Galmoy Mines LtdMianaigh Ghabhalmhaigh Teoranta

Community Report 2007

Galmoy Mines Ltd

Galmoy Mines Ltd, a member of the Lundin Min-ing Group, would like to take this opportunity to inform the community about the operation and our activities here at Galmoy Mine. This is the fi rst community report written for the mine which we hope will convey our open and transparent way of doing business as we believe it is very im-portant to have a close relationship with the local community.

A mine is an industrial activity that can only be lo-cated at the geographical occurrence of the miner-al deposit. Mining of minerals for the production of metal is, however, essential to the development of our society in all aspects and there is an old saying; “what can´t be grown has to be mined”.

All man made activities, from farming to in-dustry, have an impact on the environment as well as the landscape and in this respect our mine is no different. However, by setting high standards in all of our activities we can strive to minimise the effects on the environment.

When production started up in 1997, the length of life of the operation was calculated to be approxi-mately 10 years. With extensions to the original ore bodies as well as new discoveries, the length of life of the operation has been extended to early 2011.

Unlike other industries mining has a fi nite life and must come to an end when all economic miner-alisation has been mined. At this point in time, all but one area within the mine site is being drilled off by the exploration team. Unless a signifi cant ore deposit is found, 2011 will unfortunately be the fi nal year for mining activities at Galmoy and we all have to be prepared for that situation.

In the meantime we hope that the ongoing efforts to fi nd more ore in the region will be successful and we will strive for continuous improvement in terms of health, safety and environment during the remaining life of mine.

Best RegardsStefan Mansson, MD

Galmoy May 2007

The overall Safety Target is refl ected in Galmoy’s Safety Policy:

“At Galmoy Mine, Safety, Health and Envi-ronmental responsibilities are an integral part of the way we do business. We are commit-ted to continual improvement in our perfor-mance, effi cient use of resources and expect zero harm to people and the environment.

To achieve this commitment Galmoy Mines Ltd. has implemented Health, Safety, and Environmental management systems.”

Safety

A safe workplace constitutes the basic foundation for any operation. Our ultimate target is to have zero accidents and no work-related ill-health.

Our track record in terms of safety, with a severe blasting accident in 2006 and the tragic fatality in early 2007 do, however, show that we have a long way to go to reach our targets.

The basis for a systematic approach to safety is like a pyramid as shown below on the TeePee, our ore storage area. The base of the pyramid is made up by incidents and, at the top, by a fatality.

It can be shown that there is a relation-ship between the number of incidents and more severe accidents. As a conse-quence, it is crucial that incidents and near misses get reported and acted upon in order to reduce the probability for more severe accidents. It is also important to realize that the variance between an inci-dent and a severe accident in many cases is no more than seconds or millimeters.

LTI = Lost Time Injury; a work related injury that leads to lost time from work 1 shift ore more

LTIFR = Lost Time Injury Frequency Rate, Nr of LTI´s per 200.000 hours worked

0

10

20

30

40

00 01 02 03 04 05 06 07

Lost Time Injury Frequency Rate 2000 - March 2007

Nr of Lost Time Injuries per 200.000 hrs, including Contractors

FatalitySerious Injury

Lost Time InjuryInjury

Near AccidentSafety Incident

Safety Focus areas for 2007 • increased focus on reporting and accident investigations• better follow up on actions• involvement of safety representatives in accident investigations• introduction of safety inspections • introduction of rolling safety plan• use of task/machine groups • tool box meetings for all employees• clear line management accountability• fortnightly management safety meetings • outlined safety targets for the company as well as individuals Targets for Line Management

• all accidents to have corrective actions with date to prevent reoccurrence• all Near Misses to have corrective actions with date to prevent an accident• 90% of all actions to be closed out in time• all Safety Inspections to be carried out according to plan• accidents and severe Near Misses to be announced by e-mail within 24 hrs• accidents to be on the system within 48 hrs• most accident investigations to be fi nalised within 7 days• safety reps to be involved in investigation

Company Safety Targes for 2007

• reduce LTI frequency to < 7• reduce severity rate < 20 lost days per accident• increase Near Misses ratio to LTIFR to > 5

Safety Our Road Map 07

Galmoy Mines consists of four main orebodies, the CW, G, K and R, with as-sociated satellite bodies, the CW South, G West and K2. The mineralisation in the G and R Orebodies consists of massive sulphides directly related to the east-west trending G Fault system.

The CW, K and K2 miner-alisation is also believed to be related to the G Fault, but primarily fed via a northwest striking plumb-ing system which connects into the G fault system at depth. Along strike of Gal-moy the G Fault is found to diminish in throw, but from aeromagnetic and drilling data the fault is known to step in an en echelon pat-tern through a series of par-allel faults to Lisheen in the southwest and to the Ra-pla Prospect in the north-east. Although each fault is orientated east-west, the steps between each fault give a general northeast-southwest strike to the belt.

The reserve of the Galmoy Mine as of the 31st Decem-ber 2006 stands at 2.6mT at 15.0% Zn and 4.3% Pb. The data is prepared in ac-cordance with the require-ments of the NI 43-101 Ca-nadian code.

GeologyOre and Mineralisations

RK2K

CW

G

RGW

9,0

10,0

11,0

12,0

13,0

14,0

97 98 99 00 01 02 03 04 05 06

0,0

1,0

2,0

3,0

4,0

5,0

6,0

% Zn% Pb

Run of Mine; % Zn, % Pb, 1997 - 2006

The Galmoy Mine is located in the southern Midlands of Ireland bordering the Laois/Kilkenny county boundary, 110km southwest of Dublin.

The area is within a broad southwest-northeast trending belt, some 20 km wide, un-derlain by Lower Carbonifer-ous carbonates. It is bounded to the northwest by the Silu-rian and Devonian rocks of the Devil´s Bit and Slieve Bloom Mountains and to the southeast by Middle and Upper Carboniferous rocks of the Slieve Ardagh Hills and the northwestern edge of the Castlecomer Plateau.

The mineralogy comprises sphalerite, galena and pyrite-marcasite as the main sul-phides, with the galena being argentiferous in places.

Copper, in the form of ten-nantite/tetrahedrite, is found in the footwall of the R Orebody associated with high silver. Smithsonite, hemimorphite, cerrusite and iron oxides (haematite and goethite) occur as secondary minerals where local weath-ering of the orebody is strong.

Three mining methods are used in Galmoy. These methods are room and pillar, drift and fi ll and bench and fi ll.

Room and PillarRoom and pillar is best suited to horizontal or fl atly dipping orebod-ies. Room and pillar has a relatively low recovery (approximately 80%) as pillars of ore must be left to support the back. Room and pillar stopes are generally mined by creating drives and then cross cutting at right angles through the pillars. Galmoy Mine uses a repeated room and pillar layout of 6m by 6m pillars with 9m wide rooms.

Drift and FillIn steeply dipping sections of ore, drift and fi ll stoping has been used. The method works by driving along the strike of the orebody to create the pri-mary drive. The standard drive width is 5m and height is 4.5m. The drive is drilled using a Jumbo drill rig with a standard advance of 3m. Pumped emulsion explosive is used with No-nel detonators to blast the round and LHDs are used to muck the heading.

When the primary drives have been mined a backfi lling barricade is con-structed at the entrance. The barricade is constructed using muck as the initial base and then timbers are sunk into the backfi ll to form a timber frame. The backfi ll at Galmoy is a high den-sity slurry with a density of 72% sol-ids. The tails from the mill are mixed with 4% to 8% binder which provides strengths of 150kPa to 1MPa.

After several months when the prima-ries have been fi lled and the backfi ll has had time to set, the secondary drives can be mined.

Min

e

The ability to mine long drives along the strike allows maximum recovery in steeply dipping orebodies. Also, as no pillars are left recovery is approxi-mately 100%.

Bench and FillBench and fi ll is used in the thick sections of the orebody and works on a similar principle as drift and fi ll. Like drift and fi ll the primary drives are mined and fi lled; then the sec-ondaries are mined in between the backfi lled primaries. The difference with bench and fi ll is that instead of mining a single drive a hangingwall and footwall drive are mined. The standard Bench and Fill Stope in the R Zone is 80m long, 10m wide with a height between 15m and 25m.

Support The standard support used for min-ing drives is Swellex rockbolts at a 1.5m spacing in a diamond pattern. In locations of poor ground shotcrete is sprayed on with a 50mm layer to contain the ground and spread the load.

The K North Vent ShaftThis ventilation shaft was mined by raise borer in December 2006 and January 2007. It is situated in the valley between the mine and Kyle Hill, just to the north of the Magazine compound.It is 90m deep and its primary func-tion is to provide fresh air intake to the K5 development drive and asso-ciated stopes. In the coming months we will be installing a ladderway to sur-face to provide another escape-way to

Mill

Mill Process

The ore from under ground is processed in the mill to produce a mineral concentrate that is saleable. The ore is ground down to a size less than 0.1 mm by adding steel balls and water to the grinding mills. The slurry that leaves the mills enters the fl otation circuit, where it is agitated in tanks.

Air and chemicals are added to the tanks which result in bubbles being formed on top of the tank. The chemicals added allow the zinc and lead minerals to attach to the bubbles and concentrate into the fi nal product. This occurs several times to obtain the quality that is required. Once the ore is concentrated to the required level it is fi ltered and trucked to New Ross port for transport to overseas smelters.

Concentrate Production 2006

The production of concentrates in 2006 was down on previous years due to lower lead and zinc grades in the ore and a lower amount of ore being processed.

The zinc concentrate contained 51.8% zinc, which is consistent with what was achieved in the past. Produced lead concentrate contained 63.5% lead. This is consistent with 2005, but an improvement on past years and is the re-sult of investments in the processing plant.

In 2007 the quality is expected to increase fur-ther due to new equipment installed in 2006. The tailings, which is the remaining product after processing, contained 2.2% zinc and 0.6 % lead.

Equipment reliability and technical issues re-sulted in less tailings/backfi ll being sent to the mine than in previous years. However, in 2007 the focus is on increasing the quantity sent tothe mine.

Two major projects completed in the mill in 2006 were:

• Commissioning of the 3rd phase of the tail-ings dam. This dam was required to hold the tailings for the remainder of the mine life.

• Increase processing capacity in the lead cir-cuit. This involved the installation of a new fl o-tation cell which will help increase the quality of the lead concentrate and reduce the amount of lead in the tailings.

Ore % Zn% Pb

Zinc Con Lead Con

Tailings Tailings to mine Tailings to dam

Zinc Con % ZnLead con % Pb

Tailings % ZnTailings % Pb

2004641290

12,95,4

13369525880

481714297007184707

51,557,92,161,61

2005644059

13,73,9

14363226967

473461289489183972

51,764,12,390,87

Discharge to the River GoulDuring the operational phase of a mine dis-charges to surface water have potentially the greatest impact on the environment. The fol-lowing table illustrates our level of compli-ance on a daily basis for each parameter with respect to the emission limits set by the Inte-grated Pollution and Control Licence for the discharge to the river Goul..

Environment

River Goul

ParameterTemperature

pHSuspended solids

Mineral OilTotal Ammonia

NitrateNitrite

Ortho-PhosphateSulphates

ArsenicMercury

CadmiumLeadZinc

AluminumVolume

2005%

10010094

10065

10099

10099.71001001007997

10091

The level of compliance with the emission limits has improved for a total of seven pa-rameters from 2005 to 2006.

The improvement in the quality of the dis-charge to the river Goul from 2005 to 2006 is more clearly seen in the following monthly average mass emission graphs for the param-eters zinc, lead, suspended solids and ammo-nia. The daily mass emission is calculated by multiplying the concentration of a particular parameter by the volume discharged on that day.The monthly average mass emission is calculated from the daily mass emission.

0

1

2

3

4

5

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

kg / day

SW1 Zn 2006SW1 Zn 2005SW1 ELV

Discharge Effluent, Zinc Mass Emission 2006 vs 2005

0,0

0,2

0,4

0,6

0,8

1,0

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

kg / day

SW1 Pb 2006SW1 Pb 2005SW1 ELV

Discharge Effluent, Lead Mass Emission 2006 vs 2005

0

50

100

150

200

250

300

350

400

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

SW1 S.S. 2006SW1 S.S. 2005SW1 ELV

Discharge Effluent, Susp. Solids Mass Emission 2006 vs 2005

kg / day

0

5

10

15

20

25

30

35

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

kg / day

SW1 NH3 2006SW1 HH3 2005SW1 ELV

Discharge Effluent, Tot. Ammonia Mass Emission 2006 vs 2005

The annual river biotic monitoring programme conducted by consultants, Aquens Limited, in-volves a study of the river Goul and the impacts of discharging effl uent to the river. The report is sent to the EPA, Fisheries Board and Kilken-ny County Council.

In summary, the Company requests an increase in the current fl ow emission limit value of 14,000 m3 per day to 22,000 m3 per day, to accommodate the high mine water makes ex-perienced from Sept. 2006 to date and to allow for possible increases into the future. The com-pany is committed to the installation of addi-tional water treatment facilities to ensure fi nal discharge compliance.

Increased water fl ow from the Mine

EnvironmentWater Treatment Plant

0

5

10

15

20

25

30

35

0104 0316 0524 0802 1013 1219

µg/l Pb upstreamdownstream

Lead at River Goul; Jan - Dec 2007

Since September 2006 above average rainfall has resulted in increased volumes of water un-derground. Consequently, larger amounts of water have had to be pumped to the surface. After treatment, in the Water Treatment Plant, this water is discharged to the River Goul. As the volume of water discharged to the river has increased so too has the level of environmen-tal monitoring. The frequency of sampling and the number of sampling points along the river have been increased. This is to ensure that the volumes of water currently being added to the Goul are not having an adverse effect.

The graph below plots the average rainfall recorded by the Galmoy Mine from January 2003 to December 2006. It clearly shows el-evated rain levels from September 2006 to December 2006.

Chemical analysis has shown that increased fl ow has impatced on the quality of the wa-ter from the Water Treatment Plant. Emission limits for lead, zinc and suspended solids in the fi nal discharge have been exceeded, on occasion, but have had a marginal impact on the receiving water of the river Goul. This is clearly shown in the graphs on the right which compare the concentration of lead and zinc upstream and downstream of the discharge point.

However, the mine has informed the EPA authority of all non-compliances and has re-quested that the scope of the licence review deal specifi cally with the fl ow limit to the river and the associated impacts.

0

20

40

60

80

100

120

140

160

Sept Oct Nov Dec

2003200420052006

Average Rainfall 2003 - 2006; Sep - Decmm

0

5

10

15

20

25

30

35

0104 0316 0524 0802 1013 1219

µg/l Zn upstreamdownstream

Zinc at River Goul; Jan - Dec 2007

There are three tailings cells on site. The combined surface area of the three cells is 33.5 ha. At this stage Phase 1 has al-most been completely rehabilitated, Phase 2 is full and restoration is expected to begin in the summer of 2007. Phase 3 is newly operational and is designed to last the remaining lifetime of the mine.

It is diffi cult to grow grass on bare tails due to the lack of organic matter and de-fi ciences in nitrogen, phosphorus and potassium. Grass growth on bare tails is also infl uenced by extremes in weather conditions particulary during periods of prolonged drought. To achieve a long term sustainable solution at Galmoy´s tailings pond the company has investigated the use of soil forming/soil improving materials.

In order to encourage growth on a full tail-ings pond, environmental stability must be achieved. This is done by the addition of organic material that can support good vegetative growth.

Restoration of the Tailings Management Facility

Reh

abilitatio

n

Ph

ase 1

At Galmoy, Phase 1 was covered with top soil sludges and spent brewer’s grains. Research using trial cells estab-lished that a mixture of Merlin, Heriot and Highland grasses along with white clover would provide good ground cov-er, good root penetration of the tails and high tolerance to heavy metals.

To date 86% of Phase 1 (9 hectares) sup-ports good vegetative cover and heavy metal analysis of the cut grass shows that it can be used as animal feed. Phases 2 and 3 of the TMF will be rehabilitated in the same way as phase 1.

Statistics

Min

e P

ro

du

ctio

n

En

erg

y

Zin

c U

ses

Over 7 million tonnes of zinc metal are produced annually worldwide. More than 50% of the amount is used for galvanizing to protect steel from corrosion. The zinc metal is produced by our cus-tomers in Europe by bringing the mineral concentrate from Galmoy up to a temperature of more than 900 degrees C in the smelter.

During 2006 the mine produced 605,000 tonnes of ore. The annual production up until 2010 is esti-mated at 625,000 tonnes.

Diesel is used for all mobile equip-ment under ground. The annual consumption is linked to the total tonnage. The main consumers of electric power are within the mill (grinding), and the mine for venti-lation and pumping of water.

54%

16%

12%

7%

7% 4%

GalvanisingBrass RodDie Casting AlloysRolled/extruded productsZinc Oxide ChemicalsOther

At this temperature the zinc mine-ral (ZnS) converts into the more active zinc oxide (ZnO). Follow-ing the roasting the zinc oxide is leached with sulphuric acid and in the fi nal stage pure zinc metal is produced in an electrolytic pro-cess.

The end products from the smelter are zinc ingots with more than 99.9 % zinc.

Galmoy Mine

History

The licence on which the majority of the orebodies lie was fi rst issued in 1962 to Southgate Exploration and was held in vari-ous joint ventures until 1977. Work carried out during this time included soil geochem-istry, geophysics and diamond drilling, all concentrated on the north and central part of the licence, north of the deposit.

The licence was granted to Galmoy Mines (known as Conroy Petroleum and Natural Resources at the time) in 1981 and the dis-covery of the mine was made in 1986 when the drillhole W1, drilled on an IP anomaly, intersected 9m of 7% Zn and 0.3% Pb in what is now known as the CW Orebody.

In the same year the main G Orebody was also discovered and in 1990 based on these two orebodies, the CW and G, the company carried out a full feasibility study which gave an estimated tonnage of 6.1mT at 11.5% Zn and 1.1% Pb.

Based on this feasibility study the company sought the necessary permits to start up the fi rst mine in Ireland in over 20 years. All permits were in place by 1995 and construc-tion on the mine site started in 1995 and the fi rst ore was mined in late 1996.

Exploration drilling restarted on a small scale in 1994 and a full exploration pro-gramme commenced in 1995 at the mine site and in the company’s block of contigu-ous licences at Galmoy. Notable successes have been;

95-96 Delineation of the K Orebody. 96 Discovery of GNE and GE 97 Discovery of the K2 Zone98 Discovery of CW South Zone02 Discovery of the R Zone

The Galmoy Mine was consolidated into Lundin Mining following the formal merger with Arcon in May 2005.

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Galmoy Mine Rescue Team

Galmoy Mine Rescue organisation was fi rst established in March 1997. All members of the mine rescue are vol-unteers which is a major commitment appreciated by all. There are also a lot of other personnel who regularly assist the mine rescue organisation with the setting up of various exercises which bring the team to the very high standard required to operate in today’s modern mining operations. The annual mine rescue competition was hosted this year by Galmoy Mine.

If you would like to have more information about Galmoy please don´t hesitate to contact us;

Galmoy Mines LtdGalmoy

Via ThurlesCo Kilkenny

info@galmoy.ie+ 353 56 8837 100

Stefan Mansson, MDstefan.mansson@galmoy.ie

John Stapleton, Env. Suptjohn.stapleton@galmoy.ie

©smansson 0706