de Davao University, Davao City, Philippines, January 26-27, 2012.

Beyond the Global Acid Rock Drainage Guide, Lake Superior Binational Program, Mining in the Lake Superior Basin Webinar Series, Environmental Impacts of Mining in the Lake Superior Basin, October 27, 2009

Characterizing, Predicting, and Modeling Water at Mine Sites, California Environmental Protection Agency, California Water Board Training Academy, May 18 - 21, 2009

Mitigating Mining Impacts: Principles and Practices, Lake Superior Binational Program, Mining in the Lake Superior Basin Webinar Series, Environmental Impacts of Mining in the Lake Superior Basin, March 24, 2009

Long-term Requirements & Financial Assurance at Superfund & Other Mine Sites, Mine Design, Operations and Closure Conference, Fairmont Hot Springs, MT, April 2008.

The Effects of Coalbed Methane Production on Surface and Ground Water Resources, Committee on

Earth Resources, Board on Earth Sciences and Resources, National Research Council, Meeting on the Status of Data and Management Regarding the Effects of Coalbed Methane Production on Surface and Ground Water Resources, Denver, Colorado, April 2008.


Reclamation Planning and Financial Assurance Practice in the United States, Kamchatka Mining Conference, Kamchatka Oblast People’s Council of Deputies, the Committee on Ecology and Resource Management of Kamchatsky Krai, the Rosprirodnadzor Division of Kamchatka Oblast and Koryaksky Autonomous Okrug, the Division for Minerals Management for Kamchatka Krai, and the Kamchatka Oblast Council of the All-Russia Society for Nature Protection, Petropavlovsk-Kamchatsky, Russia, October 2007.

The Good Neighbour Agreement: A Proactive Approach to Water Management through Community

Enforcement of Site-Specific Standards, w Sarah Zuzulock, Greener Management International, Issue 53, Spring 2006, Greenleaf Publishing. 2007.

Sustainable Development at the Anaconda Superfund Site, Mine Design, Operations and Closure

Conference, Fairmont Hot Springs, MT, April 2007. Comparison of Predicted and Actual Water Quality at Hardrock Mines: The reliability of predictions in

Environmental Impact Statements with A. Maest, K. MacHardy, G. Lawson. Predicting Water Quality at Hardrock Mines: Methods and Models, Uncertainties, and State-of-the-Art with A. Maest, Final Report Release December 2006.

Reclamation and Bonding in Copper Mining, U.S. EPA Hardrock 2006: Sustainable Modern Mining

Applications, Tucson, Arizona , November 2006. Sustainable Development at the Anaconda Superfund Site: U.S. EPA Hardrock 2006: Sustainable

Modern Mining Applications, Tucson, Arizona , November 2006. U.S. Perspective on Financial Assurance for Mine Cleanup, presented at International Bar Association

Conference, Chicago, Illinois, September 2006. Comparison of Predicted and Actual Water Quality at Hardrock Mines: The reliability of predictions in

Environmental Impact Statements with A. Maest, K. MacHardy, G. Lawson, presented at Mine Design, Operations and Closure Conference, Fairmont Hot Springs, MT, April 2006.

Predicted Versus Actual Water Quality at Hardrock Mine Sites: Effect of Inherent Geochemical and

Hydrological Characteristics with A. Maest, K. MacHardy, and G. Lawson at International Congress on Acid Rock Drainage (ICARD), March 2006, St. Louis, MS.

Oil, Gas and Coal Bed Methane Reclamation and Financial Assurance Guide, with Kimberley

MacHardy and Victoria Lynne, November 2005; 12th International Petroleum Environmental Conference, Houston, TX.

Approaches to Abandoned Mine Site Assessment and Remedy Selection in the U.S., NOAMI

Workshop on Assessing Liabilities and Funding Options, November 2, 2005 Ottawa, Canada Filling the Gaps: How to Improve Oil and Gas Reclamation and Reduce Taxpayer Liability, Kuipers &

Associates for Western Organization of Resource Councils, August 2005. The Environmental Legacy of Mining in New Mexico, Mining in New Mexico: The Environment, Water,

Economics and Sustainable Development, New Mexico Bureau of Geology and Mineral Resources, Decision-Makers Field Conference 2005, L. Greer Price et al Editors.


Financial Assurance and Bonding, 2005 Decision-Makers Field Conference, Mining in New Mexico: The Environment, Water, Economics and Sustainable Development, New Mexico Bureau of Geology and Mineral Resources, May 2005.

Evaluation of the NEPA Process for Estimating Water Quality Impacts at Hardrock Mine Sites with A.

Maest, K. MacHardy, G. Lawson, for Earthworks, presented at Society of Mining Engineers Annual Conference, Salt Lake City, UT, March 2005 and Mine Design, Operations and Closure Conference, Polson, MT, April 2005.

Evaluation of Methods and Models Used to Predict Water Quality at Hardrock Mine Sites: Sources of

uncertainty and recommendations for improvement with A. Maest, C. Travers and D. Atkins, for Earthworks, presented at Society of Mining Engineers Annual Conference, Salt Lake City, UT, March 2005 and Mine Design, Operations and Closure Conference, Polson, MT, April 2005.

Coal Bed Methane-Produced Water: Management Options for Sustainable Development, co-authored

with K. MacHardy, W. Merschat and T. Myers, presented at Coal Bed Natural Gas Research, Monitoring and Applications Conference, Laramie, WY, August 2004; 11th International Petroleum Environmental Conference, Albuquerque, NM, October 2004; Northern Plains Resource Council Annual Meeting, November 2004.

Technology-Based Effluent Limitations for Coal Bed Methane-Produced Wastewater Discharges in the

Powder River Basin of Montana and Wyoming, Northern Plains Resource Council, Billings, MT, November 2004.

Financial Assurance Guidelines for Hardrock Mine Cleanup, Mine Design, Operations and Closure

Conference, Polson, MT, April 2004. Introduction to Mine Water Treatment, Mine Discharge Water Treatment Short Course, Mine Design,

Operations and Closure Conference, Polson, MT, April 2004. Coal Bed Methane: A Design and Process Overview of Production and Produced Water, presented as

short course at Joint Engineers Conference, Helena, MT, November 2003. The Good Neighbor Agreement between Stillwater Mining Company and Northern Plains Resource

Councils: An Example of Industry and Citizen Cooperation, presented as a short course at Joint Engineers Conference, Helena, MT, November 2003.

Reclamation and Financial Assurance for Mines on or Impacting Tribal Land, presented at U.S. EPA

Workshop on Mining Impacted Native American Lands, Reno, NV, September 2003. Reclamation and Financial Assurance from a Public Interest Perspective, presented at U.S. Forest

Service National Geofest, Park City, UT, September 2003. U.S. State and Federal Policies on Financial Assurance Forms for Hardrock Mines, presented at New

Mexico Financial Assurance Forum, Santa Fe, NM, May 2003. Public Interest Perspective on Land Application Disposal, presented at Mine Design, Operations and

Closure Conference, Polson, MT, April 2003.


Putting a Price on Pollution: Financial Assurance for Mine Reclamation and Closure, Mineral Policy Center, Washington, D.C., March 2003.

Testimony to the Subcommittee on Energy and Mineral Resources, Committee on Resources, U.S.

House of Representatives, Hearing on “Availability of Bonds to Meet Federal Requirements for Mining, Oil and Gas Projects.” Washington, D.C., July 23, 2002.

Mine Closure and Financial Assurance: Can the Mining Industry Afford It’s Legacy?, presented at

Global Mining Initiative Conference, Toronto, Canada, May 2002. The Role of the Center for Science in Public Participation in Mining Environmental Issues, with

Perspective for Regulators and Industry, presented at Canadian Institute of Mining and Metallurgical Engineers Conference, Vancouver, Canada, May 2002 and U.S. EPA Hardrock Mining Conference, Denver, Colorado, May 2002.

The Good Neighbor Agreement between Stillwater Mining Company and the Northern Plains Resource Councils: The Formation and Implementation of a New Approach to Addressing Environmental and Community Relations Issues, presented at U.S. EPA Hardrock Mining Conference, Denver, Colorado, May 2002.

Underground Hard-Rock Mining: Subsidence and Hydrologic Environmental Impacts, Center for

Science in Public Participation, Bozeman, MT, February 2002. Co-authored with S. Blodgett. Review of the Multiple Accounts Analysis Alternatives Evaluation Process Completed for the

Reclamation of the Zortman and Landusky Mine Sites; presented at National Association of Abandoned Mine Lands Annual Conference, Athens, Ohio, August 2001. Co-authored with S.C.Shaw, A.M. Robertson, W.C. Maehl and S. Haight.

Full Reclamation and Closure Plan, Phelps Dodge Tyrone Mine, Grant County, NM; Gila Resources

Information Project, Silver City, NM, July 2001. Co-authored with S. Blodgett. Reclamation Bonding for Hardrock Metal Mines Workshop; presented by CSP2 at Juneau and

Fairbanks, AK, July 2001. Full Reclamation and Closure Plan, Phelps Dodge Chino Mine, Grant County, NM; Gila Resources

Information Project, Silver City, NM, June 2001. Co-authored with S. Blodgett. Reclamation Bonding in Montana; Montana Environmental Information Center, Helena, MT, November

2000. Co-authored with S. Levit. Full Reclamation and Closure Plan, Molycorp Questa Mine, NM; Amigos Bravos, Taos, NM, May 2000. Hardrock Mining Reclamation and Bonding Practices in the Western United States: National Wildlife

Federation, Boulder, CO, February 2000. An Economic Evaluation of the McDonald Gold Project; Blackfoot Legacy, Lincoln, MT, February 2000.. Restoring the Upper Clark Fork: Guidelines for Action; Trout Unlimited, Missoula, MT, April 1999. Co-

authored with D. Workman, B. Farling and P. Callahan.


Alternative Final Reclamation and Closure Plan, Zortman and Landusky Mines, MT: Indian Law Resource Center, Helena, MT, January 1999.

Reclamation Bonding Regulations of Precious Metal Heap Leach Facilities in the Western United

States: Presented at the workshop on Closure, Remediation and Management of Precious Metals Heap Leach Facilities, University of Nevada, Reno, Jan 15, 1999.

Wastewater Treatment Methods for Base and Precious Metal Mines: Public Education for Water

Quality Project, Northern Plains Resource Council, Billings, MT, 1996. Bacterial Leaching Pilot Study – Oxidation of a Refractory Gold Bearing High Arsenic Sulphide

Concentrate: Randol Gold Forum, Squaw Valley, 1990. Co-authored with J. Chapman, B. Marchant, R. Lawrence, R. Knopp.

Novel Aspects of Gold Recovery Using Column Flotation at Austin Gold Venture: Gold and Silver

Recovery Innovations, Phase IV Workshop, Randol International Ltd, Sacramento, CA, 1989.


Kuipers & Associates

Appendix B – TCM Base Case Economic Analysis Spreadsheet

TULSEQUAH CHIEF PROPERTY CHIEFTAIN METALS INC.

Report Date: January 22, 2013 Effective Date: December 12, 2012

22-22

© 2012 JDS Energy & Mining Inc..

Table 22-23: Base Case Economic Analysis

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Prod. Year -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Unit LOM

METAL PRICES Au $/oz 1,455.00 - - - 1,455.00 1,455.00 1,455.00 1,455.00 1,455.00 1,455.00 1,455.00 1,455.00 1,455.00 - - - - - - - - - - Ag $/oz 28.00 - - - 28.00 28.00 28.00 28.00 28.00 28.00 28.00 28.00 28.00 - - - - - - - - - - Pb $/lb 1.01 - - - 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 - - - - - - - - - - Cu $/lb 3.66 - - - 3.66 3.66 3.66 3.66 3.66 3.66 3.66 3.66 3.66 - - - - - - - - - - Zn $/lb 0.97 - - - 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 - - - - - - - - - -

F/X RATE CAD:USD 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01 METAL GRADE

Au g/t 2.30 - - - 1.54 1.80 1.79 2.89 3.26 2.52 2.10 2.29 2.38 - - - - - - - - - - Ag g/t 81.38 - - - 63.87 70.46 80.71 101.27 105.90 85.73 74.91 69.58 77.09 - - - - - - - - - - Pb % 1.04% - - - 0.96% 0.92% 0.98% 1.13% 1.14% 1.22% 1.00% 1.01% 0.98% - - - - - - - - - - Cu % 1.12% - - - 0.93% 0.78% 1.05% 1.45% 1.61% 1.02% 1.03% 1.08% 1.13% - - - - - - - - - - Zn % 5.59% - - - 5.36% 5.19% 5.38% 6.42% 6.63% 5.43% 5.53% 5.44% 4.93% - - - - - - - - - -

MINE PRODUCTION Waste tonnes 1,229,504 - 63,263 285,955 268,489 261,152 234,477 68,640 5,564 - 28,248 13,716 - - - - - - - - - - - Total Ore Processed tonnes 6,447,098 - - - 607,098 730,000 730,000 730,000 730,000 730,000 730,000 730,000 730,000 - - - - - - - - - - Strip Ratio w:o 0.19 - - - 0.44 0.36 0.32 0.09 0.01 0.00 0.04 0.02 0.00 - - - - - - - - - - NSR CALCULATION Zn CONCENTRATE Payable Zn lbs 601,460,418 - - - 54,270,313 63,170,125 65,458,004 78,163,960 80,768,803 66,076,851 67,291,321 66,276,309 59,984,731 - - - - - - - - - - $ 583,416,605 - - - 52,642,204 61,275,021 63,494,264 75,819,041 78,345,739 64,094,545 65,272,581 64,288,020 58,185,189 - - - - - - - - - -

Total Payable in Zn Concentrate $ 583,416,605 - - - 52,642,204 61,275,021 63,494,264 75,819,041 78,345,739 64,094,545 65,272,581 64,288,020 58,185,189 - - - - - - - - - - TC/RCs Zn Treatment Charge + Escalator $ 77,931,702 - - - 7,031,847 8,185,003 8,481,445 10,127,766 10,465,278 8,561,630 8,718,990 8,587,474 7,772,269 - - - - - - - - - -

Total TC/RC $ 77,931,702 - - - 7,031,847 8,185,003 8,481,445 10,127,766 10,465,278 8,561,630 8,718,990 8,587,474 7,772,269 - - - - - - - - - - At-mine Revenues $ 505,484,903 - - - 45,610,356 53,090,018 55,012,819 65,691,275 67,880,461 55,532,916 56,553,592 55,700,546 50,412,920 - - - - - - - - - - Transport Charge $ 102,134,229 - - - 9,215,663 10,726,944 11,115,449 13,273,053 13,715,382 11,220,536 11,426,766 11,254,406 10,186,031 - - - - - - - - - - Penalties in Zn Concentrate $ - - - - - - - - - - - - - - - - - - - - - - -

TOTAL Zn NSR $ 403,350,674 - - - 36,394,693 42,363,075 43,897,369 52,418,223 54,165,079 44,312,380 45,126,826 44,446,140 40,226,889 - - - - - - - - - - Cu CONCENTRATE Payable Cu lbs 135,505,308 - - - 10,550,481 10,693,352 14,351,754 19,814,726 21,976,251 13,930,211 14,028,935 14,720,373 15,439,225 - - - - - - - - - - $ 495,949,427 - - - 38,614,761 39,137,667 52,527,420 72,521,898 80,433,079 50,984,572 51,345,902 53,876,566 56,507,562 - - - - - - - - - - Uncommitted Payable Ag oz 8,183,831 - - - 602,253 814,560 923,043 1,149,608 1,196,249 986,627 853,370 784,704 873,416 - - - - - - - - - - $ 229,147,259 - - - 16,863,090 22,807,677 25,845,211 32,189,033 33,494,958 27,625,559 23,894,358 21,971,725 24,455,647 - - - - - - - - - - Uncommitted Payable Au oz 169,324 - - - 10,647 14,971 14,869 24,019 27,099 20,956 17,446 19,064 20,254 - - - - - - - - - - $ 246,366,098 - - - 15,491,084 21,782,635 21,633,877 34,947,497 39,428,830 30,491,269 25,383,205 27,738,746 29,468,954 - - - - - - - - - -

Total Payable in Cu Concentrate $ 971,462,784 - - - 70,968,935 83,727,979 100,006,509 139,658,428 153,356,868 109,101,400 100,623,465 103,587,037 110,432,163 - - - - - - - - - - TC/RCs Cu Treatment Charge + Escalator $ 38,415,503 - - - 2,991,042 3,031,545 4,068,696 5,617,438 6,230,226 3,949,189 3,977,177 4,173,198 4,376,991 - - - - - - - - - - Cu Refining Charge $ - - - - - - - - - - - - - - - - - - - - - - - Ag Refining Charge $ 12,275,746 - - - 903,380 1,221,840 1,384,565 1,724,412 1,794,373 1,479,941 1,280,055 1,177,057 1,310,124 - - - - - - - - - - Au Refining Charge $ 4,233,094 - - - 266,170 374,272 371,716 600,472 677,471 523,905 436,138 476,611 506,339 - - - - - - - - - -

Total TC/RC $ 54,924,343 - - - 4,160,591 4,627,657 5,824,977 7,942,323 8,702,070 5,953,035 5,693,369 5,826,866 6,193,455 - - - - - - - - - - At-mine Revenues $ 916,538,440 - - - 66,808,344 79,100,322 94,181,532 131,716,105 144,654,798 103,148,366 94,930,095 97,760,171 104,238,708 - - - - - - - - - - Transport Charge $ 60,631,902 - - - 4,720,817 4,784,744 6,421,698 8,866,107 9,833,282 6,233,078 6,277,252 6,586,637 6,908,287 - - - - - - - - - - Penalties in Cu Concentrate $ 16,042,314 - - - 1,249,059 1,265,973 1,699,087 2,345,842 2,601,743 1,649,181 1,660,869 1,742,728 1,827,832 - - - - - - - - - - Total Cu NSR $ 839,864,225 - - - 60,838,468 73,049,604 86,060,747 120,504,156 132,219,773 95,266,106 86,991,974 89,430,807 95,502,590 - - - - - - - - - - Pb CONCENTRATE Payable Pb lbs 92,976,079 - - - 8,080,560 9,350,969 9,893,526 11,411,918 11,572,299 12,359,303 10,145,418 10,219,290 9,942,797 - - - - - - - - - - $ 93,905,840 - - - 8,161,365 9,444,479 9,992,461 11,526,037 11,688,022 12,482,896 10,246,872 10,321,483 10,042,225 - - - - - - - - - - Uncommitted Payable Ag oz 1,030,234 - - - 74,996 100,777 116,199 146,740 153,792 121,678 106,943 98,590 110,518 - - - - - - - - - - $ 28,846,560 - - - 2,099,884 2,821,758 3,253,576 4,108,729 4,306,178 3,406,989 2,994,410 2,760,528 3,094,509 - - - - - - - - - - Uncommitted Payable Au oz 12,921 - - - 742 1,107 1,080 1,891 2,175 1,573 1,314 1,464 1,576 - - - - - - - - - - $ 18,800,544 - - - 1,079,132 1,610,774 1,571,626 2,750,944 3,164,178 2,288,648 1,911,896 2,129,590 2,293,757 - - - - - - - - - - Total Payable in Pb Concentrate $ 141,552,944 - - - 11,340,380 13,877,011 14,817,663 18,385,710 19,158,377 18,178,533 15,153,179 15,211,601 15,430,490 - - - - - - - - - - TC/RCs Pb Treatment Charge + Escalator $ 8,740,433 - - - 759,632 879,060 930,064 1,072,804 1,087,881 1,161,865 953,744 960,688 934,696 - - - - - - - - - - Pb Refining Charge $ 0 - - - 0 0 0 0 0 0 0 0 0 - - - - - - - - - - Ag Refining Charge $ 1,545,351 - - - 112,494 151,166 174,299 220,110 230,688 182,517 160,415 147,885 165,777 - - - - - - - - - - Au Refining Charge $ 323,033 - - - 18,542 27,677 27,004 47,267 54,367 39,324 32,850 36,591 39,412 - - - - - - - - - - Total TC/RC $ 10,608,818 - - - 890,667 1,057,902 1,131,367 1,340,181 1,372,936 1,383,706 1,147,009 1,145,164 1,139,885 - - - - - - - - - - At-Mine Revenues $ 130,944,126 - - - 10,449,713 12,819,109 13,686,296 17,045,528 17,785,441 16,794,826 14,006,170 14,066,437 14,290,606 - - - - - - - - - - Transport Charge $ 14,896,912 - - - 1,294,692 1,498,241 1,585,171 1,828,452 1,854,149 1,980,245 1,625,530 1,637,366 1,593,065 - - - - - - - - - - Penalties in Pb Concentrate $ 0 - - - 0 0 0 0 0 0 0 0 0 - - - - - - - - - - Total Pb NSR $ 116,047,214 - - - 9,155,021 11,320,868 12,101,125 15,217,076 15,931,292 14,814,581 12,380,640 12,429,071 12,697,541 - - - - - - - - - -

TULSEQUAH CHIEF PROPERTY CHIEFTAIN METALS INC.

Report Date: January 22, 2013 Effective Date: December 12, 2012

22-23

© 2012 JDS Energy & Mining Inc..

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Prod. Year -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Au Dore Production Uncommitted Payable Au oz 172,168 - - - 10,826 15,222 15,118 24,422 27,554 21,308 17,739 19,385 20,594 - - - - - - - - - - $ 250,504,659 - - - 15,751,310 22,148,549 21,997,292 35,534,559 40,091,172 31,003,475 25,809,602 28,204,713 29,963,986 - - - - - - - - - - TC/RC Au Refining Charge $ 1,033,009 - - - 64,954 91,334 90,710 146,534 165,324 127,849 106,431 116,308 123,563 - - - - - - - - - - At-Mine Revenues $ 249,471,650 - - - 15,686,356 22,057,215 21,906,582 35,388,025 39,925,848 30,875,625 25,703,171 28,088,405 29,840,423 - - - - - - - - - - Total Au NSR $ 249,471,650 - - - 15,686,356 22,057,215 21,906,582 35,388,025 39,925,848 30,875,625 25,703,171 28,088,405 29,840,423 - - - - - - - - - - Ag Dore Production Uncommitted Payable Ag oz 64,061 - - - 4,734 6,280 7,193 9,026 9,438 7,640 6,677 6,202 6,870 - - - - - - - - - - $ 1,793,715 - - - 132,557 175,848 201,415 252,719 264,277 213,934 186,943 173,651 192,373 - - - - - - - - - - TC/RC Ag Refining Charge $ 96,092 - - - 7,101 9,420 10,790 13,538 14,158 11,461 10,015 9,303 10,306 - - - - - - - - - - At-Mine Revenues $ 1,697,624 - - - 125,456 166,427 190,625 239,180 250,119 202,473 176,928 164,348 182,068 - - - - - - - - - - TOTAL Ag NSR $ 1,697,624 - - - 125,456 166,427 190,625 239,180 250,119 202,473 176,928 164,348 182,068 - - - - - - - - - - Total NSR (All Concentrates) US$ 1,610,431,387 - - - 122,199,994 148,957,189 164,156,448 223,766,659 242,492,111 185,471,165 170,379,539 174,558,770 178,449,510 - - - - - - - - - -

$CAD 1,626,374,658 - - - 123,409,774 150,431,865 165,781,597 225,981,949 244,892,783 187,307,330 172,066,296 176,286,902 180,216,160 - - - - - - - - - - Cashflow from Streaming $CDN 36,169,297 - - - 2,441,964 3,383,159 3,551,008 5,181,316 5,682,345 4,481,975 3,787,125 3,895,209 3,765,196 - - - - - - - - - - Upfront Cash Payment Received $CDN 50,495,000 8,313,240 21,204,929 20,976,831 - - - - - - - - - - - - - - - - - - - Total Cashflow From Streaming $CDN 86,664,297 8,313,240 21,204,929 20,976,831 2,441,964 3,383,159 3,551,008 5,181,316 5,682,345 4,481,975 3,787,125 3,895,209 3,765,196 - - - - - - - - - - Net Revenues $CDN 1,713,038,955 8,313,240 21,204,929 20,976,831 125,851,737 153,815,025 169,332,605 231,163,266 250,575,128 191,789,305 175,853,421 180,182,111 183,981,356 - - - - - - - - - - OPEX Mining Cost $/t milled 30.06 - - - 19.40 21.61 23.55 34.36 37.68 39.39 31.84 30.88 30.04 - - - - - - - - - - Processing $/t milled 23.02 - - 0 25.86 22.59 23.12 22.58 23.20 22.58 22.58 22.58 22.58 - - - - - - - - - - G&A $/t milled 22.47 - - 0 27.70 22.18 22.17 22.49 22.52 22.31 21.57 21.09 21.05 - - - - - - - - - - Power $/t milled 22.58 - - 0 24.68 23.42 23.39 23.35 23.15 22.39 21.51 21.13 20.52 - - - - - - - - - - Operating Supplies - Tail. & Effl. $/t milled 0.00 - - 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - - G&A $/t milled 0.00 - - 0 - - - - - - - - - -

Total Unit Cost $/t milled 98.13 Mining Cost $ 193,808,343 - - $0 $11,778,372 $15,776,660 $17,191,250 $25,079,360 $27,509,252 $28,755,374 $23,242,367 $22,545,920 $21,929,788 - - - - - - - - - - Processing $ 148,421,212 - - - 15,702,379 16,488,064 16,874,399 16,485,260 16,935,248 16,483,832 16,484,118 16,484,054 16,483,858 - - - - - - - - - - G&A $ 144,850,061 - - - 16,816,661 16,190,434 16,183,530 16,418,646 16,442,707 16,288,594 15,746,703 15,394,632 15,368,155 - - - - - - - - - - Power $ 145,552,596 - - - 14,985,275 17,095,881 17,077,595 17,048,907 16,898,257 16,345,303 15,702,454 15,421,793 14,977,132 - - - - - - - - - -

Total OPEX $ 632,632,213 - - - 59,282,686 65,551,039 67,326,774 75,032,173 77,785,463 77,873,102 71,175,642 69,846,400 68,758,933 - - - - - - - - - - Operating Cashflow $ 1,080,406,742 8,313,240 21,204,929 20,976,831 66,569,051 88,263,986 102,005,831 156,131,093 172,789,665 113,916,203 104,677,779 110,335,712 115,222,423 - - - - - - - - - - CAPEX Mining $ 114,220,605 - 22,766,902 27,469,547 25,118,924 15,791,317 14,084,366 5,648,569 953,366 33,200 1,744,390 610,025 - - - - - - - - - - - Site Development $ 7,417,819 2,871,306 4,546,513 - - - - - - - - - - - - - - - - - - - - Limestone Crushing $ 159,237 - $0 $159,237 - - - - - - - - - - - - - - - - - - - Processing Plant $ 63,054,443 1,643,474 $23,651,647 $37,759,321 - - - - - - - - - - - - - - - - - - - Tailings & Waste Rock Mgmt $ 15,502,816 - - $15,502,816 - - - - - - - - - - - - - - - - - - - On-site Infrastructure $ 61,478,528 3,900,163 $24,881,524 $32,696,841 - - - - - - - - - - - - - - - - - - - Off-site Infrastructure $ 54,197,178 22,582,157 31,615,020 - - - - - - - - - - - - - - - - - - - - Project Indirects $ 91,642,283 22,108,087 $37,444,897 32,089,299 - - - - - - - - - - - - - - - - - - - Engineering & EPCM $ 31,351,419 6,413,213 $13,538,746 $11,399,459 - - - - - - - - - - - - - - - - - - - Owner's Costs $ 17,343,672 5,081,679 $6,332,874 $5,929,119 - - - - - - - - - - - - - - - - - - - Salvage Value $ -7,577,409 - $0 $0 - - - - - - - - - -7,277,409 - - - -300,000 - - - - - Reclamation Costs $ 13,751,173 - - - - - - - - - - - - 12,651,670 523,957 99,888 82,003 73,061 64,119 64,119 64,119 64,119 64,119 Pre-Contingency CAPEX $ 462,541,764 64,600,079 164,778,124 163,005,639 25,118,924 15,791,317 14,084,366 5,648,569 953,366 33,200 1,744,390 610,025 - 5,374,262 523,957 99,888 82,003 -226,939 64,119 64,119 64,119 64,119 64,119 Contingency % 12.0% - - - - - - - - - - - - - 12% 12% 12% 0% 12% 12% 12% 12% 12% $ 47,209,234 7,752,010 19,773,375 19,560,677 - - - - - - - - - - 62,875 11,987 9,840 - 7,694 7,694 7,694 7,694 7,694 CAPEX incl. Contingency $ 509,750,998 72,352,089 184,551,499 182,566,316 25,118,924 15,791,317 14,084,366 5,648,569 953,366 33,200 1,744,390 610,025 - 5,374,262 586,832 111,874 91,844 -226,939 71,813 71,813 71,813 71,813 71,813 Working capital $ - - - - 14,820,672 - - - - - - - -14,820,672 - - - - - - - - - - Cashflow Net Cashflow $ 570,655,744 -$64,038,849 $163,346,570 161,589,484 26,629,455 72,472,669 87,921,465 150,482,523 171,836,299 113,883,003 102,933,389 109,725,687 130,043,095 5,374,262 586,832 111,874 91,844 226,939 71,813 71,813 71,813 71,813 71,813 Cumulative Cashflow $ -$64,038,849 $227,385,419 388,974,903 362,345,448 289,872,779 201,951,314 51,468,790 120,367,509 234,250,512 337,183,901 446,909,587 576,952,682 571,578,421 570,991,588 570,879,714 570,787,871 571,014,810 570,942,997 570,871,183 570,799,370 570,727,557 570,655,744

Pre-Tax Payback Years 4.3 0 0 0 0.0 4.3 0.0 0.0 0 0 0 0 0 0 0 0 0 0 0 0 Pre-Tax IRR % 16.5%

Pre-Tax NPV 8.0% 192,701,281

Taxes (Incl. BC Mineral Tax) $ 119,511,187 - - - - 1,320,067 1,805,646 2,095,363 3,268,407 3,638,062 11,057,970 24,044,760 36,069,158 40,073,700 -3,571,616 -215,561 -47,047 -11,940 74,829 -25,055 -15,615 -16,551 -16,686

Net After-Tax Cashflow $ 451,144,557 64,038,849 163,346,570 161,589,484 26,629,455 71,152,602 86,115,819 148,387,160 168,567,892 110,244,941 91,875,419 85,680,927 93,973,937 45,447,961 2,984,783 103,687 44,797 238,879 146,642 46,758 56,198 55,262 55,127 Cumulative Cashflow $ 64,038,849 227,385,419 388,974,903 362,345,448 291,192,846 205,077,027 56,689,866 111,878,026 222,122,967 313,998,386 399,679,313 493,653,250 448,205,289 451,190,072 451,293,759 451,248,962 451,487,841 451,341,199 451,294,441 451,238,244 451,182,982 451,127,855

After-Tax Payback Years 4.3 0 0 0 0.0 4.3 0.0 0 0.0 0 0 0 0 0 0 0 0 0 0 0 After-Tax IRR % 14.7%

After-Tax NPV 8.0% 138,661,259

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