Los Calatos Proyect

Los Calatos Proyect

Location

The Los Calatos Project is located in a well-defined copper-molybdenum porphyry belt in southern Peru, in a dry desert environment, approximately 80 kilometres to the southeast of Arequipa and 32 kilometres northwest of Moquegua.

Production from mines in this region exceeded 600,000 tonnes of copper metal in 2010. With the proposed upgrade to the Toquepala, Cuajone and Cerro Verde mines and the development of the Tia Maria and Quellaveco mines, production from this belt is anticipated to increase to more than 1.3 million tonnes of copper metal per annum. Molybdenum constitutes a significant by-product of copper mining from this belt (Figure 1).

The project comprises 27 exploration licences covering an area of 224 square kilometres, and occurs at an altitude of approximately 2,900 metres above mean sea level. It can be accessed via a sealed road (Pan American Highway) from Moquegua, except for the last 50 kilometres which is unsealed. The port of Ilo is located approximately 160 kilometres by road to the southwest of the project area.

In July 2011 the Los Calatos Project was declared a "Project of National Interest" by the Peruvian Government. This is an exceptional designation that allows Metminco's wholly owned subsidiary, Minera Hampton Peru SAC, to acquire surface title to the Los Calatos tenements, which are located on State-owned barren lands, by direct purchase from the Peruvian government.

Figure 1: Location of Los Calatos and its nearest neighbours.

Geology The project occurs within the major, northwest – southeast trending Paleocene/Eocene copper-molybdenum porphyry belt in southern Peru, where the major controlling structural feature appears to be the Incapuquio Fault System. The Los Calatos porphyry system has many similarities to that of a classic porphyry system as described by Sillitoe (2009) and others (Figure 2). Figure 2: Northwest-southeast section through the Los Calatos porphyry system.

The mineralisation and alteration at the Los Calatos deposit is directly related to a multi-stage brecciated porphyry stock (diorite to granodiorite), as a sub-volcanic manifestation of a multi-stage precursor pluton, which intruded a sequence of basaltic andesites and rhyolites of the Toquepala Group (age of 80 - 65 Ma). The porphyry system was subsequently 'intruded' by a phreatomagmatic diatreme with associated breccias and tuffs, and later porphyritic plugs (46 ±1.36 Ma). The age of the copper-molybdenum mineralisation at Los Calatos is 57-52 Ma (Eocene), as is the case for the porphyry systems at the Toquepala, Quellaveco and Cuajone mining operations. Further, preliminary work suggests that the mineralisation occurred over four stages, as described below: Pre-Main Stage: Dominated by copper mineralisation as chalcopyrite, associated with potassic alteration. This style of mineralisation is only preserved at the borders of the system. No clear brecciation developed. Main Stage: Dominated by copper and molybdenum mineralisation as chalcopyrite, bornite and molybdenite, associated with quartz sericite and potassic (dominant) alteration. This represents the main phase of mineralisation, and is characterised by well-developed igneous and hydrothermal breccias.

Transitional Stage: Dominated by copper mineralisation (chalcopyrite and tennantite) with the remobilisation of molybdenite, associated with quartz sericite (dominant) and potassic alteration. Digenite (and possibly covellite) mineralisation occur during this stage. Breccias include molybdenite breccias and massive copper sulphide breccias. Late Stage: Dominated by copper mineralisation (covellite, digenite, chalcopyrite and tennantite) occurring in close proximity to the margins of the Diatreme Complex. Presence of diatreme and slump breccias as well as late hydrothermal breccias. The main area of interest at Los Calatos is defined at surface by a north-westerly trending zone of advanced argillic alteration or "LIX capping", which overlies a sub-vertical porphyry system that is developed to drilled depths in excess of 1,700 metres. The LIX capping is 3.3 kilometres in strike extent with a variable width of up to 1 kilometre. By virtue of the limited amount of erosion that has taken place of the Los Calatos porphyry system, a thick chalcocite "blanket" is not developed. The geology of the porphyry system below the LIX capping is depicted in Figure's 3, 4 and 5 below. (Note: Drill holes in Figures 4 and 5 indicate position of copper mineralisation). Figure 3: Schematic geology of the Los Calatos porphyry system showing select Cu and Mo isogrades (1900mRL).

Figure 4: Geological cross-section 10300E (Central sector of Porphyry Complex).

Figure 5: Geological cross-section 10900E (South-eastern sector of Porphyry Complex).

Exploration

An extensive, regional scale, mapping, geochemical and geophysical program has been completed historically by Metminco over the Los Calatos tenements, which identified eight anomalies (targets) with potential, of which two (Targets 1 and 2) have been drill tested. The mineral resource estimate of February 2013 relates to these two target areas (Figure 6). Four phases of drilling have now been completed at Los Calatos, totalling 125,393 metres, of which the Phase 3 and 4 results are summarised under the Significant Results - Table 1 and 2 Section of the website. Figure 7 below summarises the history of key developments at Los Calatos over the period January 2009 to March 2013.

The drilling successfully delineated the extent of the mineralised envelope associated with the Los Calatos porphyry system, as well as having confirmed the following:

• Los Calatos embraces a classic mineralised porphyry system that has been 'intruded' by a younger diatreme complex ("Porphyry Complex")

• The Porphyry Complex developed over time in response to differential movement on the regional Incapuquio Fault System

• Copper and molybdenum mineralisation largely occurs in association with the porphyry system and the adjoining wall-rock

• Molybdenum mineralisation tends to be more constrained in its distribution

• High copper and molybdenum grades occur near-surface in the core of the porphyry system, which facilitate open pit mining

• High copper and molybdenum grades persist at depth, and along strike, which lends itself to underground bulk mining (block caving)

• Abrupt changes in grade occur the 0.25% Cu and 0.075% Cu isograde lines, as well as a 0.013% Mo isograde line

• The delineation of high grade and low grade zones allows for optimal mine scheduling

• Additional metals present (potential by-products) include gold, silver and rhenium.

Figure 6: Project area comprising 224km2 of tenements and defined exploration targets (1 to 8).

Figure 7: Key developments at Los Calatos over the period January 2009 to January 2013.

Modelling Process – Janaury 2013 Mineral Resource Estimate.

A 3-D geological model of the Los Calatos deposit was produced by Metminco, and submitted to SRK Consulting (Chile) S.A. for the construction of a block model to derive the January 2013 Mineral Resource Estimate. In order to establish a regular sample support length, samples were composited to 5 metres with a total of 12,560 composites having been used to interpolate grades. The block model provided for a block size of 15 x 15 x 15 metres (Figure 8). Densities for the mineralised unit were based on 5,654 measurements from 65 drill holes. Grade and density estimates were interpolated using oridinary kriging. Figure 8: 3-D block model and surface DTM - January 2013 Mineral Resource Estimate.

Separate copper and molybdenum models were developed and estimated, and then reported using a CuEq cut-off grade. The mineralised solid model produced by SRK Consulting (Chile) S.A. provided for copper isogrades of 0.25% and 0.075% (Figure 9), and a molybdenum isograde of 0.013%. Due to the lack of continuity of the copper and molybdenum grades across the boundaries defined by the isograde shells, the boundaries were considered as 'hard boundaries' for grade estimation purposes. Figure 9: Mineralised solid model for the copper isogrades 0.25% (red) and 0.075% (blue).

The mineral resource estimate was performed on three domains for copper and two domains for molybdenum, as summarised below:

Copper

• Domain 1: Estimated on the basis of the composites that fall within the solid model above 0.25% Cu

• Domain 2: Estimated on the basis of the composites that fall within the solid model above 0.075% Cu

• Domain 3: Includes those high grade molybdenum blocks that occur outside the Domain 1 and 2 copper envelopes, but which contain low grade copper mineralisation

Molybdenum

• Domain 1: Estimated on the basis of the composites that fall within the solid model above 0.013% Mo

• Domain 2: Includes those high grade blocks lying outside the 0.013% Mo boundary, but within the low grade copper domains

The resultant block model, as depicted in Figure 8 above, formed the basis of subsequent mine planning work undertaken as part of an ongoing mining options study. Mineral Resourse Estimate – February 2013 With the completion of the Phase 4 drilling program at Los Calatos in October 2012, SRK Consulting (Chile) S.A. were requested to complete a mineral resource estimate for the project, using at its basis the Phase 1 to 4 drilling results, as well as a preferred mining scenario (small open pit followed by an underground bulk mining operation) identified as part of an ongoing mining options study. The resultant, January 2013 Mineral Resource Estimate, incorporated the drilling results from 138 drill holes (totalling 125,393 metres), of which 103 drill holes intersected the mineralised unit.

The January 2013 Mineral Resource Estimate was superceded by a further mineral resource update (February 2013 Mineral Resource Estimate) in support of a Scoping Study completed on the preferred mining scenario. The February 2013 Mineral Resource Estimate provided for additional modelling of the near surface supergene mineralisation, as well as further pit optimisation work, which resulted in an increase in the resources amenable to open pit mining, concommitant with a minor reduction in the underground bulk mining resources. Mineral resources were estimated for those resources which are potentially amenable to open pit mining to a vertical depth of 500 metres below surface (Table 1), and for those resources occurring below this depth which are potentially amenable to underground bulk mining (Table 2). The resources were categorised into Measured, Indicated and Inferred Mineral Resources in accordance with the JORC Code (2004) for Reporting Mineral Resources and Mineral Reserves. Table 1: Mineral Resource Statement for the Los Calatos Project to a vertical depth of 500 metres below surface, SRK Consulting (Chile) S.A., February 2013.

Resource Classification Tonnage (million)

Cu (%)

Mo (%)

CuEq (%)

Measured 121 0.35 0.027 0.47

Indicated 117 0.35 0.016 0.42

Total Measured and Indicated 238 0.35 0.022 0.44

Inferred 66 0.40 0.006 0.43

Note: Mineral Resource reported at a 0.15% CuEq cut-off. Rounding-off of figures may result in minor computational discrepancies.

Table 2: Mineral Resource Statement for the Los Calatos Project sub-500 metres below surface, SRK Consulting (Chile) S.A., February 2013.

Resource Classification Tonnage (million)

Cu (%)

Mo (%)

CuEq (%)

Measured 281 0.48 0.035 0.63

Indicated 485 0.52 0.022 0.61

Total Measured and Indicated 766 0.51 0.027 0.62

Inferred 292 0.52 0.018 0.60

Note:

Mineral Resource reported at a 0.35% CuEq cut-off.

Rounding-off of figures may result in minor computational discrepancies. Appendix 1 provides more detailed information on the sensitivities of the abovementioned mineral resources to various CuEq cut-off grades.

Comparation - Janaury 2013 an d April 2012 Mineral Resource Estimate.

In comparing the January 2013 Mineral Resource Estimate with the April 2012 Mineral Resource Estimate, it is clear that there has been a material reduction in the resource tonnes, albeit that the copper grade has increased. The reason for this is as follows:

• The April 2012 Mineral Resource Estimate anticipated a large scale open pit mining operation, whereas the January 2013 Mineral Resource Estimate provides for a small open pit operation that transitions into a underground bulk mining operation

• As a large percentage of the resource is expected to be mined via an underground bulk mining operation focusing on the higher grade zones, a higher cut-off grade has been applied to those resources that are deeper than 500 metres below surface - with a consequential reduction in tonnage (and increase in grade)

• 'Hard boundaries' were not used to constrain grade estimates for the April 2012 Mineral Resource Estimate. With the conclusion of the Phase 4 drilling program in October 2012, the additional data facilitated the recognition of such 'hard boundaries', which were subsequently applied to grade estimates. In the absence of such, the potential exists to over-estimate tonnage and under-estimate grades at any given cut-off grade

Mining Options Study. A mining options study was initiated by NCL Ingenieria Construccion Ltda ("NCL") (an independent Chilean based engineering consultancy group with substantial experience in underground block cave design) in October 2012, to evaluate five different mining options for the development of Los Calatos, which included a large open pit operation, a large underground bulk mining operation, and a combination of both open pit and underground operations of various sizes. The study provided for a high level review of the following issues:

• Mining methods and cut-off grades

• Resource to reverse conversion ratios

• Switch point from open pit to underground mining

• Application of competitive underground mining methods (e.g. block caving)

• Production schedules

• Impact of mining method (s) on layout of infrastructure and environmental footprint

• Capital and operating cost estimates

• Process plant and infrastructure costs

In late January 2013, and following the completion of the mining options study by NCL, the Company announced that it had identified a preferred mining scenario for Los Calatos involving an initial open operation followed by an underground bulk mining operation. Following this, NCL then focussed on the preferred mining scenario as part of a Scoping Study, the results of which were reported in March 2013. The following is relevant in the context of the preferred mining scenario:

• An open pit operation will be developed initially that will be followed by an underground bulk mining operation with a combined life of mine of 31 years

• At a daily production rate of 60,000 tonnes per day, a total of 656 million tonnes of ore will be processed of the life of mine (21.9 million tonnes per annum)

• The open pit will have an expected life of 7-years, and will span the timeframe required to commence undergound production

• A low grade stockpile will be developed from the open pit, which will provide feed to the plant as underground production is ramped-up

• The undergound bulk mining operation has a life 24 years

• Operating and capital costs have been estimated in accordance with accuracy levels normally ascribed to scoping studies

• Strong emphasis has been placed on the optimisation of grade/production in both the open pit and underground mining operations to ensure a phased capital spend, and optimal return on capital. However, additional work is required to optimise the open pit further

Figure 10 shows the spatial relationship between the mineralised envelope defined at Los Calatos and the surrounding topography, the latter of which impacts on stripping ratio of any planned open pit operation, and the transition thereof into a underground bulk mining operation. Figure 10: Los Calatos mineralised envelope relative to the surrounding topography.

Table 3 below summarises the tonnes mined by operation over the life of mine and the corresponding head grade, whereas Table 4 summarises the key life of mine operational parameters. Table 3: Total tonnes mined - Preferred Mining Scenario, February 2013.

Type of Mining Operation Tonnes (million)

Cu (%)

Mo (%)

CuEq (%)

Open Pit 194 0.37 0.018 0.44

Underground - Bulk Mining 462 0.49 0.029 0.61

Total tonnes mined 656 0.45 0.026 0.56

In determining the tonnes mined ('economic resources'), measured, indicated and inferred resources were considered, with 23% of the mineralised material reporting into the mining plan having been derived from inferred mineral resources. The latter resources will be converted to higher confidence resource categories when conducting further drilling as part of the planned pre-feasibility study. Table 4: Preferred Mining Scenario - Life of Mine production.

Parameter Open Pit Underground LoM

Total tonnes milled (millions) 194 462 656

Average copper grade (%) 0.37 0.49 0.45

Average molybdenum grade (%) 0.018 0.029 0.026

Copper in Concentrate (kt) 585.6 1,997.6 2,583.2

Molybdenum in Concentrate (kt) 23.6 91.1 114.7

Mining costs (US$/t ore milled) 4.19 8.34 7.11

Processing costs (US$/t ore milled) 4.55 4.55 4.55

G & A costs (US$/t ore milled) 0.59 0.59 0.59

Total site costs (US$/t ore milled) 9.33 13.48 12.25

Total off-site costs (US$/t ore milled) 3.35 3.35 3.35

Cash operating costs net of credits (US$/t ore milled)

1.11 1.09 1.09

The provisional development schedule for Los Calatos and the annual CuEq production for the life of mine is graphically depicted in Figure 11. The development schedule allows for the construction of the

surface infrastructure and metallurgical plant to be undertaken simultaneously with the development of the open pit operation. However, in order to commence underground bulk mining in Year 12 of the life of mine, underground development is required to commence four years prior to production from the open pit being initiated. This is presently under review by way of further optimising the open pit operation, with the objective of reducing the lead time for the commencement of the underground development. As mentioned previously, the life of the open pit is estimated to be seven years, during which time a low grade stockpile will be established that will supplement high grade ore from the underground operation during the ramp-up stage of the operation (Years 12 to 16). Figure 11: Provisional development schedule and life of mine CuE production.

The annual contained copper and molybdenum metal in concentrate production is expected to average 83.3kt and 3.7kt respectively over the life of mine, with cash operating costs net of by-product credits expected to average US$1.09/lb of copper over the life of mine. On this basis, the operating costs compare favourably with global cash costs, ranking in the lower quartile of producers. The impact of the by-product credits, which include molybdenum, gold, silver and rhenium, is such that the cash operating costs are reduced from a total cash operating cost of US$1.88/lb to US$1.09/lb - a reduction of US$0.79 per lb of copper. Of this, 75% of the credit is derived from the molybdenum. The initial capital requirement for the establishment of the open pit, surface infrastructure, metallurgical plant and underground development is estimated at US$1,506 million, which includes contingencies of between 10% and 30% based on the quantum of work undertaken to derive the cost estimate. Sustaining capital post initiation of production will be funded from cashflow. The pre-production capital is summarised as follows:

• Flotation plant, tailings dam & water and concentrate pipelines = US$814 million

• Open pit, including pre-strip and equipment = US$255 million

• Underground mine including development and equipment = US$167 million

• Infrastructure including power supply, port, access, site facilities, workshops and osmosis plant = US$227 million

• Owners costs = US$43 million

• Total = US$1,506 million

The underground mine infrastructure will consist of a twin decline system, one of which is for personnel and equipment, and the other is for a conveyor system for the removal of ore. Four vertical raise-bored ventilation shafts will support the underground operation, and ore will be crushed via a primary crusher located underground. Figure 12 shows a schematic layout of both the open pit and the underground mining operation. Figure 12: Schematic section showing the open pit and underground mining operations.

Block caving will be the underground mining method of choice at Los Calatos. This mining method involves pre-conditioning programs to assist cave propogation involving arrays of long blast holes into the rock mass overlying the planned undercuts, whereafter gravity takes effect. Whilst underground block caving has a higher level of risk than an open pit operation, this can be managed through the application of best practise mine designs and scheduling. Due to the high levels of productivity, unit operating costs are substantially lower than other underground mining methods. In addition, the environmental footprint is reduced considerably by comparison to large open pit operations. Block caving was first adopted in Chile as far back as 1924 (Potrerillos Mine), and lends itself to the underground mining of large porphyry systems where strip ratios get excessive. It is furthemore the large scale mining method of choice for porphyry copper deposits as discoveries get deeper, head grades decline and strip ratios get excessive. Examples of large copper mines where block caving has successfully been used include El Teniente and Andina (Chile), Northparkes (Australia), Palabora (South Africa) and Grasberg (Indonesia). Metallurgical Testwork

Preliminary flotation testwork was undertaken in 2009 on composite samples sourced from Phase 2 drill core. The test results (predicted results from each of the locked cycle tests using 160 micron material) are summarised in Table 5 below.

Table 5: Predicted results from locked cycle tests.

Concentrate Grades Concentrate Recovery

Cu (%) Mo (%) Cu (%) Mo (%)

22.3% 2.5 87.7 82.2%

Note: Results based on a copper concentrate only.

By comparison, the average historical concentrate grade for the nearby Cuajone mine has been 26% Cu and for the Toquepala mine just over 27% Cu. Historic copper recoveries at these mines have generally been in the range of 85% to 87%. The molybdenum recoveries in the copper concentrate for Los Calatos are exceptionally high, but are expected to be in line with an overall recovery rate of 65% to 68% for a commercial grade molybdenum concentrate.

Gold, silver and rhenium are likely to contribute as by-product credits to any revenue stream arising from mining operations at Los Calatos. The grades of eight copper concentrate samples relating to the metallurgical work undertaken in 2009 are shown Table 6.

Table 6: Grades obtained from eight concentrate samples.

Metal Unit Ave Grade Range

Ag g/t 42 12 - 91

Au g/t 1.25 0.7-1.8

Cu % 24.93 21.4-30.5

Mo % 3.08 0.62-5.94

Further metallurgical testwork is required to optimise copper recoveries and copper concentrate grades by conventional flotation, and to test the flotation and separation of the molybdenum from the combined copper-molybdenum concentrate. In addition, and as seawater is to be used for flotation purposes, metallurgical testwork is to be conducted to evaluate whether seawater will have any deleterious effect on recoveries. However, based on the fact that several mining operations (e.g. Esperanza and La Luces

in Chile), or projects (e.g. Sierra Gorda in Chile) in the Region are using (or plan to use) seawater, problems with recoveries are not anticipated.

General Infraestructure

Based on preliminary investigations, and the size of the envisaged tailings disposal site and mine waste dumps, it is estimated that an area of some 13,000 ha of surface rights will need to be purchased from the Peruvian government. Extensive work has been completed on the proposed route for a services corridor to the coast. The purpose of the services corridor will be for the pumping of sea water to the metallurgical facility at Los Calatos, and for the pumping of concentrate to a port facility on the coast. This will require that a right of access for the installation of the pipeline be aquired, in addition to obtaining a permit for the establishment of a port facility. Preliminary work has also been undertaken by consultants regarding road access to Los Calatos, the supply of power and the design of a port facility - the associated costs estimates of which have been included in the Scoping Study concluded by NCL.

Communities

Metminco has established a local office in the town of Moquegua to facilitate communications with the local communities.

Planning for Pre-Feasibility Study

The Company is well poised to take to take the next step in the development of Los Calatos, namely the initiation of a pre-feasibility study. Key achievements in this regard are as follows:

• Project declared a "Project of National Interest" by the Peruvian Government: Required freehold right can be purchased directly from the State

• Sensitivities to use of potable water: Seawater to be used at the planned metallurgical facility for floatation purpose

• Access to seawater: Preliminary cost estimates completed for the construction of a dual pipeline to the coast for pumping seawater to Los Calatos, and concentrate to the coast

• Infrastructure, power and road access: Indicative site and off-site infrastructure requirements identified, and detailed surveys are in progress to support such

• Exploration programs: Phase 4 drilling program completed in October 2012, resulting in revised mineral resource estimate (February 2013)

• Mineral resource estimate: February 2013 mineral resource estimate to form the reference base for the planned pre-feasibility study

• Preferred mining scenario: Identified by NCL as part of a mining options study. Comprises an initial open pit operation followed by an underground bulk mining operation

• Metallurgy: Preliminary flowsheet completed using conventional sulphide flotation technology. Expected recovery rates of copper and molybdenum into separate copper and molybdenum concentrates expected to be 87% and 68% respectively

• Scoping Study: Completed on the preferred mining scenario. Confirms that Los Calatos has the potential to be a low cost, long life, copper mine

• Funding: As at 07 January 2013, the Company had US$17 million free cash. Funding strategies to complement this are under consideration

Following the completion of the Scoping Study on Los Calatos, preparatory work has commenced to define the scope of the work required for the planned pre-feasibility study, and the associated costs, for submission to the Metminco Board.

Apendix 1