Hunter Mine Engineering Services Pty Ltd - Infomine Inc

Hunter Mine Engineering Services Pty Ltd

Independent Technical Report

on the

Boléo Copper Cobalt Project

Located in Baja California Sur, Mexico

A Review of the Potential to Develop a Mining Operation in the Boléo District

together with Recommendations for Further Project Development

prepared for

Minera y Metalurgica del Boléo, S.A. de C.V. Sinaloa #106, Desp. 301

Col. Roma 06700, Mexico, D.F.

and

Baja Mining Corp.

2350 – 1177 West Hastings Street Vancouver, British Columbia

Canada V6E 2K3

by

Don Hunter, FAusIMM, C.P. (Mining) Brisbane, Australia

June 2005

HMES Pty Ltd. Boléo Copper Cobalt Project Independent Technical Report ________________________________________________________________________________

June 2005 Page 2 of 2

TABLE OF CONTENTS Section Description Page 3 Summary 6

3.1 History and Background 6 3.2 Resource and Reserve Estimation 7 3.3 Exploration and Exploitation Potential 9 3.4 Mining Concept 10 3.5 Metallurgical Process Development 11

4 Introduction and Terms of Reference 13 5 Disclaimer 16 6 Property Description and Location 17

6.1 Location 17 6.2 Description 19 6.3 Ownership 21 6.4 Taxes and Assessment Work Requirements 21

6.4.1 Taxes 21 6.4.2 Work Requirements 23 6.4.3 Option Payments 23

6.5 Permits and Liabilities 23 6.5.1 Permits 23 6.5.2 Liabilities 23

7 Accessibility, Climate, Local Resources, Infrastructure and Physiography

25

7.1 Access 25 7.2 Climate 25 7.3 Local Resources 25 7.4 Infrastructure 26 7.5 Physiography 26

8 History 28 9 Geological Setting 32

9.1 Regional Geology 32 9.2 Property Geology 34 9.3 Structural Geology 36

10 Deposit Types 40 11 Mineralization 41 12 Exploration 44 13 Drilling 46 14 Sampling Method and Approach 47

14.1 Diamond Drill Core 47 14.2 Dump Sampling 47 14.3 Trench Sampling 48 14.4 Moisture, Specific Gravity and In-situ Bulk Density

Determinations 48

15 Sample Preparation, Analysis and Security 50



15.1 Sample Preparation 50 15.2 Analysis 50

15.2.1 General 50 15.2.2 Analytical Procedure 50 15.2.3 Analytical Laboratories 50

15.3 Security 51 16 Data Verification 52

16.1 Accuracy 52 16.2 Precision 52 16.3 Database Verification 53

17 Adjacent Properties 54 18 Mineral Processing and Metallurgical Testing 55

18.1 Background 55 18.2 Recent Developments 55 18.3 Pilot Testwork and Program Cost 59

19 Mineral Resource and Mineral Reserve Estimates 61 19.1 General 61 19.2 Fluor Daniel Resource and Reserve Estimates, 1997 61 19.3 Open Pit Resource Estimate by Juan Manuel Berlanga, 2001 62 19.4 Underground Resource Estimation by Adolfo Rodriguez, 2003 62 19.5 Review of Rodriguez’s Underground Resource Estimate, 2003 64 19.6 Exploration Potential 65

20 Other Relevant Data and Information 67 20.1 Conceptual Mining Methods 67

20.1.1 Open Cut Mining 67 20.1.2 Underground Mining 69 20.1.3 Production Rate and Scale of Operations 71 20.1.4 Preliminary Costs Estimates 75

20.2 Pilot Metallurgical Testwork and Process Flowsheet Development 75 20.3 Tailings Dam Location and Option Study 75 20.4 Environmental Data Collection and Studies 76

21 Interpretation and Conclusions 77 21.1 Exploration 77 21.2 Preliminary Mining Concept 77 21.3 Underground Mining Trial 79 21.4 Mineral Processing 80 21.5 Conclusion 81

22 Recommended Feasibility Study Program and Budget 83 23 References 85 24 Date of Report 86 25 Additional Requirements for Technical Reports on Development

Properties and Production Properties 87

26 Illustrations 88



GLOSSARY OF TERMS

AMDAD Australian Mine Design and Development Pty. Ltd. – mining engineering consultants Arroyos Spanish term for “erosion gullies” Bateman Bateman Engineering Pty. Ltd., Brisbane, Australia Bateman Study Bateman Engineering Pty. Ltd. Pre-Feasibility Study 2002 BEIM Boléo Estudios y Inversiones Mineras, S.A Berlanga Juan Manuel Berlanga – Geostatistician Biosphere Spanish title = Reserva de la Biosfera El Vizcaíno,

English translation = Vizcaíno Biosphere Reserve Boléo Boléo Property, Boléo District, Boléo Mining District, Boléo

copper-cobalt-zinc deposit – located just outside of Santa Rosalía, Baja California Sur, Mexico.

Canmex Canmex Minerals Corp. CCD Counter Current Decantation CDN CDN Resource Laboratories – Burnaby, B.C., Canada Chemex Chemex Laboratories Ltd. of North Vancouver, B.C., Canada CIM Standards Canadian Institute of Mining, Metallurgy and Petroleum

Standards on Mineral Resources and Reserves, as adopted by CIM Council on 20th August 2000.

Curator International Curator Resources Ltd. Cu Copper CSIRO Commonwealth Scientific and Industrial Research

Organization, Australia DFS Definitive Feasibility Study EIS Environmental Impact Study FDW Fluor Daniel Wright FDW Study Fluor Daniel Wright 1997 Pre-feasibility Study Fomento Minera Comisión de Fomento Minera (Bureau of Mines) GEP Gulf Extensional Province Gulf Gulf of California - between mainland Mexico and Baja

Peninsula Hazen Hazen Research Inc. H&S Hellman & Schofield Pty Ltd., Sydney, Australia – economic geological consultants HQ Holes Standard diamond drilling nomenclature – bit size that will

produce a 63.5 mm diameter core. Lakefield SGS Lakefield Research Ltd., Lakefield, Ontario, Canada LHD Load Haul Dump mining vehicle LPF Leach Precipitation Flotation Ma Millions of years Manto Spanish mining term for a “mineralized layer or stratum” Mehner David Mehner P.Geo. – Consulting Geologist. Min-En Mineral Environments Laboratories - Vancouver, Canada



Minera Curator Minera Curator, S.A. de C.V. – Mexican subsidiary of International Curator Resources Ltd., the name eventually changed to Minera Y Metalurgica del Boléo, S.A. de C.V. Mintec Mintec International Corporation, Barbados, formed as the parent company of Minera Curator, S.A de C.V Mintec Inc. Mintec Inc., Tucson, Arizona MMB Minera y Metalurgica del Boléo, S.A de C.V. MSNM Reserve Mexican Strategic National Mining Reserve MTG Minera Tera Gaia, S.A. de C.V, Mexican subsidiary of Terratech Environmental Corporation NAFTA North American Free Trade Agreement NI 43-101 National Instrument 43-101 NPV Net Present Value NQ Standard diamond drilling nomenclature – bit size that will

produce a 47.6 mm diameter core. OEMs Original Equipment Manufacturers Parkes David Parkes, P.Eng (Mining) Poquiteros Spanish term for small groups of independent miners ppm Parts per million QC Quality Control RE Rare Earths Retaque Spanish term meaning “back fill” Rodriguez Ingeniero Adolfo Rodriguez ROM tonne Run-of-Mine tonne SAG Mill Semi-Autogenous Grinding Mill SEMARNAT Secretaria de Medio Ambiente y Recursos Naturales –

Secretariat of the Environment and Natural Resources SEMARNAP Secretaria del Medio Ambiente, Recursos Naturales

y Pesca - Secretariat of the Environment, Natural Resources and Fisheries.

SGS-Hermosillo SGS-XRAL – analytical laboratory Stope An underground excavation made for the purpose of extracting

mineral. SX/EW Solvent Extraction and Electro-winning Tek Terra Tek Terra Corporation, Bridgetown, Barbados, formed as the parent company of Terratech Environmental Corporation TEM Survey Transient Electromagnetic Geophysical Survey Terratech Terratech Environmental Corporation, Barbados



3.0 SUMMARY 3.1 History and Background The extensive copper-cobalt-zinc bearing, bedded deposits of the Boléo District located near the coastal town of Santa Rosalía in Baja California Sur, Mexico first came to prominence following the discovery in 1868 of copper nodules or concretions known as boléos in a dry river bed. Within four years surface exposures were being exploited by open cut methods to produce high grade (about 20% Cu) oxidized ore which was shipped to Europe for treatment. Between 1875 and 1884 approximately 60,000 (short) tons grading 24% Cu were produced from a combination of open cut and underground working and shipped off-shore while a further 120,000 tons at 8% Cu where placed on dumps or used as backfill. In 1885 the French-backed Compañia del Boléo S.A. acquired mining rights and concessions in the area and commenced systematic exploitation, mostly by underground methods. Production by the French continued until 1954. During this period, Compañia del Boléo S.A. constructed a township (present day Santa Rosalía), a smelter and a port facility. From 1938 onwards the proportion of smelter feed from informal miners increased progressively until 1954 when Compañia del Boléo’s operations were taken over by a combination of Mexican State and private sector interests. Copper production then continued sporadically until 1985 when the smelter finally closed. Following closure of the smelter and the cessation of mining operations (both formal and artisanal) there was little activity at Boléo until 1993 when International Curator Resources Ltd. (Curator) of Vancouver and its Mexican subsidiary, Minera Curator S.A. de C.V. (Minera Curator) acquired an option on the property from Terratech Environmental Corp. (Terratech), a Barbados company and its wholly owned Mexican subsidiary, Minera Terra Gaia S.A. de C.V. (MTG). An extensive diamond drilling program was undertaken between 1994 and 1995. This was followed by scoping level definition work by mining and metallurgical consultants. While diamond drilling continued until 1997, mine planning and process testwork was started in late 1994. In 1995 Curator commissioned the large, multi-disciplined engineering company, Fluor Daniel Wright (FDW) to supervise a Pre-Feasibility Study (FDW Study) which was completed in 1997. There was no further project development between the latter part of 1997 and March 2001 when ownership of Boléo reverted 100% to Terratech as a result of an out-of-court settlement with Curator. During the currency of the option with Curator, the parties re-structured the original (1993) Option agreement to minimize tax implications. This resulted in Tek Terra Corporation (Tek Terra), a Barbados company, being formed as the parent of Terratech while another Barbados company, Mintec International Corporation (Mintec), was established as the parent of Minera Curator. Mintec was initially owned 90% by Terratech and 10% by Curator with the restructured Option Agreement providing Curator the option to acquire 100% of Mintec. Concurrent with such restructure, an 87.4% interest in the Boléo Property was transferred to Minera Curator with 12.6% interest remaining with MTG. As part of the restructure, ownership of Minera Curator was transferred to Mintec which company was eventually acquired 100% by Curator (and then reacquired by Terratech in 2001). Because the Boléo Property contains not only copper, cobalt, and zinc mineralization, but also extensive gypsum deposits, Tek Terra re-structured its holdings in 2002 (after reacquiring 100% of the shares of Mintec in 2001) to separate the metals and gypsum assets. Consequently, 100% ownership of the Boléo copper, cobalt, and zinc assets was transferred to Minera Curator



(now Minera y Metalurgica del Boléo, S.A. de C.V. (MMB)) while the gypsum assets were transferred to MTG. Following acquisition of the copper, cobalt and zinc assets, Mintec, through its Mexican subsidiary Minera Curator, funded a new pre-feasibility study using a modified process flowsheet, developed by Bateman Engineering Pty Ltd. (Bateman), and different planning assumptions. This study was completed in July 2002 and recommended further development of the project by undertaking a final feasibility study. In July 2003, Minera Curator SA de CV changed its name to MMB and is currently the 100% owner of the Boléo copper-cobalt-zinc metal assets. In 2003, Tek Terra dividended the shares of Mintec to the shareholders of Tek Terra. In November 2003, the Shareholders of Mintec entered into an agreement with First Goldwater Resources Inc., a TSX-Venture Exchange (TSX-V) public company, to exchange all the issued shares of Mintec for shares in First Goldwater (now Baja Mining Corp.) and effectively vend the Boléo copper-cobalt-zinc asset by way of a reverse take-over. The TSX-V approved the transaction and a C$10 million financing in April 2004. In June 2004, the name First Goldwater Resources Inc. was changed to Baja Mining Corp.(Baja). 3.2 Resource and Reserve Estimation A significant amount of exploration, project development, and evaluation work has been done since 1993, including generation of a number of resource and reserve estimates. The following paragraphs briefly describe the more significant resource work and provide an indication of how this project has evolved over time. Fluor Daniel Wright (FDW) – 1997. Working under FDW supervision, and assuming open pit only exploitation, resource consultant Mintec Inc. of Tucson, identified a global resource from Mantos 2, 3, 3A, and 3AA of 408.8 million tons at a 0.85% Cu equivalent cut-off. Included in this global resource was 257.4 million tonnes of measured resource grading 0.73% Cu, 0.060% Co, and 0.64 Zn and 151.4 million tonnes of indicated resource grading 0.69% Cu, 0.054% Co, and 0.78% Zn. Within this global resource Mintec Inc. estimated an open pit mineable reserve of 71.2 million tonnes of proven material grading 1.44% Cu, 0.092% Co, and 0.55% Zn and 13.1 million tonnes of probable material grading 1.57% Cu, 0.065% Co, and 0.81% Zn. The life of mine average stripping ratio was estimated at 18:1. In their report, which pre-dated the introduction of National Instrument 43-101 (NI 43-101), FDW pointed out their geological resource and the diluted mineable reserve estimates were preliminary in nature and not intended as definitive statements. Therefore the FDW estimates should not be relied upon. Since publication of the Mintec, Inc. estimates, neither Baja, Mintec or MMB has done the work necessary to verify the classification of the resource or the reserve. Consequently, MMB is not treating the FDW estimates as NI 43-101 compliant and has not relied upon the FDW estimate. The author has not independently reviewed the FDW estimates but Mintec, on behalf of MMB, did review the FDW work with respect to the geological procedures, data verification, and the quality



control procedures used for drilling, sampling, and assaying. The method of reserve estimation was also reviewed. From this Baja and Mintec concluded that FDW’s categorization of Mineable Reserves appears to be generally in accordance with the CIM Standards on Mineral Resources and Reserves Definitions and guidelines adopted by the CIM Council on 20th August 2000, with the exception it is not categorically stated whether Mineral Resources are reported additional to, or inclusive of, the Mineral Reserve. The FDW report also reported the following reserve categories which are not accepted CIM nomenclature;

• The “Overall Mineable Reserve” estimate reported included a classification described as “Possible” which is not recognized by the CIM (though Proven and Probable categories are reported separately).

• Because the reported Overall Mineable Reserve estimate was based only on copper and cobalt grades, a separate estimate, referred to as an Incremental Reserve, was made to account for zinc values; and,

• A Scheduled Reserve and an Incremental Scheduled Reserve were reported by estimating the reserve material contained within 17 of 20 mining blocks.

Mintec - Juan Manuel Berlanga – 2001. Geostatistician Juan Manuel Berlanga (Berlanga) was commissioned by Minera Curator in 2001 to re-assess the resource and reserve estimates previously prepared by Mintec Inc. of Tucson on the basis of then current metal prices, updated mining costs, and capital and operating costs from Bateman’s “base case” process flowsheet. Berlanga estimated a global geologic resource of 262 million tons with an average grade of 0.824% Cu, 0.064% Co, 0.749% Zn, and 3.064% Mn. This resource was classified 54.1% measured, 31.5% indicated, and 14.4% inferred. From within this global resource an open pit “mineable reserve” of 71.669 million tons at an average grade of 1.05% Cu, 0.08% Co, 0.77% Zn, and 3.21% Mn was estimated. This open pit reserve estimate was based on a then current view of metal prices, metal recoveries taken from Bateman’s process design work and estimated mining, processing, and administrative costs. The estimated overall stripping ratio was 13.5:1 which is significantly less than that reported by FDW (18:1.) The author has not verified this estimate which was essentially done for internal, project scoping purposes and therefore it should not be relied upon. Minera y Metalurgica del Boléo (MMB) – Adolfo Rodriguez - 2003. In early 2003 Ingeniero Adolfo Rodriguez (Rodriguez) was commissioned to determine the scale of a high grade resource that might be amenable to exploitation by underground methods. Using a 1.0% Cu cut-off, a minimum mining width of 1.8m, no maximum (i.e. unlimited) mining width, and including no allowance for dilution, Rodriguez estimated an indicated resource of 27.7 million tonnes grading 2.17% Cu, 0.092% Co, and 0.40% Zn. A further inferred resource of 15.25 million tonnes was estimated grading 2.19% Cu, 0.12% Co, and 0.66% Zn. Minera y Metalurgica del Boléo (MMB) – David Mehner – 2003. Later in 2003, consulting geologist, David Mehner (Mehner) was commissioned to review the criteria and methodology used by Rodriguez in his earlier resource estimation, to revise that estimate as necessary and, on this basis, to identify any exploration opportunities that might exist to expand the resource base. Mehner



has first hand knowledge of the Boléo project, having designed and supervised the Curator drilling programs and other investigations on the property including the waste dumps evaluation. With the benefit of this knowledge, Mehner modified the resource calculation criteria to include a maximum mining height of 4.5m. He also corrected some minor errors in the original calculations, re-classified a number of blocks, and added a number of mineralized blocks with the result that he generated a revised indicated resource estimate totaling 23.627 million tonnes grading 2.11% Cu, 0.09% Co, and 0.42% Zn. A further 21.37 million tonnes of inferred resource were identified with an average grade of 2.25% Cu, 0.10% Co, and 0.61% Zn. The bulk of this revised resource is located in two distinct zones near the Arroyo Providencia which includes a higher grade core of 6.9 million tonnes of indicated category material grading 2.82% Cu and 11 million tonnes of inferred category material grading 2.73% Cu. Areas identified as having further exploration potential include 10 areas adjacent to mineralized blocks in Mantos 1 and 3 with potential for an additional 4 – 6 million tonnes and in the untested Montado Basin to the South West where there is further potential for 5 – 7 million tonnes in Manto 3. 3.3 Exploration and Exploitation Potential Copper, cobalt and zinc mineralization in the Boléo District occurs within widespread, stratiform, relatively flat-dipping, clay-rich horizons, or beds, known as “mantos” (manto is a Spanish mining term for a mineralised layer or stratum). Within the Boléo stratigraphy there are up to eight mantos including two of very limited extent and several which crop out in the sides of erosion gullies or “arroyos”. With increasing depth, these Mantos are known as 0, 1, 1B, 2, 3AA, 3A, 3 and 4. The majority of historical production has been predominantly from Manto 3 and to a lesser extent from Manto 1. Based on previous studies and exploration work to date, the Mantos which offer the most potential for hosting significant economic mineralization are assessed to be Manto 1 in the Southeast and Manto 3 throughout the Boléo district. Manto 2 is assessed as having potential to host underground economic mineralization in two restricted areas in the central and northern parts of the district. Manto 3A has been shown to carry good grades but, except where it coalesces with Manto 3, there is likely to be insufficient parting to allow separate underground exploitation. Though mineralized, Mantos 0, 3A, and 3AA do not appear to offer significant potential for economic exploitation in their own right. Recent exploration drilling targeting Manto 4 has produced what are reported to be very interesting mineralized intersections though the author has not seen any analytical results. To improve the level of definition of known resources, Mehner, in his report dated 27th November 2003, recommended a two stage exploration program. Phase 1 would consist of 49 drill holes totaling 7,490m together with an underground mining trial to test the applicability of mechanized underground mining methods and to establish operational and cost parameters for future feasibility study work. The underground mining concept was proposed by mining engineer David Parkes (Parkes), P.Eng (Mining), who was commissioned in 2003 to assess the potential for underground mining on a scale large enough to be economic. The overall cost of drilling and the underground mining trial were estimated at about US$4.0 million. Depending on the results of Phase 1, Mehner proposed a Phase 2 program that would consist of in-fill drilling totaling an estimated 6,000m with



the objective of promoting resources grading 2% Cu or better into the measured resource category. Estimated Phase 2 drilling cost was put at $1.3 million . A program of diamond drilling which includes the Manto 4 drilling mentioned above, is currently underway and will continue through the first quarter of 2005. The results of this drilling will be reported separately. 3.4 Mining Concept Although the area has been extensively mined by predominantly underground methods, FDW based their FDW Study on a large scale open cut with high stripping ratios (life of mine average of 18:1). Since then attempts have been made to identify areas amenable to open pit mining but at higher grade and lower stripping ratios than used in the FDW Study. Work has also been directed at identifying resources amenable to mechanized underground methods at a scale that would be economic. While metallurgical process development has progressed significantly since 1997, it appears that mine engineering has lagged behind and it was only recently that the issue of alternative mining concepts has been re-addressed. Key to the development of alternative mining concepts has been the preparation by economic geological consultants, Hellman & Schofield Pty. Ltd. (H&S) of Australia, of a new, 3-dimensional digital block model based on the existing drillhole database. (The 3-D block model was used in preference to a gridded seam model because of its greater versatility to evaluate mining methods at different cut-off grades.) Using the H&S model, mining engineering consultants, Australian Mine Design and Development Pty. Ltd. (AMDAD), of Australia, carried out preliminary conceptual mining studies which identified a number of relatively high grade, low stripping ratio open pits. With the assistance of previous rock strength testwork and cutting studies by an equipment vendor, AMDAD also developed an earlier concept of using high productivity continuous miners similar to those commonly used in underground coal mines around the world including some Mexican, Australian, and South African mines. From this, AMDAD went on to develop a modified bord and pillar mining method at a conceptual level which was thought to be sufficiently versatile to handle the variable dips and frequent minor faulting expected at Boléo. The path forward for mining the Boléo resource is believed to be a combination of relatively small but high grade open pits and mechanized underground mining methods followed at a later date by higher strip ratio, lower grade open cut mining. AMDAD has already identified a number of high grade open pits with relatively low stripping ratios that would also provide locations from which underground access could be developed directly into mineralized manto from the highwall in the base of the pit. These openings would then become the main points of access and egress to high grade areas of the deposit amenable to continuous mining methods but too deep for economic open pit exploitation. The open pits would not only provide a low risk entry into production but would also provide alternative sources for supplementing underground production. The results of AMDAD’s conceptual mining studies will be subject of a future NI 43-101 compliant report. Critical to this concept for exploiting the Boléo deposit is the viability of the proposed underground mining method. Therefore, a key recommendation of this report is to carry out an underground



mining trial to test and confirm the effectiveness of using a road header type of continuous miner and to provide key planning, cost, and productivity data. 3.5 Metallurgical Process Development The hydrometallurgical process flowsheet developed by FDW as part of FDW Study demonstrated that the clay-rich Boléo ore could potentially be treated economically by a process comprising an oxidation leach followed by a reductive leach. However, the flowsheet was complex and the very fine clay component of the ore was recognized as presenting challenges. The FDW flowsheet also produced relatively low metal recoveries. After current management (Tek Terra) acquired control of the project in 2001, Bateman was commissioned (among other things) to develop a revised process flowsheet. Central to Bateman’s approach is the ability to settle the high clay content of the Boléo ores after a whole ore acid leach. Bateman reviewed the testwork completed during the FDW Study and, combined with project data obtained from other recent Bateman projects, designed a simplified process flowsheet. This was reported in a pre-feasibility level report dated July 2002 and published to NI 43-101 reporting requirements. This report was also reviewed in the First Goldwater Resources Inc. Filing Statement of 19th March 2004. The high fine clay content of the ore provided both FDW and Bateman with significant challenges with respect to clarification of the leachate. A major step forward has been recent testwork by Lakefield, Pocock Industrial Inc. (Salt Lake City) and Outokumpu Oy (Toronto) which, under the supervision of Bateman, successfully demonstrated that conventional counter current decantation using high rate thickeners can separate the solids and liquids in the slurry product of the initial leaching stage of the process. Following this initial leaching, other process stages in the Bateman Base Case Flowsheet include the extraction of copper cathode by conventional solvent extraction and electro-winning followed by sulfidization using H2S sparged through the solution remaining after copper extraction to produce cobalt sulphide and zinc sulphide which are then leached in an autoclave. This is followed by the sequential extraction of first zinc, and then cobalt, by solvent extraction and electro-winning. Another recent development has been the discovery by the Commonwealth Scientific and Industrial Research Organization (CSIRO), of Australia, that a combination of two existing solvent extraction reagents provides high selectivity and a potentially effective means of separating copper, cobalt, and zinc contained in the copper raffinate from manganese, iron, aluminum, and other commonly occurring contaminant metals. Because fresh water resources are scarce in the arid, desert environment, advantage has been taken of the project’s proximity to the coast to design the process to utilize sea water wherever possible. Up to the end of 2003, Mintec and Curator have spent total funds in the order of US$25 million on the technical development of Boléo.



This report describes the Boléo project by: summarizing the mining history of the Boléo District and outlining the current status of project development; providing a review of exploration drilling and resource estimates carried out since 1993; and over-viewing metallurgical testwork and recent conceptual mine planning work. The report concludes with a recommendation and justification for taking this project to the next stage of development.



4.0 INTRODUCTION AND TERMS OF REFERENCE Between 1993 and 1997, and on the basis of an option agreement, Curator explored the sediment-hosted Boléo Copper-Cobalt-Zinc Deposit near Santa Rosalía in Baja California Sur, Mexico, with 914 diamond drill holes. The objective was to define sufficient reserves in the relatively flat to shallow-dipping Mantos 1, 2 and 3 to support a large scale open pit mining and processing operation. Following a down-turn in world metal prices and a dispute with the underlying vendors, Curator withdrew from the project in March 2001. A corporate reorganization by the owners ensued, ending with the Boléo Copper-Cobalt-Zinc Project being held by MMB, a wholly owned subsidiary of Barbados based, Mintec. In resource related work, Mintec re-assessed the open pit and underground potential.

• In 2001, Mintec commissioned Mexican engineer, Berlanga to estimate open pitable resources for the Boléo district based on the Curator drill data.

• In 2003, Mintec engaged engineer Rodriguez to estimate resources but this time, focusing on the copper-cobalt-zinc material within the Boléo District amenable to underground mining.

During the period April-June, 2003, Rodriguez re-examined the logs of individual drill holes and using the East-West and North-South cross-sections constructed by Curator, identified numerous areas within Mantos 1, 2, and 3 thought to be of sufficient grade and thickness to support underground mining. Using a minimum mining width of 1.80 meters and with no restriction on maximum width, Rodriguez estimated indicated underground resources of 27,761,839 tonnes grading 2.17% copper, 0.09% cobalt, and 0.40% zinc. A further 15,252,484 tonnes of inferred underground resources grading 2.19% copper, 0.12% cobalt, and 0.67% zinc were identified. Since completion of Rodriguez’s revised resource estimate, the shareholders of Mintec merged the Boléo copper-cobalt-zinc asset into a Vancouver-based public company, the shares of which are listed for trading on the TSX-V which, effective June 2004, became known as Baja Mining Corp. (Baja). Funds were also raised to commence a Definitive Feasibility Study (DFS). Since then, a study team has been assembled in Vancouver and Mexico to prepare for and undertake a full DFS, operating under the general guidance of the Vice President – Operations. In Mexico, Mintec’s former chief geologist has been appointed as Assistant Project Manager and Mexican Legal Representative. The base of operations is Mexico City with a field office in Santa Rosalía, Baja California Sur, where a team of geologists and field workers have been mobilized. The Mexican team is responsible for the geology, drilling, test mining, infrastructure, and environmental aspects of the project. The Vancouver office has overall coordination responsibility for the project and will be directly responsible for the engineering design and metallurgical testwork. Bateman has been retained as the coordinating consultant for all elements of the DFS. Over the last 12 months a variety of work has been undertaken to advance the project. This includes:

• Detailed review of existing documentation and historical mining records;



• A total of 33 exploratory trenches have been excavated, geologically mapped, and sampled. Of the 33 trenches, 23 were excavated specifically to extract material for metallurgical testwork. The balance were used to confirm or test aspects of geology, structure, and for grade sampling;

• A trench composite totaling approximately 6 tons of Manto 3 material has been prepared and shipped to SGS Lakefield Research Ltd. (“Lakefield”) in Ontario, Canada for Phase 2 metallurgical testwork that was successfully completed on the 28th November 2004;

• Preliminary environmental work has been undertaken including submission of a permit application to carry out exploratory drilling and an underground mining trial;

• A firm of consulting resource geologists (H&S) has been commissioned to construct a geological grade model based on existing drill hole data and previous detailed mapping, much of which dates from the period of intense mining activity prior to the 1950’s;

• A conceptual level study has been undertaken of possible underground mining methods and the sustainable production rate that might be achieved with these methods;

• A preliminary assessment has been made of the potential to exploit parts of the deposit by open pit methods;

• Preliminary evaluation has been undertaken of possible alternative process plant and tailings impoundment sites;

• An in-fill drilling program has been designed together with preliminary planning for an underground “proof of concept” mining trial; and

• Initial assessment has been made of potential environmental impacts, environmental study, data gathering, and permitting requirements.

Based on the considerable volume of exploration, geological interpretation, and process design work already carried out together with a critical re-examination of some of the planning and economic assumptions used previously, the Board of Baja Mining Corp. felt that the Boléo Project had sufficient potential to justify taking it to the next stage of project development, namely completion of a DFS. With this in mind, an independent technical report into the potential to develop a base metal mining operation at Boléo was commissioned. This report has been prepared by mining consultant, Donald J. Hunter, FAusIMM, MIMMM, CP (Mining), C.Eng., of Brisbane, Australia. Mr. Hunter’s remit was to review the work completed to date and on the basis of his mining and project development experience and site visits which took place between 27th and 29th August 2004 and 14th and 19th November 2004, to assess the potential to develop a mining operation at Boléo and make recommendations regarding the development of the project. In preparing this report the author has relied on the documents listed below. In the case of resource estimates prepared by others, the author has accepted those estimates without carrying out separate check calculations of his own. However, he has reviewed the assumptions and estimation criteria used and has commented on their suitability where appropriate. The author has relied extensively on information obtained during his 2 site visits during which he was able to spend time in the field viewing the terrain, examining surface outcrops and recently completed exploration trenches, as well as old mine workings. Extensive discussions were held with the field geological team to gain an understanding of the geology of the deposit. Some drill core was examined and extensive



discussions were also held with local Mexican mining consultants who have been retained by MMB to advise on the development of an underground test mining program. In this context, several potential access portal sites for the mining test were examined in the field. The specific requirements for environmental permitting have not been examined, however, the author has relied upon information from consultants Raul Vicente Orozco and Manuel Moreno, as well as personal knowledge and experience of environmental permitting and compliance requirements elsewhere as a guide to the standards likely to apply to Boléo. In any event, it is the author’s recommendation that the project should aim to meet “best practice” standards of environmental impact minimization and mitigation, notwithstanding that some local standards may be less stringent in terms of compliance. In addition to discussions with staff members of MMB and Bateman currently involved with the Boléo project, the author has had access to a variety of internal communication documents as a source of information. The author has also relied on the following documents for the preparation of this report: Australian Mine Design and Development Pty Ltd. 2004. Mining Methods for El Boléo Copper Cobalt Project. Unpublished communication for Baja Mining Corp, Vancouver, Canada, September 2004. Albinson, T. 2003. Underground Ore Reserve Calculation, Boléo District, Baja California Sur, Mexico. Unpublished company report by Minera y Metalurgica del Boléo SA de CV. Mexico. July 2003. Bateman Engineering Pty Ltd., 2002 Pre-Feasibility Study Report – BAP104 - Boléo Project, Brisbane, Australia. Mintec International Corporation of Barbados. 2002. Fluor Daniel Wright Ltd. 1997. Pre-Feasibility Study of the Boléo Project, Santa Rosalía, Mexico. International Curator Resources Ltd., Mexico. 1997. Mehner, D. 2003. Underground Resource Calculation and Review, Boléo District. Minera y Metalurgica del Boléo SA de CV. Mexico and Mintec International Corp., Barbados. November 2003.



5.0 DISCLAIMER In preparing this report the author, Donald Hunter, has acted as an independent consultant to MMB. Mr. Hunter holds no equity in MMB and is independent of the issuer applying the tests described in NI 43-101. The author visited the Boléo project site between the 27th and 28th August 2004 and between the 14th and 19th November 2004 to gain first hand knowledge of the project environment and its current status and although he had prior knowledge of some aspects of the project’s development history, he had not been directly involved in MMB’s efforts to develop the project prior to the August site visit. The author has not examined or verified title to the concessions making up the Boléo Property, neither has the legality of any underlying agreements concerning the property been verified. Where resource estimates are quoted they have been taken directly from their source documents and are used solely to illustrate the progressive evolution of this project rather than as a verifiable statement against which a possible project value can be placed. Because it is outside the author’s field of competence, sections of this report which describe the regional and local geology, the geological structures and mineralization of the Boléo base metals deposits have been taken from earlier reports but more specifically from Mehner’s November 2003 report entitled “Underground Resource Calculation and Review, Boléo District.” Similarly in the case of metallurgical test work and metallurgical process design work, the author has relied on the published process descriptions, opinions and conclusions of others as part of previous technical evaluation work and reporting.



6.0 PROPERTY DESCRIPTION AND LOCATION 6.1 Location

The Boléo project area is located to the west of the small port of Santa Rosalía which lies on the east coast of the Baja peninsula overlooking the Golfo de California (Gulf) in the province of Baja California Sur, Mexico (Figure 6.1). Santa Rosalía is approximately 180 kms (3 - 4 hours drive) north of the coastal town of Loreto and approximately 850 km. south of San Diego, California, U.S.A. The Boléo project area is an irregularly shaped polygon approximately 19 km long and up to 9 km wide with its long axis oriented approximately north-south. Co-ordinates of the approximate center of gravity of the property are latitude 27º19’35 N and longitude 112º18’01 W. Corresponding U.T.M. co-ordinates are 3,023,093 N and 371,345 E.

Figure 6.1 Boléo - Regional Location Map



Communications with Santa Rosalía are reasonably good. The town lies on the main asphalted highway, Route 1, which runs the length of the peninsula (Figure 6.2). A vehicle and passenger ferry provides a regular service across the Gulf between Santa Rosalía and Guaymas while there are regular daily commercial flights between other parts of Mexico and Loreto. Until recently there were also daily commercial flights between Loreto and Los Angeles however this service has recently been reduced to three flights a week. The Loreto airfield is large enough to accommodate Boeing 737 size aircraft and is frequented by charter and light private aircraft, mostly carrying holiday makers and sports fishermen from the US.

Figure 6.2 Boléo - District Location Map



6.2 Description The Boléo Property consists of 16 contiguous mineral concessions covering 10,081.19 hectares. These include seven exploitation concessions (see Table 6.1) and nine exploration concessions (see Table 6.2 and Figure 6.3). The project also includes three surface lots which total 6,692.58 hectares and cover all of the identified mining areas (Figure 6.4).

Figure 6.3 Boléo – Exploration and Exploitation Concessions Map

EL BOLEO PROPERTY

SOLEDAD PROPERTY

SAN LUCIANO 2 T - 220740

SAN LUCIANO 3 T - 221073

SAN LUCIANO 4 E - 416

SAN LUCIANO PROPERTY

BOLEO II FRACCION IV T-218975

0 500 1000 m.

FIGURE 6.3

DEC. 2004.

TITLED EXPLOITATION CLAIMS

CLAIM TITLE SURFACE HAS. DATE ISSUED EXPIRY DATE

267.1579 28 ENE. 2003 27 ENE. 2053

8,783.0000 27 AGO. 2004 26 AGO. 2009e

3029000.0000 m

3025000.0000 m

3021000.0000 m

3017000.0000 m

374000.0000 m

370000.0000 m

366000.0000 m



Figure 6.4 Boléo – Surface Ownership Plan

6.3 Ownership The mineral concessions covering the Boléo copper-cobalt-zinc deposit are 100% owned by MMB, a Mexican company involved in mineral exploration and development and wholly owned subsidiary of Mintec.



In October, 1993, Mintec was incorporated as part of a restructuring of the ownership interests in the Boléo Property, Mexico, between Terratech (owner of MTG which originally owned the Boléo concessions), a Barbados company controlled by the former (prior to the reverse take over) shareholders’ of Mintec and by Curator. Between 1993 and 1997, Mintec, primarily under the direction of Curator, conducted significant exploration and development of the Boléo Property, culminating in 1997 in a pre-feasibility study managed by FDW. A dispute arose between Terratech and Curator in 1999 which was ultimately settled in 2001 with Curator withdrawing from Boléo by transferring its interest in the Boléo project and Mintec back to Terratech. Tek Terra (the parent of Terratech and the former parent of Mintec) subsequently restructured its corporate organization and property holdings which resulted in Mintec owning MMB and, in turn, 100% of the Boléo Property while Terratech acquired MTG and 100% of the gypsum assets. In late 2003, Tek Terra dividended the shares of Mintec to its underlying shareholders (the “Mintec Shareholders”). On 22nd April 2004 the Mintec Shareholders exchanged all the Mintec shares for shares of FGW (now called Baja), a British Columbia company, the shares of which are listed for trading on the TSX-V. 6.4 Taxes and Assessment Work Requirements 6.4.1 Taxes: In a report dated 27th November 2003, Mehner stated that total annual fees payable in January, 2004 in respect of the Boléo Property and Exploitation Concessions would be Pesos 909,128 or using the exchange rate of the day, US$ 83,748. The calculated annual fees were based on the then current published government tax guides though it was expected the final amounts would be higher as a result of tax increases expected in January, 2004. Payments are paid in two annual installments in January and July. Tables 6.1 and 6.2 list the value of taxes levied on the 7 Boléo Exploitation and 9 Exploration concessions, as determined in November and October 2004 respectively. Table 6.3 lists the value of current surface property taxes. Table 6.1 Boléo Property - Exploitation Concession Taxes, as at October 2004

Claim Title No.

Surface Area (hectares)

Date Initiated

Expiry Date Annual Taxes (pesos)

El Boléo 218082 4,975.6132 Sept. 29-2000 Sept. 28-2050 597,409.00 El Boléo I 218092 72.4463 Aug. 31-2000 Aug. 30-2050 9,132.00 El Boléo II frac I 218179 1296.6156 Sept. 29-2000 Sept. 28-2050 155,682.00 El Boléo II frac IA 218180 507.2841 Sept. 29-2000 Sept. 28-2050 60,909.00 Boléo III 212148 224.6410 Aug. 31-2000 Aug. 30-2050 28,315.00 Nuevo San Luciano 214189 150.0000 Aug. 10-2001 Aug. 9-2051 14,296.00 Boléo II frac 4 218975 267.1579 Jan. 28-2003 Jan. 27-2053 13,390.00 Total 7,493.7581 878,133.00 Total US$ 77,029 Note: the exchange rate used is Pesos11.4 =US $1



Table 6.2 Boléo Property - Exploration Concession Taxes, as at November 2004

Claim Title No.

Surface Area (hectares)

Date Initiated

Converted to Exploitation

Annual Taxes (pesos)

Boléo X frac 5 211055 1.3829 Mar. 24-2000 Mar. 23-2006 30.00 Boléo X frac 8 211058 3.9486 Mar. 24-2000 Mar. 23-2006 87.00 Boléo X frac 9 211059 9.9612 Mar. 24-2000 Mar. 23-2006 218.00 Boléo X frac 12 211062 3.1241 Mar. 24-2000 Mar. 23-2006 69.00 Boléo X frac 16 211066 0.0068 Mar. 24-2000 Mar. 23-2006 2.00 Biarritz B 219819 0.0055 April 16-2003 April 15-2009 2.00 San Luciano 2 220790 670.000 Sept. 30-2003 Sept. 29-2009 4,061.00 San Luciano 3 221073 1,899.000 Nov. 19-2003 Nov. 18-2009 9,453.00 San Bruno 222772 8,783.000 Aug. 27-2004 Aug. 26-2010 12,264.00 Total 11,370.4291 26,186.00 Total US$2,297.00 Table 6.3 Boléo Project - Surface Property Taxes

Surface Lot Size (hectares)

Annual Taxes (pesos)

El Boléo 6,553.55 21,604 Soledad Property 99.91 23,786 San Luciano Property 39.12 5,301 Total 6692.58 50,691 Total US$4,447

6.4.2 Work Requirements: Mehner reported that as at November 2003, work obligations on the property ( “Informes de Comprobaçiones de Obras”) were in good standing and that based on past work expenditures of approximately US$ 25 million, enough credits have been accrued to keep the property in good standing until 2013. 6.4.3 Option Payments: There are no royalties payable on the properties and there are no other agreements or encumbrances known to the author. 6.5 Permits and Liabilities 6.5.1 Permits: There are no permits required to keep the property in its current state. When project work was halted in 1998, all required land use permits were in place. Due to inactivity these permits have lapsed and will require re-activation in order to complete certain studies as part of the DFS. This includes permits to carry out further diamond drilling, drill road or access construction, bulk sampling for metallurgical testing, and an underground mining test.



On 13th October 2004, Secretaria de Medio Ambiente y Recursos Naturales (SEMARNAT) through the Direccion General de Impactos y Riesgo Ambiental published document S.G.P.A/DGIRA.DE12587.04 which authorized 54 new diamond drill holes, 12,500 m2 of underground workings and development of 7,582m of new tracks/roads throughout the Boléo District. The FDW Study included an environmental baseline study which is estimated to have met 70% of the requirements of a full Environmental Impact Statement (EIS). In Mexico, the environmental program initially covers baseline studies including the (existing) natural environment conditions and the socio-economic environment. The second and final stage is preparation of a full EIS report which normally is prepared close to the end of a feasibility study. The EIS gives a detailed description of the project and its operations, identification and description of the environmental impacts, and a description of the preventative and mitigation measures applicable to the environmental impacts. The EIS, which is overseen and regulated by the Department of the Environment, Natural Resources, and Fishing, [Secretaria del Medio Ambiente, Recursos Naturales y Pesca] (SEMARNAP), will include all permits required prior to the initiation of production and MMB has committed to work closely with SEMARNAP on such matters. 6.5.2 Liabilities: Site disturbances caused by Curator’s drilling and metallurgical sampling program in 1997-98 were remediated and there are no remaining environmental liabilities from that program. However, some of the exploration and bulk sample trenches excavated during 2004 remain open and will require remediation in due course. At the time of writing there are understood to be no outstanding liabilities for which a remediation provision has not been made. The project area is located within the Vizcaíno Biosphere Reserve [Reserva de la Biosfera El Vizcaíno] (Biosphere) which extends westward through the Desierto de Vizcaíno to the Central Pacific Coast of the Baja Peninsula. The Biosphere encompasses the old Boléo Mining District with the object of protecting certain environmental and cultural features in the town of Santa Rosalía, notably the large number of historic buildings and structures dating from the late 1800’s. The town and all the protected historical buildings and structures are outside of the Boléo Project and study area and will not be directly affected by project development. Since the district has been mined for copper and cobalt in the past and there are two large gypsum quarries currently operating in the region, the area has been designated for mining and land management directives have been established for development within the Biosphere. There are no tailings impoundments on land controlled by MMB although there is a large, disused impoundment northwest of the now closed smelter which lies outside MMB property. Scattered over the entire property are a large number of old dumps from the numerous historic workings in the area. Some of these dumps are as originally placed while others have been re-worked as recently as the early 1980’s. While MMB has a duty of care responsibility to ensure excavations are properly fenced or otherwise closed off, the author understands that MMB has no other residual liability for any of these historical waste dumps and their associated excavations.



7.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND

PHYSIOGRAPHY 7.1 Access

The Boléo Property is located a short distance inland from the small, tidewater port of Santa Rosalía on the east coast of the Baja Peninsula in the State of Baja California Sur, Mexico. (Figure 6.1.2). Santa Rosalía has a population of approximately 7,500 and apart from economic activity associated with gypsum mining, fisheries and tourism, the area has been in decline since closure of the copper smelter. Access for construction materials and equipment would principally be by the Trans-Peninsular Highway (Route 1) which passes through Santa Rosalía and carries heavy traffic volumes year round. An alternative to road transport for heavy construction equipment and bulk project supplies would be the port of Santa Rosalía and the Pacific Coast marine facilities at Guerro Negro. There are regular scheduled air services from the United States and mainland Mexico to both Loreto and La Paz, the latter being located near the southern tip of the peninsula and about six hours drive to the south. The closest private airstrip is at Palo Verde, a half hour drive away. Port facilities, which serviced the copper smelter and adjacent mines until 1985, are still being used twice a week by a ferry service to the mainland at Guaymas. 7.2 Climate

The project area is immediately adjacent to the Gulf, with a climate typical of the Sonoran desert region with average daytime temperatures ranging from hot to very hot and minimal seasonal precipitation. Temperatures range from 16ºC to 30ºC with maximum temperatures exceeding 40°C. Rainfall is confined mainly to heavy cloud bursts at intervals of several years during tropical cyclones. Therefore, mining operations could be scheduled year round with only very rare interruption due to heavy rainfall events which occur on average every ten years when cyclonic activity moves up the Gulf. 7.3 Local Resources

The town of Santa Rosalía is situated in Mulegé County, Province of Baja California Sur, and has a population of about 7,500 inhabitants. The principal industries being fishing, fish processing and two open pit gypsum mines. Due to the arid climate there is almost no agriculture except on a very limited scale in the few valleys that have groundwater that is not unacceptably saline. A 1997 socio-economic study prepared as part of the FDW Study showed that many of the non-staff positions for a new mine and processing plant could be filled from the local population. Education levels are reported as being reasonably high and the level of technical skills and technical support in the area is also reported as reasonably good, however, unemployment is high. According to the most recent census, nearly 40,000 people live in Mulegé County, which is over 10 percent of the province’s population. Santa Rosalía is the largest town in Mulegé County with a population of about 7,500.



Hotel accommodation of varying standards, gasoline, fuel oil, groceries and various hardware goods can all be purchased in Santa Rosalía. Other items including machinery and trained personnel are available from mainland Mexico via the ferry to Guaymas, by air through Loreto or La Paz or by road from the north. Services and supplies are also obtainable from the USA within the framework of the North American Free Trade Agreement (NAFTA). There a number of local haulage and earth moving contractors in the area though equipment is generally small and not particularly well maintained. While these equipment owners and contractors could adequately and cost effectively support an exploration program, it is questionable whether they are likely to be able to support or sustain the level of activity required for project construction or contract mining. Fresh water for domestic and industrial purposes is scarce, not of good quality and mostly must be obtained from wells in Santa Agueda, 30 km away. Availability of potable and process water will be a major planning and design consideration of any new mining and mineral processing operation established in the area. 7.4 Infrastructure

Although the area has been extensively mined and is scattered with dumps and other relics of that mining activity, the project site is almost devoid of useful infrastructure. Several kilometers of drill access tracks have been developed over the years. A roofed structure within a fenced enclosure, situated approximately 1 km west of the main public road running north from Santa Rosalía (Route 1) was constructed by MMB in 2002 as a site improvement measure and could be used for ongoing project development activities though it currently has no power, sanitation or water supply. 7.5 Physiography Property topography is best described as mesa-arroyo with relatively flat topped plateaux or mesa structures which have been deeply incised by water eroded gullies and valleys (or arroyos). The result is a series of rugged, irregular, steep sided valleys that drain into the Gulf of California. Project site elevations vary from 50 - 250 meters above sea level. The floors of these valleys or arroyos are characterized by large volumes of rounded rocks which vary in size from pebbles to boulders which originated in the abundant but poorly consolidated conglomerates that occur extensively throughout the area. The obvious extent of the erosion of the original topography may be surprising in such an arid climate but is evidence of the strength and intensity of run-off following cyclonic cloud burst precipitation. Another characteristic of the area is the absence of naturally occurring angular aggregate that could be used for road base. Hence, unless a crushed aggregate is obtained to provide a compactable surface, any vehicular access track constructed over the natural surface of the arroyos will tend to deteriorate quickly. The project site is arid with vegetation consisting of sparse, low, scrub, and bushes and several varieties of cactus. There are very few trees in the area but where groundwater occurs in the floor of the larger valleys, pepper trees and other arid region trees maintain a precarious existence. Figure 7.1 illustrates the arid nature and topography of the Boléo District.



Figure 7.1 Typical view of the topography and sparse vegetation of the Boléo District.



8.0 HISTORY The information in this section is a compilation of information from a variety of published sources including Wilson and Rocha (1955), Mehner (November 2003), the Curator commissioned FDW Study, and the Mintec Pre-Feasibility Study Report, July 2002. The discovery of copper in the Boléo District is attributed to local rancher, Jose Rosa Villavicencio, who found copper nodules, known locally as “boléos” in 1868 while wandering in an arroyo not far from present day Santa Rosalía (Wilson and Rocha, 1955). Shortly thereafter, the Boléo Property was sold to two individuals from Guaymas, Sonora who in 1872 began mining and hand sorting high-grade oxidized copper ores from trenches and open cuts and then shipped them to smelters in Europe and Guaymas. Lower grade material was left on dumps or used as backfill in the stopes. This continued until 1884 when declining copper made operations difficult to sustain. Up until 1884 production is estimated to have been 60,000 short tons grading 24% copper (Wilson and Rocha, 1955) with a further 120,000 tons averaging about 8% copper estimated to have been deposited on dumps or used as backfill.

In 1884, a number of French geologists and mining engineers including Messrs. Eduardo Cumenge and G. de la Bouglise, visited Boléo and after recognizing its potential recommended a significant investment to develop the district. On May 16, 1885 the Compagnie du Boléo (later to be known in Mexico as the Compania del Boléo, S.A. - “the Boléo Company”) was formed in Paris, backed mainly by the banking interests of the French house of Rothschild. On July 7, 1885, the Boléo Company acquired all mining claims in the region and a concession covering about 20,655 hectares from the Mexican Government. Systematic mining operations were organised later that same year with early work involving the development of several mines and construction of a smelter, port facility, town site, and other infrastructure.

Production started in 1886 and by 1894 had reached over 10,000 annual tons of copper contained in copper matte and “black copper”, which were transported to Europe for treatment. In 1922, a new smelter was built to produce blister copper, which was shipped to Tacoma, Washington, for refining. The Boléo Company was active from 1885 to 1938, when it went into liquidation. However, operations continued on a reduced scale until 1948, when the company was reorganized as the Boléo Estudios y Inversiones Mineras, S.A. From 1938 on, much of the smelter feed was supplied by small groups of independent miners called poquiteros, who re-worked backfilled slopes, robbed pillars, and worked smaller, lower grade mines. Not surprisingly their work is poorly documented. Smelting operations were initially suspended in 1954 when operations were taken over by the Compañia Minera Santa Rosalía, S.A., jointly owned by Federal and State Governments and private Mexican interests and managed by the Comisión de Fomento Minera (Bureau of Mines) (“Fomento Minera”). Fomento Minera attempted to sustain copper production by re-opening the smelter and building a leach-precipitation-flotation (LPF) plant to treat dump material and small amounts of underground ore produced by the poquiteros. Recoveries in the LPF plant are reported to have been about 60 % in the early years but diminished with time as the plant deteriorated. The smelter



continued operation, treating material produced by poquiteros and concentrates from off-shore, until final closure in 1985.

During the latter years of operation at Boléo, there was some exploration in the form of diamond and churn drilling by both French and Mexican concerns. Shafts were also sunk to intercept the high grade mineralization. This work was concentrated in a few relatively restricted areas of the district since the smelting operations needed a cut off grade of >4.5%. This exploration work showed that the required grades lay near the southeast corner of the present property and at a depth of greater than 200 metres. It should be noted that these early operators assayed only for copper and only portions of the mineralized units were sampled. The results are thus of little value in the overall scheme of a modern exploration program. During the 1960's and early 1970's, the Compañia Minera Santa Rosalía S.A, in an effort to find more reserves for the LPF plant, commenced an underground program in which it blocked out a measured resource of backfill material in the Apolo Mine area reported to be in the order of 660,000 tonnes grading about 1.60% copper, with an unknown cobalt and zinc content. This material was never mined due to lack of funding.. Table 8.1 below, shows the approximate production of ore and copper metal from inception of mining activity until closure of the smelter in 1985. After about 1947 historical reporting appears to not always have been reliable and the figures shown in the table have been derived from several sources and are approximations. Table 8.1 Historical Mining Production from the Boléo District, 1872 – 1985.

Period Mined Avg Copper Grade Copper Produced (tonnes) (% Cu) (tonnes)

1872 - 1884 ~54,400 ~24.0 ~10,400 1888 - 1947 13,622,300 4.81 540,300 1948 - 1952 817,300 3.95 ~27,000 1953 - 1972 1,118,200 3.95 ~36,500 1973 - 1985 720,900 3.02 ~18,000

Between about 1964 and 1972 about 2.5 million tonnes averaging 1.4% Cu are believed to have been recovered from old dumps and to a lesser extent by poquiteros from small scale workings.

After cessation of operations in the 1980's, the bulk of the district was placed into the Mexican Strategic National Mining Reserve (“MSNM Reserve”). Some months after the release of the ground from the MSNM Reserve in 1991, much of the district was acquired by MTG, which subsequently optioned the concessions to Curator in 1993. Over the period October 1993 to March 1997, Curator completed 68,685 meters of HQ coring in 828 holes. In addition, there were 28 holes either re-drilled or twinned, and 58 large diameter holes drilled to recover metallurgical test samples. This was supplemented with 108 hand or mechanically excavated trenches intended to expose mineralised mantos for both assay data and to better define



the erosional limits of the various mantos. Ten larger trenches were excavated using bulldozers to expose the base of Mantos 2 and 3 and to provide sites for bulk sampling. Only six of these trenches were successful in exposing the desired contact and, of these, five contained Manto #3. The FDW Pre-feasibility Study was completed in 1997 and incorporated all work undertaken since 1993. In summary, FDW estimated open pit proven reserves of 71.2 M tonnes grading 1.44% Cu, 0.092% Co, and 0.55% Zn at a cut-off grade of 0.90% Cu equivalent (based on a copper price of US$0.95/lb and cobalt at US$7.50/lb) with further probable reserves of 13.1 M tonnes grading 1.57% Cu, 0.065% Co, and 0.81% Zn. These were deemed sufficient to support an 11,500 tonne per day operation for about 17 years with an estimated capital cost in money of the day of US$ 440.5 million. It should be noted that the geological resource estimate and the diluted mineable reserve estimates in the FDW Study are preliminary in nature and not intended to be a definitive statement of resource or reserve. It should also be noted that the work necessary to verify the classification of the FDW resource and reserve estimates has not been done and, therefore, they should not be relied upon. It should also be noted that results from earlier drilling by previous operators were not included in the FDW databases used to estimate resources and reserves primarily because there were no cobalt or zinc assays available and copper assays were thought to be unreliable. Moreover, in much of the earlier drilling only the obviously better grade sections were assayed thereby providing an incomplete picture of grade distribution. The operation envisioned in the FDW Study was a conventional open-pit mine with on-site processing utilizing a hydrometallurgical plant producing copper, zinc, and cobalt cathode with an option to produce a cobalt sulphide product instead of cathode. Metal recovery would involve acid leaching with copper, cobalt, and zinc recovered from the leach slurry using an in-pulp method of recovery. In 2001, following a significant down turn in metal prices, Curator withdrew from the project by handing back its interest in Mintec and the Boléo concessions to Terratech. Although the reasons for withdrawing were never made public, it is believed a combination of low metal prices, difficulty in raising capital in equity markets, and a dispute with the vendors (Terratech) over certain terms of the underlying deal were all contributing factors. After regaining operatorship, Mintec engaged Bateman to assess the FDW Study and determine if significant improvements in mining, processing and capital costs could be achieved. Most of Bateman’s work concentrated on the metal recovery part of the proposed flow sheet where a conventional counter current decantation (CCD) solid-liquid separation circuit was proposed. The Bateman flow sheet also included acid leaching of the copper, zinc, and cobalt followed by rejection of the leach residue and separate recovery of copper and zinc metal and cobalt either as metal or a high value cobalt precipitate Following Bateman’s assessment, Mintec embarked on a corporate re-organization in the belief that the new process, if proved viable through future metallurgical testing, would greatly improve project economics, In April, 2002, as part of this restructuring, Tek Terra caused its subsidiary corporations



to transfer to Mintec’s wholly owned Mexican subsidiary, MMB, all of the rights to the copper-cobalt concessions, as described above, such that MMB became the registered owner of a 100% interest in the Boléo copper-cobalt-zinc concessions. In the spring of 2003, Mintec commissioned Rodriguez to assess the underground mining potential and determine what underground resources may exist in Mantos 1, 2 and 3 within the Boléo sub-basin. Without considering dilution and using a 1.80 meter minimum mining width, Rodriguez calculated indicated resources of 27,761,800 tonnes at 2.17% Cu, 0.092% Co, and 0.40% Zn plus a further 15,252,500 tonnes of inferred resources at 2.19% Cu, 0.12% Cu, and 0.66% Zn. In late 2003, independent consulting geologist Mehner was commissioned to evaluate Rodriguez’s resource estimates and to identify areas with potential to yield further resources through additional exploration work. Part of Mehner’s remit included review of a proposed underground mining test, the objective of which was to determine costs and the viability of exploiting the deposit by underground mining methods.



9.0 GEOLOGICAL SETTING

The following geological descriptions have been taken largely from Mehner (2003). 9.1 Regional Geology The Boléo deposits occur within the Boléo sub-basin of the Santa Rosalía basin which formed as a result of Miocene rifting in the Gulf Extensional Province (GEP) (Stock and Hodges, 1989). The northward extension of this province is the Basin and Range Province of the Southwest United States.

The timing of initial rifting varies throughout the Baja peninsula from 13 Ma to 8 Ma. In the Boléo District, which is located near the western edge of the GEP, rifting is believed to have started some time after 10 Ma (Sawlan and Smith, 1984).

The early direction of rifting, which was east-northeast, produced north-northwest oriented basins and ranges in basement Miocene volcanic rocks flanking the rift axis. The latest movement, resulting after the Gulf transform and San Andreas wrench-fault systems were initiated, has been right-lateral oblique movement (Stock and Hodges, 1989). This has moved Baja California approximately 350 km. northwest relative to mainland Mexico and has created a number of deep pull-apart basins along the axis of the Gulf of California (Bailes et al, 2001).

Figure 9.1 illustrates the Boléo regional geological setting showing the manner in which transform faults have shaped the Gulf of California. Stratigraphically the Boléo copper-cobalt-zinc district occurs within a late Miocene age succession of fine to coarse clastic sedimentary rocks of the Boléo Formation, lying unconformably on andesitic rocks of early to middle Miocene age Comondú Volcanics. The Boléo Formation is characterized by a number of coarsening upward cycles of sediments that are believed to represent deltaic deposition in a shallow, near-shore marine basin. The upper part of the formation has been locally eroded and unconformably overlain by similar but barren and fossil-rich sedimentary successions of Pliocene and Pleistocene age delta and beach deposits, known as the Gloria, Infierno, and Santa Rosalía Formations. The Boléo and overlying formations collectively make up the so-called Boléo Basin. Locally, the entire succession is capped by Pleistocene to Recent flows and pyroclastic rocks of the Tres Virgenes Volcanics. The geology of the district has been described in detail by Wilson and Veytia (1949) and by Wilson and Rocha (1955), in privately prepared reports for Curator by Peatfield (1995) and Christoffersen (1997) and in numerous other published and unpublished papers and reports referred to in the above mentioned reports.



Figure 9.1 Boléo Regional Geological Setting – Transform Faults and Spreading Centres in The Gulf of California

9.2 Property Geology

TTRRAANNSSFFOORRMM FFAAUULLTTSS AANNDD SSPPRREEAADDIINNGG CCEENNTTRREESS IINN

TTHHEE GGUULLFF OOFF CCAALLIIFFOORRNNIIAA

Oceano Pacífico

GUAYMAS

BASIN AREA

Guaymas

La Paz

BBoolleeoo

MM EE XX II CC OO

UU.. SS.. AA.. B A J A C A L I F O R N

Transform Fault

Spreading Center



The oldest rocks outcropping on the property are andesitic volcanics of the Comondú Formation. They include sub-aerially erupted flows and coarse explosive breccias which grade into coeval epiclastic sediments to the west. The volcanics have been dated from 24 to 11 Ma and are underlain by Cretaceous granodiorite (Schmidt, 1975).

The overlying Boléo Formation consists of five coarsening upward cycles of sedimentation which become progressively coarser from cycle number “4” at the base to “0” at the top. This interpretation is based on work by Curator from 1993 to 1997 and is different from that published by Wilson and Rocha (1955) who interpreted conglomerates, the coarsest units in the stratigraphy, to be the basal unit in each cycle.

The basal unit in the Boléo Formation is a 1 to 5 meter thick limestone unit. It contains cherty lenses and non-diagnostic fossil fragments. It’s occurrence atop very steep paleo-surfaces combined with banding parallel to its base and the cherty horizons suggests it is, at least in part, a chemical sediment. Lying directly on the Comondú and extending over parts of the district and particularly over much of the coastal area, is an extensive deposit of gypsum up to 80 meters thick which is overlain by limestone. Although a few dome or mound structures have been noted, the gypsum unit is characteristically flat to shallow dipping exhibiting laminated to massive and even brecciated textures. Intra-formational carbonate beds are rare.

On top of the gypsum/limestone beds is the cyclic succession of clastic beds that average 150m and range to 270m thick. Individual cycles range from 20m to 140m thick and consist of a basal mud and fine volcanic ash horizon (now altered to montmorillonite clay) that hosts the copper-cobalt-zinc mineralization (the manto). These are overlain by progressively coarser material of maroon coloured, tuffaceous claystone, siltstone, feldspathic sandstone, pebbly sandstone, and eventually cobble to boulder ortho-conglomerates.

Typically the earliest cycles (Manto 4, then 3) are thickest with each successive cycle being thinner. The last cycle is thin and believed to be incomplete. All cycles thin over basement highs and wedge out toward the basin margins. The copper-cobalt-zinc-manganese stratiform deposits only occur within Boléo Formation rocks.

Fossiliferous marine sandstones and conglomerates of the lower Pliocene (about 5.3 Ma.) Gloria formation (Bailes et al, 2001) unconformably overly the Boléo clastics. These in turn are overlain by a sequence of fossiliferous marine sandstones and conglomerates of the Infierno formation. Unconformably overlying these are fossiliferous sandstone and conglomerate of the Pleistocene, Santa Rosalía Formation (Wilson and Rocha, 1955). Figure 9.2 illustrates the typical Boleo Formation stratigraphy.

Figure 9.2 Boléo Formation – Typical Stratigraphic Column



9.3 Structural Geology



The Boléo Formation rests on an irregular volcanic basement, with several distinct basement highs and intervening troughs. In places, these basement highs are so pronounced that they have influenced the deposition of the lower mantos, which pinch out against the volcanics leaving only the upper mantos in place. There is also a tendency for the sediments of each cycle to thin towards the basement high, giving a stratigraphic compression and thus less vertical separation to the mantos. Faulting is common throughout the district. The dominant faults strike northwest to north-northwest and dip steeply with normal movements. These faults have downthrows to both east and west, with more of the major faults having down throws to the west. This, coupled with the generally easterly dip of the mantos, yields a stepwise pattern of the present position of the mineralized beds. Many of the faults appear to be long-lived, probably with their first movements influencing the initial basin formation and with continuing movements throughout time to the present day. Vertical displacements can be as much as 50 to 200 metres maximum on the major faults, with lesser movements toward the ends of these faults and on lesser structures throughout the district. Fault displacements will obviously be important in detailed mine planning; fortunately, in much of the district, the faults and their displacements are well documented in old mining records. Major faults at Boléo are, in most cases, separated by several hundred metres, to in some cases, over a thousand metres. Lesser faults are common and more closely spaced. Faults displace mantos and, in places may form “fault windows” in which the mantos are not present. Several drill holes did not encounter mantos at the expected depth and are interpreted as falling within such fault windows. Where identified, such areas were excluded from Mehner’s revised resource calculations. An order of magnitude calculation suggests that these fault windows may represent only between 2% and 4% of the total area, however, many of the major faults have zones ranging from a few metres to tens of metres wide in which the rocks, including the mineralized mantos, are highly disrupted. There has also been some oblique strike-slip movement on many of the faults. The sense of this movement appears to be predominantly right lateral which is consistent with the spreading regime in the Gulf.

Figure 9.3 Boléo - Computer generated orthogonal view looking north-east of Manto 3 footwall with faults superimposed in red. (Not to scale).



Figure 9.4 Boléo – computer generated typical east-west cross section

(looking north) showing Mantos and major fault surfaces. (Not to scale)

Note: Mantos Represented as follows: Manto 1 Red Manto 2 Blue Manto 3AA Orange Manto 3A Green Manto 3 Yellow Manto 4 Magenta



Figure 9.5 Geological cross sections 3400N and 1300N looking north showing mineralized horizons, faults, and location of exploration drill holes.

FIGURE 9.5

0 100 500

METERS

SECTION 3400 N &SECTION 1300 N

DATE: DEC. 2004.



10.0 DEPOSIT TYPES The Boléo District hosts a number of mineral deposit types that have the potential to be of sufficient size and grade to be economically mined and processed. The most important of these are the manto hosted copper-cobalt-zinc deposits which occur in Boléo Formation clastic sediments. Another possible target is the extensive gypsum beds which occur over portions of the property, particularly north and east of Arroyo Saturno. It is believed these beds occur along the same stratigraphic position as those currently being mined immediately north of Boléo and 20 km southeast on San Marcos Island. The possibility exists of manganese deposits occurring within the Boléo formation but at this stage of project development these are not considered to represent a significant economic or developmental target. The Boléo District has been extensively mined by underground methods for nearly a century and much of this early mining extracted only the very high grade material with the lower grade used as backfill. Although considered waste by the old timers, much of this backfill grades between 1% and 2% Cu or better. The author was able to visit and examine an area of old Manto 3 underground workings in the Apolo Mine. The section visited comprised an area of older backfilled stopes that had been re-mined in 1970. It is not known whether the area visited may be considered typical, yet despite the passage of time, some of the workings were in remarkably good condition although limited re-habilitation had been carried out and some new ground support had been installed for safety reasons. Visual examination of some of the accessible old backfilled stopes showed that the backs had settled over time and had compressed the backfill (which almost certainly had not been tightly packed in the first place) such that it was difficult to distinguish between in-situ pillars and compacted backfill. Because these old backfilled stopes contain material with potentially economic grade their physical characteristics will have to be better understood before they can be considered exploitable. Backfilled stopes are extensively distributed throughout the project area and represent, in the broadest sense, a unique, albeit man-made type of deposit that it is recommended to evaluate (in the same way that most of the mantos will be evaluated) at the next stage of project development. Economic geologic consultants, Hellman & Schofield, have recently prepared an independent preliminary resource estimate which includes an assessment of previously worked areas. The results of this assessment are to be published in a separate NI 43-101 compliant technical report.



11.0 MINERALIZATION Copper-cobalt-zinc mineralization occurs throughout the Boléo District within widespread, stratiform clay-rich horizons or beds known as “mantos”. Within Boléo Formation stratigraphy there are up to eight mantos including two of very limited extent that occur as relatively flat to generally shallow dipping, stratabound, and stratiform beds. These include, with increasing depth, Mantos 0, 1, 1B, 2, 3AA, 3A, 3, and 4. Generally ore grade material will only occur in one bed in a given area although there are a couple of exceptions. Historically Manto 3 has been the major producing manto yielding approximately 83% of all production between 1886 and 1985 when the mine shut down. Most of the remaining production has come from Manto 1 in the southeast portion of the property where Manto 3 is absent. A small amount of production have also come from the widespread but generally thin Manto 2 and from Manto 3A which is limited in extent. Based on previous studies and exploration work, the mantos which offer the most potential for hosting significant economic underground reserves are assessed to be Manto 1 in the southeast part of the Boléo District and Manto 3 throughout the district. Manto 2 has potential to host small reserves in two restricted areas in the central and north part of the district. Manto 3A is situated between 5 and 8 meters above Manto 3 and in some areas the two coalesce. Although Manto 3A can exhibit good grades it may be too close to Manto 3 to be mined separately by underground methods. Thus where the mantos coalesce they may be mined together, however, where the parting is sufficiently thick to cause unacceptable dilution, Manto 3A would not be mined. Virtually unexploited until now, recent diamond drilling has indicated Manto 4 may be significantly mineralized. However, further drilling and assessment will be required before any of this material can be included in a resource estimate. The mantos themselves tend to be clay rich (ash altered to montmorillonite) with laminated basal zones generally less than 1 meter thick overlain by intra-basin slump breccias up to 20 meters thick. Underlying lithologies vary from predominantly ortho-conglomerates in the heart of the Boléo basin to coarse sandstones typically containing pebbles of Comondú volcanics. The contact between the mantos and footwall rocks is sharp. Overlying lithologies vary from fine to medium grained sandstones. The contact between them and the clay rich slump breccias is gradational. Metals of interest in the mantos include copper, cobalt, and zinc. Ore minerals include a fine grained, complex assemblage of primary sulfides including pyrite, chalcocite, chalcopyrite, bornite, carrolite, sphalerite, and secondary minerals including malachite, azurite, boleite, pseudoboleite, and cumengite. Mineralization is generally finely disseminated over intervals up to 20 meters thick in the slump breccias. The richest material typically occurs in the laminated basal section of the mantos which historically (1886 to 1953) averaged about 80 cm grading 4.76% Cu. Cut-off grade for the smelter was reportedly above 3% Cu meaning a large tonnage of “low grade” material was left behind (Bailes et al, 2001). In fact, the historic mining methods employed concentrated on removing the basal part of the manto, extracting the 80 cm thick copper rich zone and then back-filling the



stope with the low grade material (often 2%-3% Cu plus Co and Zn credits) referred to as “retaque”. Historically cobalt and zinc were not recovered. In a general sense, each manto has distinctive characteristics, especially with regard to copper-cobalt ratios and relative concentrations of zinc, manganese, and carbonates. Zoning of the principal economic metals occurs both vertically and laterally. Within individual mantos, copper is enriched at the base, zinc towards the top and cobalt is more or less evenly distributed. Stratigraphically, vertical zoning shows a trend of zinc enrichment from the lowest, Manto 4 to the uppermost mantos. Lateral variations indicate the central core of the Boléo sub-basin is copper rich flanked by a zinc rich marginal zone. Cobalt is variable and shows no clear correlation with copper or zinc. Individual mantos have great lateral continuity and relatively consistent thicknesses. In the principal areas of interest, the lowest manto (Manto 4) lies at the base of the Boléo Formation, directly on the Comondú Formation. Manto 3 is widespread and thick, accounting for the bulk of the mineral resources and mining reserves. Mantos 3A and 3AA which are higher in the sequence are less continuous and thinner. In some places, especially in the Saturno-Jalisco area, Manto 3A merges with Manto 3. Manto 2 is stratigraphically continuous but is absent over large areas due to erosion. Manto 1 makes up the bulk of the mineral resource in the southeast portion of the Boléo Property, where, for the most part, the lower mantos (Mantos 3 and 4) were not deposited. However, the south easterly dip has resulted in Manto 1 being deeply buried in this area. To the northwest, Manto 1 overlies the well-mineralized portion of Manto 3 (and in many places, Mantos 3A, 3AA, and 2). One distinctive unit known as the “Cinta Colorada” or “red ribbon” is a layer of reddish andesitic-basaltic tuff up to two metres thick. This is interpreted as the product of a single explosive volcanic event, which probably blanketed the entire region. The Cinta Colorada represents a time marker horizon which transgresses the stratigraphy and as a result of pre-depositional faulting, lies within the #2 conglomerate in some areas and the #3 clastic conglomerate in others. Figure 11.1 below, illustrates the nature of mineralization and typical distribution of copper, cobalt and zinc grades in Mantos 3 and 3A.



Figure 11.1 Mineralization and typical distribution of copper, cobalt, and zinc

grades in Mantos 3 and 3A.



12.0 EXPLORATION Extensive exploration has taken place at Boléo over many decades, however, for the purposes of this report the most relevant activity has occurred since 1993. Between late 1993 and early 1997 four separate diamond drilling campaigns took place and 828 holes totaling an aggregate of 68,685 meters of drilling were completed. A further 28 holes were either re-drilled or twinned and 58 large diameter holes were drilled for metallurgical test samples. Most of this diamond drilling was done using HQ core (63.5mm diameter) though in some places it was necessary to reduce to NQ size (47.6mm diameter.) Where there was a significant thickness of barren overburden a rotary tri-cone bit was sometimes used to drill down to close to the expected intersection with a manto. The tri-cone bit was then replaced with a diamond bit and conventional diamond core drilling continued through the strata of interest. Overall, core recovery was reported to be good to very good. During the same period 108 trenches were dug either by hand or using a small excavator. In addition, 10 trenches were excavated using a bulldozer with the objective of exposing the base of Mantos 2 and 3 and to provide sites for bulk sampling. However, only six of these large trenches were successful in exposing the desired contacts and, of these, five intersected Manto 3. There are numerous old mine dumps around the property and many were thought to carry significant grade. Because they represented material that would be readily accessible and easy to recover for initial production, these dumps were mapped at a scale of 1:500 using chain and compass methods and a control grid was established across each dump for sampling. A two-stage channel sampling process followed which is described more fully in Section 12.2 below. Overall a total of 3,460 samples were collected from systematic sampling of 88 separate dumps. After acquiring control of the Boléo project in 2001, Mintec, either in its own right or through MMB, carried out only limited field exploration work. Instead, MMB concentrated on a complete geological, mining, and processing review of the property. This included an independent review of the open-pit copper-cobalt-zinc reserves, a preliminary determination of underground resources, an in-depth review of alternate ore processing flowsheets, and an investigation into alternative mining methods. This review was followed in February 2002 by a pre-feasibility study prepared by Bateman (“Bateman Study”).

Since the beginning of 2004, MMB has excavated a total of 33 trenches of which 26 were primarily to collect material for pilot metallurgical testing. A composite ore sample of approximately 6 tonnes was prepared from the material excavated from trenches and shipped to Lakefield Ontario, Canada, together with a one tonne sample of high carbonate material to test for final tailings neutralization. In addition to collection of metallurgical sample, all trenches were mapped and channel sampled. Samples were also taken to determine moisture content which, in fresh samples of Manto 3 is in the order of 23% moisture. Gallium, Indium, and Germanium occur in minor amounts in association with copper-cobalt mineralization. Moreover, because of the sedimentary exhalative (Sedex) origins of the deposit and the occurrence of abundant clays, attention has also been drawn to the potential of the Rare Earths



(RE) Yttrium, Lanthanum, Cerium, and Neodymium. Despite their low grade but because of their relatively high unit values, Gallium, Indium, and Germanium were recognized as being potentially of economic interest as by-products but technically challenging to recover. This prompted the re-analysis in 2001 of a total of 446 drill core intervals which returned grades in the order of 11-14ppm Ga, 6ppm In, and 1.5ppm Ge. Bateman also addressed the issue of recovery of these elements and proposed modifications to their process flow sheet accordingly. More recently (early 2004), 23 samples from the material excavated from the metallurgical sample trenches were analyzed for Ga, Ge, and In along with a suite of RE elements. The results for Ga, Ge, and In were generally consistent with results from the 2001 re-analysis and confirmed that Gallium was the most abundant of the 3 elements with values averaging between 15 – 20ppm Ga. Analysis of RE elements suggested anomalous values of Lanthanum and Cerium (in the order of 200 – 300ppm), Neodymium (79 – 118ppm), and Yttrium (35 – 39ppm) that might justify further investigation. It is noted that Neodymium is finding increasing application in small, high quality batteries hence there may be future demand growth. However, it is recognized that alternative, higher grade sources of RE’s exist elsewhere and that for the Boléo project the RE’s may prove, at best, to be value adding by-products. Within the Boléo sub-basin the following areas are considered to represent exploration potential in Mantos 1 and 3 with potential to be up-graded to the inferred underground resource category;

• Texcoco • Dos de Abril • Providencia – Purgatorio • Rancheria, and • San Luciano.

Elsewhere, the Montado SW Basin is thought to have excellent potential for significant underground resources in Mantos 1, 2 and 3. Although in the early stages of exploration, recent diamond drilling has indicated there may be potential for the eventual definition of a mineralized resource in Manto 4.



13.0 DRILLING The oldest recorded drilling program was carried out between 1927 and 1940 when 10,237 meters were drilled in 46 vertical churn holes (Wilson and Rocha, 1955). Most of these holes were drilled in the southeast portion of the property to explore for Manto 1 in the Rancheria, San Luciano, and Montado areas. Further diamond drilling was carried out during the latter years of mining operations when Fomento Minera was looking for high-grade reserves to exploit. Records of this drilling were either never kept or have been lost and it was only by talking with those who carried out the actual work that this knowledge became available. The drilling program conducted by Curator between 1993 and 1997 was probably the biggest single exploration drilling program carried out in the Boléo District. All diamond drilling for that campaign was by skid mounted Longyear 38 drill rigs using predominantly HQ core size (63.5 mm dia.) which was reduced to NQ (47.6 mm dia.) when necessary. In areas where a considerable thickness of overlying barren stratigraphy (Gloria, Infierno, Santa Rosalía Formations) was expected, the upper portion of the hole was tri-coned before coring nearer the target horizon. Core recovery was, for the most part, reported to be good to very good. Drilling for metallurgical samples was carried out by a truck mounted, large diameter (6 inch diameter) drill rig. A program of further targeted exploration and in-fill diamond drilling was initiated in early January 2005 and remains on-going at the time of writing. The results of this drilling are expected to be reported separately in due course.



14.0 SAMPLING METHOD AND APPROACH 14.1 Diamond Drill Core Sampling procedures used by Curator during their 1993 – 1997 drilling campaigns were assessed and separately reported in Mehner, 2003 and are summarised below. However, the author did not independently corroborate these procedures. Core was transported in core boxes from the drill site to a warehouse in Santa Rosalía where the boxes were labelled and core recoveries estimated. Core was then logged by a company geologist who also marked the sample intervals. A trained local employee then split the core using a mechanical splitter or a knife, depending on the degree of consolidation, and the samples were placed in plastic bags, labelled, and shipped to Guaymas. Remaining half-core was stored in a secure warehouse or in a secure underground adit known as the Apolo Adit. In June 2004 a fire deliberately lit in the Apolo Adit by two juvenile delinquents caused the destruction of core from 429 holes. (The motives for setting the fire were related to an argument between the youths and a local pastoralist and were unrelated to MMB’s exploration activities.) The lost core, which represents less than half of all core from drilling, had not been photographed prior to storage but it had all been logged. The original logs and analytical data remain available for future reference. In Guaymas, the bagged core samples were collected by laboratory personnel and taken to the SGS-XRAL Laboratories (“SGS-Hermosillo”) in Hermosillo, Sonoro Province, where they were dried, crushed, and pulverized. At the start of the Curator drilling, samples were prepared and assayed in Hermosillo; however, from 1997 onwards samples were prepared in Hermosillo and assayed by Bondar-Clegg in Canada. Reject material and remaining pulps either from SGS-Hermosillo or Bondar-Clegg were returned to Santa Rosalía where they were systematically stored. All core was logged by Curator geologists who prepared a summary log and a computer code log for each hole. Assay results were returned from the laboratory in electronic digital format and were transferred directly to the computer database. The results were subsequently entered manually into the drill and summary logs which provided a check of the assay results against the expected values based on the geologist’s original examination.

14.2 Dump Sampling There are numerous old mine dumps around the property and many were thought to carry significant grade. These dumps were mapped at a scale of 1:500 using chain and compass methods and a control grid was established across each dump for sampling. A two-stage channel sampling process followed. The initial sampling phase consisted of hand excavating slots 40 – 60cm deep and 50 – 60cm wide on the inclined slopes of each dump and manually extracting a channel sample from the bottom of each slot. Samples were taken over 2m intervals and each trough was geologically logged for rock type. Dumps which demonstrated reasonable values (there is no record of what was considered a reasonable value) were then subject to a second phase of sampling using hand or mechanical methods to excavate pits across the level portions of the dumps. In this way, a total of



3,460 trench samples were collected from 88 dumps though there is no record of any form of drill sampling having been carried out. 14.3 Trench Sampling Curator excavated a number of trenches for sampling using both manual methods and a small hydraulic backhoe excavator. In all cases, the exposed surface of a manto was marked up in 2m intervals for mapping and sampling control purposes. The trench was then mapped by a geologist who recorded in a separate log for each trench its location, inclination and azimuth, geology, and the position and number of each sample collected for analysis. Mapping was at a scale of 1:100 with trench location fixed by means of a tape and compass survey from known points. Trench sampling results were detailed in a Curator report, dated April 6, 1997 though this was not examined by the author. 14.4 Moisture, Specific Gravity, and In-situ Bulk Density Determinations Boléo manto material may be characterised by its high moisture content and the hygroscopic nature of the clay-rich portions which, if not assessed appropriately, could result in resource and reserve calculation errors. The in-situ free water content of manto material is highly variable but averages about 25% while the high clay content portions tend to swell on exposure to atmosphere as a result of rapid absorption of moisture by the silicates. (Anecdotally it is reported that the rate of moisture absorption by a clay-rich sample could be observed by its increase in weight on the chemical balance while being weighed.) Recognising the implications of moisture content for resource and reserve calculations, Curator calculated all assays on a dry weight basis by oven drying samples at over 100º C. For its resource and reserve calculations, Curator used a global in-situ, dry bulk density of 1.41 tonnes per cubic metre for manto material, based on an average calculated from 995 density and moisture content measurements. Curator used two methods for density determination. Initially, a volume/mass method was used but this was replaced by the simpler and quicker water immersion method. Mehner (2003) reported that on the basis of testing a number of duplicate samples there was no statistical difference between the two methods. The results of Curator density and moisture content measurements are summarised in Table 14.4 below, representing the results of 995 sample measurements.



Table 14.4 Density & moisture measurements for mineralized Mantos –

Curator pre-feasibility study

Manto No. of Samples/

Calculations

Wet Density Water (%) Calculated Dry Density

0 53/53 1.84 26.75 1.36

1A 2/2 1.90 25.53 1.41

1 86/86 1.88 26.15 1.40

2A 11/11 1.86 26.86 1.36

2 136/136 1.87 26.93 1.38

3AA 9/9 1.88 26.89 1.38

3A 133/128 1.90 26.15 1.41

3 543/489 1.89 25.71 1.41

4A 3/3 1.93 25.48 1.44

4 78/78 1.91 24.19 1.46

Avg. 1054/995 1.89 25.93 1.41



15.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY 15.1 Sample Preparation Mehner (2003) reported that because of the high water content, all Curator drill core was kept in plastic (rather than absorbent wooden) core boxes and every effort was made to minimize sample drying in the hot, dry, desert conditions. Core was logged and split as soon as possible after extraction and samples were placed in heavy duty plastic sample bags securely closed with wire ties. In some cases it was considered necessary for samples to be double bagged. Bagged samples were shipped by ferry to Guyamas, Sonora, where a representative of SGS-Hermosillo collected the samples and took them to SGS-Hermosillo where they were dried, crushed, pulverized, and then assayed. In 1997 Curator re-evaluated the sample preparation and analytical processes used since 1993 and changed to using Chemex Laboratories Ltd. (“Chemex”). From that time, samples were collected from the ferry in Guaymas by Chemex representatives in the same way as before but instead, were transported to Chemex in Hermosillo, where they were dried, crushed, and pulverized. The pulps were then sent to Vancouver for assay. 15.2 Analysis 15.2.1 General: Owing to the mixture of sulphide, mixed and oxide material, the fine clays and hygroscopic nature of much of the material as well as the variable manganese oxide content, analysis of Boléo mineralization proved challenging. Early assay work (i.e. between 1993 and up to early 1996) by SGS-Hermosillo, was carried out using a perchloric acid digestion technique. However, check assaying by Bondar-Clegg in Vancouver, Canada demonstrated that copper assays were erratic and cobalt grades were understated by about 15%. These discrepancies caused Curator to re-consider the validity of the overall database created up to that point. To remove all doubt, Curator had Chemex in Vancouver re-assay all mineral intercepts obtained from drilling before the spring of 1997 and essentially re-built the database with new assay results of approximately 6,800 samples. 15.2.2 Analytical Procedure: Following confirmation of the unreliability of the perchloric acid partial digestion technique a total digestion method using nitric, hydrochloric, perchloric, and hydrofluoric acids was adopted. This method proved sufficiently aggressive for the range of mineralogical types, metals and grade ranges encountered in Boléo samples and, in particular, to fully liberate the copper, cobalt, zinc, and manganese. 15.2.3 Analytical Laboratories: Having identified analytical weaknesses in their laboratory procedures, SGS-Hermosillo was replaced in 1997 by Chemex as the principal laboratory for the re-assay program and for ongoing routine analysis. As indicated above, Chemex had sample preparation facilities reasonably close to the project site at Hermosillo though prepared pulps were sent to a Chemex laboratory in Vancouver for analysis. A second laboratory, Mineral Environments Laboratories (Min-En) also of Vancouver, was used to assay duplicate pulps as a check on the Chemex results.



15.3 Security Mehner reported that all drill core and samples (both drill and trench samples), and returned reject material and pulps were securely stored both before shipment to the analytical laboratory and after their return. However, Mehner does not provide information on the procedures used to prevent sample misplacement or mis-ordering either at the project site or at the sample preparation and analytical laboratories. Currently, all core and sample reject material is securely stored in locked facilities. 16.0 DATA VERIFICATION



Mehner reported that exploration assay results have been subjected to rigorous quality control (QC) to ensure assay accuracy and define the precision of the results. The author has not independently verified Mehner’s work. Consulting geologic consultants Hellman & Schofield assessed aspects of data quality control and quality assurance in late 2004 and have reported their findings in an independent, NI 43-101 compliant technical report.

16.1 Accuracy In addition to the use of laboratory standards, all assays for the 1997 re-assay program and all subsequent assays have been controlled by the use of three dedicated standards prepared from Boléo material and inserted in rotation at every twentieth position in the sample stream. Boléo assay standards were prepared by CDN Resource Laboratories (CDN) of Burnaby, BC, Canada and subjected to multiple round-robin analyses by six different laboratories to establish confidence limits for copper, cobalt, zinc, manganese, and iron assay values. The controlling parameter used in preparing the composites for assay standards was copper grade. Three standards were produced which had the following copper grades:

• 0.51% Cu which was near what was considered the probable copper cut-off grade for an open-pit operation;

• 1.12% Cu which was considered near the mean grade of an open-pit operation; and • 7.41% Cu which was near the upper limit of expected copper values.

Coincidentally, cobalt grades in those standards corresponded with the expected values while zinc values in all three standards were lower than the expected values and hence could not be relied upon to provide a check for zinc assays. Mehner reported that by monitoring the standards, all assay reports in the 1997 re-assaying program returned acceptable results as indicated by the standards falling within their acceptable value limits. Mehner further reported that pulp duplicates analysed at CDN returned results within the acceptable limits of the original assays thereby confirming the Chemex results. 16.2 Precision During the 1997 re-assay program, precision levels for the sample analyses were calculated by systematic re-assaying of pulp samples. The results, which were reviewed for Curator by Peatfield and Smee in 1997, indicated that above what might be regarded as open-pit cut-off values, in all cases the results showed a relative variation of less than 5% which was considered acceptable. Precision levels were also calculated for a sub-set of reject duplicates to monitor the effects of sample preparation. The results showed only slight differences from those calculated for the pulp duplicates and in the case of zinc, the values were essentially the same. This indicated that the process of preparing pulps from rejects was acceptable since it did not add any uncertainty to the results of samples prepared from those rejects.



When core duplicates were assayed, the initial sub-set results were within the established limits of acceptability but tended towards the high side of the acceptable limit. There was also a tendency for repeat assays to be about 10% lower than the originals. 16.3 Database Verification Assay and drill hole data is stored in Microsoft Excel spreadsheet format along with geological and summary logs. The author has not independently validated or audited the database. 17.0 ADJACENT PROPERTIES



There are no adjacent properties that are relevant to this report. 18.0 MINERAL PROCESSSING AND METALLURGICAL TESTING



18.1 Background

The metallurgical testwork undertaken to date was mostly carried out in 1996 on behalf of Curator. Metallurgical samples were derived from a variety of sources, including exploration drill core sample reject material, dedicated metallurgical drill holes, and surface trench bulk samples. Fifty-eight holes totalling 2,947 metres were drilled specifically to obtain metallurgical sample. Of these, six HQ (63.5 mm diameter) holes totalling 300 metres were drilled in 1995 with a further fifty three six inch (15.2 cm diameter) holes totalling 2,647 metres drilled in 1995 and 1996. Curator also collected two 3-tonne samples from bulldozer and mechanical excavator trenches in the Saturno Area and a further two 10-tonne samples from elsewhere for grinding / scrubbing tests. Ore characterization test work was undertaken on more than 250 assay composite pulps with samples chosen by Curator geologists to represent typical ore types from all mantos and all areas within the open-pit mine plan proposed by FDW. To better define process parameters, co-mingling tests were carried out on samples of hangingwall material taken from above Mantos 2, 3A, and 3. These samples were collected in mid-1996 using hand tools and a small backhoe under the supervision of an engineer from Knight Piésold LLC. During 1996 a number of different process testing activities were undertaken including the following:

• Grinding work index testing on 16 composites, including determination of the rod mill work index for scrubber oversize;

• Scrubbing tests already mentioned above; • Bond rod and ball mill indices; • Autogenous work index; and • Leaching and acid consumption tests.

Hazen Research Inc. (Hazen), of Denver, Colorado carried out much of this early stage metallurgical testing including a series of scrubbing and attrition tests using a rotary trommel and a log washer to remove clay. A rod mill work index was also determined as a result of this work. However, in their 1997 pre-feasibility study, FDW proposed using a SAG mill and appeared to have discounted the importance of beneficiating the ore ahead of milling by removing fine clay and then re-combining the fines with the milled product. 18.2 Recent Developments

After acquiring control of the project in 2001, Mintec commissioned Bateman to carry out a pre-feasibility level update of the process and infrastructure elements of the 1997 study. This involved a detailed review of the process design work done previously under the auspices of FDW, in the belief that a different, simpler approach to processing the ore could result in capital and operating cost savings.



Bateman carried out their study in two phases. The first phase consisted of a detailed review of the existing test work database to determine whether a number of proposed modifications to the original circuit would be not only viable but also offer the opportunity of lower capital and operating costs. A total of seven options were reviewed from which, ultimately, a single preferred option was selected for further investigation. The second phase of Bateman’s remit was to develop preliminary process and engineering design for capital and operating cost estimation of the selected option which then became, in effect, the “Bateman Base Case” option. During their detailed process review, Bateman came to the conclusion that much of the earlier process testwork by FDW was relevant and could be used for the purposes of their design work. Bateman also concluded that it would be better to remove clay material ahead of milling and mill only the coarser, harder fraction before recombining both streams for subsequent leaching. Bateman therefore proposed using a drum scrubber as an initial clay removal step followed by a number of alternative mill configurations including vertical attrition milling. FDW’s process “base case” involved several process steps:

• an oxidation leach process followed by a reduction leach; • a sulfidization step whereby H2S gas is sparged through the slurry and fine elemental sulphur

admixed to provide a nucleating surface for crystallization; • sulfide flotation to extract copper, cobalt, and zinc; • roasting; • re-leach in sulphuric acid to extract metals to solution; and • separate solvent extraction and electro-winning (SX/EW) of copper, zinc and cobalt in that

order of recovery; and • tailings neutralization and disposal.

The FDW Study “base case” mine and plant design was developed on the basis of an open pit mining operation with a daily throughput rate of 11,500 tonnes per day to exploit some 70 million tonnes of ore with an average grade of 1.29% Cu, 0.089% Co, and 0.62% Zn over a 17 year mine life. By comparison, Bateman’s “base case” proposes a much simplified process:

• an oxidation leach followed by a reduction leach; • a six stage CCD process using high rate thickeners; • copper recovery by SX/EW; • a sulfidization step with H2S sparged through a much reduced solution flow, post copper

removal; cobalt sulphide and zinc sulphide precipitate leached in an autoclave; followed by separate zinc and cobalt recovery by SX/EW; and

• tailings neutralization and disposal. It should be noted that in both the FDW and the Bateman “base cases” cobalt may be recovered as either a metal or a high value precipitate.



The Bateman “base case” used the same 11,500 tonnes per day open pit production and plant throughput rates as the basis for capital and operating cost estimates which could then be directly compared with the earlier FDW “base case”. Bateman also produced a factored capital and operating cost estimate for an operation at a significantly reduced daily throughput rate of 7,500 tonnes per day. Table 18.1 below compares metal recoveries determined for the FDW and the Bateman “base cases”. Table 18.1 Comparison Of Metal Recoveries From Primary Ore – FDW Versus Bateman

“Base Cases”

Fluor Daniel Wright Bateman Engineering (%) (%) Copper 84.6 87.3 Cobalt 75.2 83.5 Zinc 62.1 70.3

Note: FDW also recognized zinc and high manganese ore types for which they estimated separate recoveries as follows: Zinc ore – copper, cobalt, and zinc recoveries were assumed the same as for Primary Ore; High manganese ore – copper, cobalt, and zinc recoveries were all assumed to be 56.4%. Bateman’s remit for carrying out their study was to include only tried and tested processing techniques and equipment. The initial sulphuric acid leach under oxidation followed by reduction conditions is effective and necessary to obtain high cobalt extraction. While leaching of the metals into solution is relatively straightforward, historically the subsequent separation of leachate and leached solids has been challenging because of the abundant, fine clay minerals. The key to success of the Bateman “base case” process is the successful application of conventional CCD solid-liquid separation. To test the process performance of Boléo ores, MMB commissioned a testwork program in August 2004 at Lakefield to test methods of solid-liquid separation and of washing the barren solids. The work at Lakefield on six composite samples was overseen by Bateman and involved Pocock Industrial, Inc., of Salt Lake City, Utah, USA and Outukumpu Oy, Toronto, Canada. Both these companies specialise in solid-liquid separation technology and equipment. The outcome of this testwork was that Boléo ores were successfully separated and the solid residue settled and washed using conventional CCD in high rate thickeners. Results were consistent for all six tests and the success of the CCD solid-liquid separation process has removed a significant amount of technical risk from the process flowsheet. A further process development has been investigated by Bateman for process simplification. This involves a discovery by CSIRO that a combination of two existing solvent extraction reagents provides high selectivity for copper, cobalt, and zinc away from a background of manganese, iron, aluminium, and other contaminating metals. Recently completed initial testwork on this approach is



reported as having been successful in separating the principal metals of interest from samples of Boléo material. A two (2) week program of pilot testing was successfully carried out during November 2004 at SGS Lakefield Research laboratories in Lakefield, Ontario on a two tonne bulk sample of ore grade material. The object of this further testwork was to develop and refine Bateman’s simplified process flowsheet (shown in Figure 18.2 below) which consists of the following stages:

• Conventional crushing, scrubbing to remove clay minerals, and grinding; • Two-stage atmospheric leaching; • Partial neutralization; • Solid-liquid separation using high rate thickeners; • SX/EW of copper to cathode; • Removal of iron from the copper raffinate followed by stripping of the contained cobalt,

zinc, and any residual copper using an extraction system developed by the CSIRO; • Zinc recovery from the CSIRO extractant by precipitation as saleable zinc sulphate; and • Cobalt recovery from a purified solution followed by electrowinning to produce cobalt

cathode. Bateman has also made a preliminary assessment of modifications to the “base case” flow sheet to recover minor, potentially value adding metals such as gallium, germanium, indium, and RE’s.

Figure 18.2 - Boléo – Bateman Simplified Process Flowsheet



18.3 Pilot Testwork Program & Cost A two phase approach will be adopted for pilot testing Boléo ores. The first stage is referred to as the “proof of concept” stage and was run at Lakefield from the 15th – 28th November 2004. Two batches of material have been received at Lakefield. One batch of material comprises six tonnes of ore grade material (predicted composite grade is 1.92% Cu, 0.093% Co, 0.59% Zn, and 3.75% Mn) from which a two tonne sample will be extracted and tested. The second batch consists of one tonne of material containing high calcium carbonate for comprehensive reactivity testing. First phase testwork will be on a locked cycle basis and includes the following principal steps:

• Two oxidation, two reduction, and two neutral leach cycles will be performed with agitator vendors involved during the tests for resolution of design and operating issues;

• Six stages of counter current decantation will be tested with a target wash efficiency of 98%; as with the agitators, CCD equipment vendors will be involved to provide operating, scale-up and other design support;

• Copper solvent extraction; • Testing of the CSIRO reagent for extraction of cobalt and zinc; • Selective zinc stripping in two stages; • Cobalt solvent extraction;

MILL OXIDISING LEACH

REDUCING LEACH

CCD

Cu SX / EW

CSIRO Process

ZINC STRIP

Co SX / EW

Zinc Sulphate Crystallization

Acid SO2 Water

Tailings

Copper

Cobalt

Tailings

Leach Residue



• Bulk metals stripping; • Tailings residues testing; and • Determination of overall recovery performance.

It is proposed during piloting to produce a bulk strip liquor in sufficient quantity to allow a controlled approach to the development of the cobalt product recovery section of the flowsheet - in the first instance at bench scale. This can then be incorporated into the continuous campaign that may follow in 2005. This provides the opportunity to conduct a wide range of testing on real solution, together with a range of variability testing sufficient to produce an optimum process design. The contract price of this first phase of “proof of concept” testing is C$1.5 million. Upon analysis of the first stage piloting campaign, a decision will be made whether or not to proceed with the second test phase which will require a larger pilot plant. Currently two options are available: to construct a larger facility at Lakefield or to run a longer term test at a facility owned by Peñoles in Monterrey, Mexico. A quotation received from Lakefield for carrying out this second phase is C$2.5 million. No indication is currently available regarding the cost of the Peñoles option. The purpose of the larger and longer duration second pilot campaign is to allow Bateman to obtain sufficient design information so that process guarantees can be provided. An integral part of a second piloting campaign will be the involvement of Original Equipment Manufacturers (OEMs) who would be part of the financing effort (in the form of supplier credits) and individual process guarantees. The final requirement of the second pilot campaign will be determined from discussions with project financiers. 19.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES



19.1 General

As described earlier, the Boléo District has been extensively mined for decades, mostly by underground methods. However, despite all this activity it is estimated that only about 30% of the current resource has been exploited. Where underground mining has taken place, typically the highest grade material (>4% Cu) was extracted and the workings were backfilled with lower grade material in the range of 2% to 3% Cu which, at that time, was regarded as waste. Since the cessation of mining several resource and reserve estimates have been prepared. FDW identified a global (mineral) resource and estimated mineable resources from which a scheduled reserve was estimated. These were published in the 1997 Pre-Feasibility Study. Subsequently, an estimate of underground resources based on the database prepared by Curator between 1993 and 1997 was made by Rodriguez in 2003. This estimate was reviewed in detail and revised by Mehner later in the same year. Neither the FDW estimate, the Rodriguez estimate, nor the revised Rodriguez estimate have been reviewed or validated by the author. Most recently, H&S used the existing drillhole database (which also formed the basis of the previous resource estimates) to prepare a preliminary grade and dip model which was used to develop a conceptual mine plan which is described more fully in Section 20.1 below. The H&S preliminary resource estimate and a preliminary reserve estimate based on the H&S model and prepared by mining consultant AMDAD are described in an NI 43-101 compliant interim technical report that will be published in the near future. 19.2 FDW Resource and Reserve Estimates, 1997

Extensive exploration over the Boléo sub-basin by Curator identified a large global mineral resource within Mantos 2, 3, 3A, and 3AA. Under FDW supervision, Mintec Inc. of Tucson quantified this resource by using a copper equivalent cut-off based on then current metal prices and known (from metallurgical testwork) or expected recoveries. Using a 0.85% copper equivalent cut-off, Mintec (Tucson) estimated a global resource totaling 408.8 million tonnes which included 257.4 million tonnes of measured resource grading 0.73% Cu, 0.060% Co, and 0.64% Zn and 151.4 million tonnes of indicated resource grading 0.69% Cu, 0.054% Co, and 0.78% Zn. Within this global resource, FDW used a three-dimensional block model and nested floating cones to calculate an open pit mineable reserve of 71.2 million tonnes proven category material grading 1.44% Cu, 0.092% Co, and 0.55% Zn and 13.1 million tonnes of probable reserve grading 1.57% Cu, 0.065% Co and 0.81% Zn. A further 2.5 million tonnes of possible reserve grading 1.46% Cu, 0.087% Co, and 0.60% Zn was also reported. FDW stated in their Pre-feasibility Study report that these resource and reserve estimates were preliminary in nature and not intended to be used as a definitive statement of the geological resource or mineable reserve. The FDW Study pre-dates the introduction of NI 43-101 and although Mintec, Barbados, reviewed information in regard to the geological procedures, data verification and quality control procedures applied to drilling, sampling, and assaying and has reviewed the methods of reserve estimation used, the estimates themselves should not be relied upon. However, Baja and Mintec, did conclude that the categorization of Mineable Reserves appears to be generally in



accordance with the CIM Standards on Mineral Resources and Reserves Definitions and guidelines adopted by the CIM Council on 20th August 2000, with the exception of the use of non-standard nomenclature as described in section 3.2. The author has not independently verified these estimates but believes they serve to provide a preliminary and early stage indication of the potential scale of resource that might ultimately be identified at Boléo. 19.3 Open Pit Resource Estimate by Juan Manuel Berlanga, 2001

In early 2001 Minera Curator took a fresh look at the resource and in an attempt to revitalize the project and commissioned Berlanga to re-address Boléo’s open pit potential and estimate an open pit resource. Berlanga re-assessed the resource and reserve estimates previously prepared by Mintec Inc. on the basis of then current metal prices, updated mining costs and capital and operating costs from Bateman’s “base case” process flowsheet. Berlanga estimated a global geologic resource of 262 million tons with an average grade of 0.824% Cu, 0.064% Co, 0.749% Zn, and 3.064% Mn. This resource was classified 54.1% measured, 31.5% indicated, and 14.4% inferred with 20.5% corresponding to Manto 1, 27.5% to Manto 2, 12.2% to Manto 3A, and 32.3% to Manto 3. The balance was made up of smaller amounts of Mantos 3AA and 4. From within this global resource an open pit “mineable reserve” of 71.669 million tons at an average grade of 1.05% Cu, 0.08% Co, 0.77% Zn, and 3.21% Mn was estimated. Berlanga’s open pit reserve estimate was based on a then current view of metal prices, metal recoveries derived from Bateman’s process design work, and estimated mining, processing, and administrative costs. From documentation reviewed it is not clear whether this reserve estimate is based a single large open pit or a number of smaller pits, however, the estimated overall stripping ratio was 13.5:1 which is significantly less than that reported by FDW (18:1). The author has not verified this estimate which was essentially done for internal, project scoping purposes and therefore it should not be relied upon. 19.4 Underground Resource Estimation by Rodriguez, 2003

In early 2003, MMB engaged Rodriguez to assess the underground mining potential in the Boléo sub-basin. Using a 1% Cu cut-off grade, a minimum mining width of 1.80m, and no allowance for losses or dilution or restriction on maximum mining width, Rodriguez estimated an indicated resource of 27.8 million tonnes at an average grade of 2.169% Cu, 0.092% Co, and 0.402% Zn. A further 15.25 million tonnes of inferred resource were estimated at an average grade of 2.192% Cu, 0.122% Co, and 0.665% Zn. This estimate, which was based on the results of more than 920 drill holes, was determined for Mantos 1, 2, and 3 only. The method of estimation was essentially a two dimensional polygonal method. Intervals with greater than 1% Cu and more than 1.8m in thickness were identified for each of Mantos 1, 2, and 3 by plotting the weighted average copper values for each hole on a plan. There was no restriction on the maximum mining width. The area enclosed by a minimum of three drill holes with intercepts grading greater than 1% Cu and a minimum of 1.8m in thickness was considered ore and included in the estimate. Holes with weighted average grades of less than 1% Cu were only included where they



fell within the perimeter created by other holes with greater than 1% Cu and 1.8m mining width. A specific gravity of 1.41 tonnes/m3 was used. No separate cut-off was applied for Zn and Mn and where Zn and Mn values were missing the interval was assigned a zero value. In calculating grade, no distinction was made between undisturbed, in situ manto and intervals logged as “retaque” or backfill, neither was any allowance made for dilution, either in terms of tonnage or grade. Block grades were determined by weight averaging the mineralized intercepts in holes used to define the block shape as well as any holes included within the block. In a number of areas an additional area of influence was extended outside the perimeter of a contiguous group of ore blocks depending on the grade, interval thickness and distance to the surrounding holes. These “peripheral” blocks tended to be defined by only two drill holes and hence their area of influence was restricted to 50 or 100 meters. Although drill logs were carefully checked and resource blocks were compared against the corresponding geological sections to ensure reasonable consistency with geology, this method of estimation is considered simplistic and did not adequately take account of metals other than copper or the abundant faulting that is apparent in the old workings and in records from previous mining. It is not recorded whether a minimum thickness of cover criterion was applied to underground mining blocks determined in this way. To categorize the resource Rodriguez relied on previous work on drill hole spacing by Mintec Inc. who determined that any material within 100m of an assay composite could be categorized as measured resource or proven reserve; material within 100 – 200m of an assay composite was considered indicated resource or probable reserve; while any material more than 200m from an assay interval was considered inferred resource or possible reserve. However, Rodriguez simplified his resource classification by assuming any material up to 350m from an assay interval was indicated resource while anything greater than 350m from an assay interval was considered inferred. (see Table 19.1 below) Table 19.1 Boléo - Underground Resource Estimate by Rodriguez (2003) for Mantos 1, 2

and 3 using 1.0% Cu cut-off, no restriction on maximum mining width and no dilution allowance.

Category Manto Thickness

(m) Tonnes Cu

(%) Co (%)

Zn (%)

2 2.06 1,247,108 2.662 0.066 0.791 3 2.60 26,514,731 2.146 0.093 0.384

Indicated

Sub-total 2.58 27,761,839 2.169 0.092 0.402 Inferred 1 2.67 15,252,484 2.192 0.122 0.665 A more detailed description of the estimation methodology used by Rodriguez is reported in Mehner (2003). 19.5 Review of Rodriguez’s Underground Resource Estimate, 2003.



In the latter part of 2003 Mehner examined the underground resource estimate prepared by Rodriguez earlier that year with the objective of determining whether an upgrade was possible. Because of the large amount of data, Mehner restricted the review to a thorough examination of the criteria and procedures used, to a series of cross-checks of randomly selected Manto 3 blocks in three widely spaced areas of the deposit and a detailed examination of the inferred resource in the Rancheria area and the measured-indicated resource in Purgatorio-Providencia. Details of his examination are provided in Mehner’s report entitled “Underground Resource Calculation and Review, Boléo District” published in November 2003. The results of Mehner’s review and his conclusions can be summarized as follows: Rodriguez’s assumptions and procedures were considered “reasonable” in the geological framework of the deposit and the style and nature of mineralization. Mehner also suggested that including holes with voids and only narrow mineralized intercepts had the effect of downgrading the corresponding block in terms of grade and width. The practice of extending the zone of influence no more than 50 to 100m beyond the limits of a block as defined by holes that met the grade and minimum width criteria, rather than halfway to the next non-qualifying hole was also described as conservative. Rodriguez applied a minimum mining width criterion of 1.8m but no upper mining width limit. Mehner applied a 4.5m upper limit on mining width based on the actual reach dimensions of a continuous miner to better reflect the actual capability of such a machine in a production situation. Mehner also determined that relatively wide drill hole spacing (100m – 300m) was too great to justify the “measured” and “indicated” categorization applied by Rodriguez. Accordingly, Mehner downgraded the resource as follows: All material defined by 3 holes or more with an average distance apart of less than 300m was classified “indicated”. Where drill hole spacing exceeded 300m or in the case of peripheral blocks defined by 3 or more non-qualifying holes, the resource was classified “inferred”. Resource blocks averaging less than 1.80m in width (usually as a result of one or more holes defining the block having intersected a void) were classified “inferred” to reflect the greater width and grade uncertainty as a result of the material missing from the void. By checking the resource blocks as defined by Rodriguez’s polygonal method against geological mapping, Mehner found a significant number of resource blocks were found to extend outside the mapped limits of Manto 3 (there were no similar problems with Mantos 1 and 2.) The tonnage in the blocks concerned was reduced in proportion with the area falling outside the mapped manto limits. Six resource blocks in the Soledad area, four in Saturno and five blocks in the Dos de Abril area, all of which were in Manto 3, were examined in detail to verify the derivation of the length and grade of mineralized intercepts and the calculations of block area. Only minor errors were detected and these were assessed as having no material impact on the resource calculation.



Mehner also carried out an exhaustive re-examination and re-interpretation of mineralized blocks in the Providencia – Purgatorio area as well as a re-interpretation of drill holes surrounding the area. A small number of minor errors were corrected but the re-interpretation of the peripheral areas resulted in the addition of a number of new peripheral blocks and the re-drawing of others. During the final stage of checking, drill holes containing mineralized intercepts greater than 4.5m were reduced to 4.5m and their weighted average grades re-calculated. Re-calculation of Rodriguez’s underground resource estimate produced the results shown in Table 19.2. below. Approximately 70% of these resources occur in the areas known as Rancheria and San Luciano which are situated south east of the Arroyo Providencia.

Table 19.2 Boléo - Rodriguez Revised Underground Resources, Mantos 1, 2 and 3.

Category Manto Thickness (m)

Tonnes Cu %

Co %

Zn %

2 2.09 850,612 2.58 0.07 0.77 3 2.40 22,776,337 2.09 0.10 0.41

Indicated

Sub-total 2.39 23,626,949 2.11 0.09 0.42

1 2.56 15,205,518 2.21 0.12 0.67 2 1.97 396,655 2.84 0.07 0.85 3 2.09 5,767,307 2.32 0.05 0.42

Inferred

Sub-total 2.42 21,369,480 2.25 0.10 0.61 As a result of his review, Mehner postulated that higher grade zones exist within the areas categorized as indicated and inferred resource. One such area is within Manto 3 in the Providencia-Purgatorio area where, by using a 2%Cu cut-off, a core of 6.9 M tonnes averaging 2.90% Cu, 0.07% Co and 0.37% Zn occurs within a larger indicated resource block. Similarly, within the inferred resources in Manto1, there is a high grade “core” of 7.6M tonnes grading 2.73% Cu, 0.12% Co and 0.58% Zn. 19.6 Exploration Potential A significant aspect of Mehner’s 2003 remit was to identify areas with significant exploration potential. Mehner concluded that with further exploration and drilling within the Boléo sub-basin, the ten most significant targets had the spatial potential to add between 4–6 million tonnes of inferred resource at grades similar to the underground resources defined by his review of Rodriguez’s earlier work. The areas defined as of prime interest are Texcoco, Dos de Abril, Providencia-Purgatorio, Rancheria, and San Luciano. Outside the Boléo sub-basin, the Montada SW basin is believed to have significant resource potential. (See Figure 19.1) This assessment was based on a detailed study of areas currently outside the revised Rodriguez resource estimate and is described and justified in greater detail in Mehner’s 2003 report.



Figure 19.1 Boléo District – Composite plan showing underground resource blocks as

determined by Mehner, major faults, drill hole locations, mined areas, and areas considered to have exploration potential.

The as yet unexplored and untested Montado SW Basin is also rated as having good potential for significant additional underground resources. The Montado SW Basin is a separate sub-basin that lies inland i.e. southwest, of the Boléo sub-basin and is separated from it by a basement high comprising Comondú volcanics whose surface expression is the volcanic hills known as Cerro Jaunita and Cerro del Sombrero Montado. Suppositions about the geology and structure of this sub-basin are to some extent supported by a Transient Electromagnetic Geophysical Survey (TEM survey) carried out by Canmex Minerals Corp. (“Canmex”) in 1996-1997. Profiles generated by the TEM survey identify 3 layers of differing resistivity. The uppermost layer is of highly resistivity, thins to the northwest and is postulated to be Gloria and post- Boléo formation sediments. The next layer in sequence is of low resistivity and between 100m – 190m thick and could represent the Boléo sediments while the basal layer shows high resistivity and may represent the Comondú basement. Although untested by drilling, Wilson and Rocha (1955) postulated the basin could be in the order of 2km in a northwest – southeast direction and between 1.1 and 1.4km in a northeast – southwest direction. Albinson (2003) hypothesizes that the basin could be significantly larger and, potentially, as large as 3km by 5km.



On-going exploration diamond drilling has returned a number of apparently high grade mineralized intersections in Manto 4 which suggest the existence of as yet un-quantified mineral potential. Further assessment will be required before this potential can be estimated with any confidence.



20.0 OTHER RELEVANT DATA AND INFORMATION 20.1 Conceptual Mining Methods Until recently the primary focus of exploration has been on developing resources and as a result an extensive drill hole, geological, and assay database has been developed over time. Models developed from this database have been perfectly adequate for resource estimation for an exploration stage project but have tended to be of limited value for mine design and planning purposes. To overcome this shortfall and provide an improved tool for exploring Boléo’s mining potential, H&S were commissioned in September 2004 to prepare a new, preliminary, digital 3-dimensional block model together with dip and fault models. These were then used by AMDAD to carry out a scoping level mining study. 20.1.1 Open Cut Mining Using the H&S 1m by 50m x 100m block model, AMDAD performed Whittle 4X optimizations with the following cost, price, recovery, and other assumptions. Only copper and cobalt values were considered:

• Metal prices were copper US$0.95/lb, cobalt US$12.00/lb; • Mining costs of US$1.10/tonne based on a North American and other Mexican mining

projects on which AMDAD is working or has recently worked; • Process costs estimated by Bateman of US$7.96/ROM tonne; • Fixed recoveries of 88% for copper and 80% for cobalt; • 5% ore loss allowance, 5% dilution allowance; and • Average pit slopes of 45º adopted from a 1996 study by Golder Associates.

Typically, Whittle produces 2 sets of results for the optimum pit shell; a “worst” and a “best” case. The “worst” case assumes the pit is theoretically mined without any staging, from the ultimate pit crest with initially high strip ratios that reduce over the mine life. The “best” case assumes the final pit is reached by mining a series of nested shells with the first and smallest shell mined in the shallowest and highest grade material with subsequent shells becoming progressively bigger and with the strip ratio also progressively increasing until the optimum pit is reached. The “best” case, in effect, defers costs and hence results in the maximization of NPV. However, neither case accurately reflects the way in which the pit may ultimately be mined and for a pit, such as proposed for Boléo, the actual optimal pit will be between the “best” and the “worst” cases. Although this conceptual exercise, by necessity, used some broad assumptions, notably those relating to recovery, the results provide a useful and valid tool for assessing open pit potential. The results of AMDAD’s Whittle 4X optimization runs are summarized in the following Table 20.1.



Table 20.1 Whittle 4X Optimization Results – Conceptual Open Pit

Whittle Scenario “Best” Case “Worst” Case Probable Case

Tonnes (millions) 113.8 44.9 78.9 Grade % Cu 0.96 0.91 0.99 % Co 0.08 0.09 0.08

Avg. strip ratio 1 10.06 : 1 4.98 : 1 8.16 : 1 1 Average life of mine strip ratio AMDAD’s preliminary Whittle optimization demonstrates that the Boléo resource could support a large scale but low grade open cut mining operation that is broadly in line with the open cut concept proposed by FDW in 1997. However, by superimposing AMDAD’s Whittle pit shell outlines onto a plan representing the distribution of copper grade (either as an equivalence or copper only) it can be seen that there are areas within the larger pit shells that could be mined as discrete high grade open pits. Refer to Figure 20.1 below. As described in Section 20.1.2 below, AMDAD developed the concept further by assessing areas that would be potentially amenable to underground exploitation using continuous miner techniques. Particular attention was given to minimizing underground access development by accessing underground areas from within open pits. Thus, although more work is required, AMDAD’s preliminary conceptual study illustrates the potential for initiating mining with a number of relatively small high grade open pits followed by or in conjunction with underground continuous miner operations with the possibility of being followed later by a larger scale but lower grade open cut operation.



Figure 20.1 Boléo - Composite plan showing location of preliminary Whittle-generated

open pits superimposed on copper equivalent grade distribution. Based on H&S updated Block Model of October 2004

20.1.2 Underground Mining Early underground mining at Boléo was entirely manual and driven by the need to supply high grade feed to the local smelter. To a large extent manual mining methods were forced on the old timers because they mined only the narrow, very high grade portion (about 1.0m) of the manto which precluded the use of mechanized mining methods. In their 1997 study, Curator recognized the potential for using underground (shortwall) coal mining methods at Boléo but instead elected to focus on a totally open pit method of exploitation. The concept of using underground coal mining methods was re-activated by Mintec in 2003 when Parkes was commissioned to assess the potential for underground mining on a scale large enough to be economic. After having obtained information on ground conditions and having visited the property where he examined the accessible parts of the old underground workings, Parkes proposed a mechanized room and pillar mining method, similar to that used in some South African and Australian coal mines. He also recommended that an underground mining trial be conducted as part of a future feasibility study to collect data and to test the practical application of the proposed method in Boléo conditions.

Figure 20.1



The underground mining concepts proposed by Parkes were further developed in October and November 2004 when AMDAD used the H&S fault and dip models to assess the potential of Mantos 1 and 3 to be exploited by high productivity, mechanized mining methods. A report in 1994 by Coeur Exploration Inc., a subsidiary of Coeur d’Alene Mines Corporation, described ground support requirements as determined during a mining test carried out in the old San Guillermo mine. Although the results should not be ignored, it is felt that the trial does not represent a reliable basis for designing a modern underground mining operation since the method of excavation was largely manual and there were significant limitations with some of the equipment used. However, a preliminary rock strength and cutting analysis in 2002 by Voest Alpine Bergtechnik (manufacturer of continuous miners) is thought to be more useful. From physical testing, Voest Alpine determined the ore zone was weak enough to be readily cut by a continuous miner yet strong enough to stand with minimal support. This allowed AMDAD to deduce that, in principle, mechanized bord and pillar methods using continuous miners were applicable. However, AMDAD was concerned about the extent to which variable dip and the presence of numerous small throw faults (1-3m throws) between the larger, regional fault structures would complicate the operation. Using the H&S dip and fault models and the practical, operating expertise with continuous miners of an experienced coal mining engineer, AMDAD assessed areas that might be amenable to this type of mining and developed a conceptual mining layout based on the H&S derived ore-body geometry. AMDAD proposed a mining method using multiple headings advancing along the strike of the manto and approximately parallel to the major regional faults. Panel entries would be driven off the main headings at acute angles and advanced to the extremities of the mining block. A series of parallel production drives would then be driven along strike from the panel entry drive. These production drives would be wide enough to not require support (or minimal support) and would be separated by an unrecoverable, in situ web or pillar just wide enough to provide short term support while the next production drive is being developed. Eventually the webs would be expected to collapse and relieve stress but this would not be problematic as mining would have advanced and, unlike in coal mines, there would be no gas to complicate ventilation controls. In plan the layout of drives and panel entries would appear as an irregular herring bone pattern with the panel entries (which connect the production headings) being driven at an angle across the dip of the manto to reduce the apparent dip in heading faces. By mining the panel entries on an “apparent” dip, a single mining method and suite of equipment could be used to mine areas of variable dip, simply by varying the direction of the panel entry relative to dip to keep apparent dip angles within practical operating limits. Using the H&S 3-D block model (with block dimensions of 50m in the E-W direction, 100m N-S and 0.2m high) AMDAD laid out a series of mining panels for a mining height range of 1.8m to 4.25m and for areas where the dip of the footwall or floor of Manto 3 was less than 20%. The mining height range was based on known equipment configuration and sizes and the assumed maximum workable dip was based on performance of similar equipment elsewhere in coal mines. Where ore grade height was less than the 1.8m minimum mining height, blocks were made up to 1.8m by adding “dilution” to bring the block to the minimum 1.8m mining height.



Figure 20.2 Photograph of a Road Header developing an entry from the highwall of an open cut coal mine. This is similar to the concept proposed whereby access to Mantos would be developed from the floor of an open pit

Figure 20.3 Boléo - Composite plan showing areas assessed as potentially exploitable by

underground continuous mining methods, superimposed on copper equivalent grade distribution. Old underground workings are also shown. Based on H&S updated block model of October 2004.

20.1.3 Production Rate and Scale of Operations Production rate and scale of operations are a function of many factors including mining method, mine access and operating space considerations, equipment size limitations, possible process equipment size/scale limitations, capital cost, and financial risk considerations. At Boléo the main

Figure 20.3



production rate driver is mill head grade which in turn dictates process plant scale and capital and operating costs. Open Pit Mining Although the possibility of exploiting Boléo by underground methods was recognized, FDW prepared their Study on the basis of an open pit mine producing 11,500 tonnes/day (4.2 million tonnes/year) of SAG mill feed with an unusually high average life of mine stripping ratio of 18:1. Over an 18 year mine life, an estimated 1,334 million tonnes of total material, including pre-strip, would be moved which is equivalent to an average ore and waste total mining rate of 205,000 tonnes per day. Subsequent work to improve project economics was aimed at identifying areas of higher grade resource where smaller, lower stripping ratio open pits could be developed. Because a combined open pit and underground mining concept appeared feasible, the focus of project advancement shifted to development of a better understanding of what might be realistically achievable underground production rates. The achievable underground mining rate and the CCD train capacity were thought likely to be the overall project production rate drivers since, within broad limits, open pit production could be ramped up or down to a far greater degree than for underground mining. Underground Mining With this possibility in mind, AMDAD was commissioned in October 2004 to carry out a scoping level underground mining study to be based on the new, preliminary grade and geological block models developed in September 2004 by H&S. (AMDAD initially assessed the potential for open pit and underground mining separately and then later developed the combined mining concept described in Section 20.1.4 below). The intent of the underground study was to further develop the concept of using continuous miners in a form of mechanized room and pillar or bord and pillar mining method and to determine what parts of the deposit might be amenable to this method and what approximate level of mine output might reasonably be expected. An objective was to identify a realistically achievable range of underground production rates. Two types of continuous miners commonly used in the coal industry were considered;

• Continuous miners having a rotating, ranging drum; and • Road headers having a boom mounted rotating cutting head.

Figure 20.4 below depicts a road header at work underground. Ranging drum continuous miners with horizontally mounted drums generally provide high productivity in regular, continuous strata with constant dip but are relatively inflexible and cannot handle the variations in dip and manto thickness envisaged at Boléo. AMDAD therefore proposed the use of smaller, less productive road headers because of their greater flexibility and ability to negotiate variable dips and irregular face shapes that would occur as a result of the many minor faults known to exist. A road header in the 30 tonne class is proposed and would have the required flexibility for Boléo conditions as well as sufficient reactive weight to be able to cut the manto material. In coal, a unit of this size can provide production rates in the order of 240,000 – 400,000 tonnes per unit per year. Assuming a road header can excavate the same volume of manto as coal then the difference in



density (about 20%) would result in production rates in undisturbed manto ranging from 300,000 – 500,000 ROM tonnes per unit per year. At Bateman’s revised base case production rate of 7,500 wet tonnes per day or 2.7 million wet tonnes per year somewhere between 6 and 9 road header units would be required. However, for the type of mining method proposed, mine production rate will be a function of the number of machine working faces/places that can be maintained active at any one time. Based on a preliminary assessment of the geometry and extent of areas identified as amenable to underground mining, it is thought that maintaining 6-8 active working places at any one time would be possible within the constraints of reasonable mine development capital. Development of access mains will be slower and less productive than production headings because of the increased ground support requirement and periodic production interruptions as services and, possibly, the main trunk conveyor are extended. The extent and frequency of minor faulting will also result in delays and reduced cutting efficiency. At this stage it is impossible to reliably estimate road header productivity in Boléo conditions (this is a recommended task of the proposed mining trial) but if a value at the lower end of the assumed productivity range is used, say, 350,000 ROM (wet) tonnes per unit per year, and it is assumed 6-8 active working places can be maintained at all times, an underground mining production rate would be in the range 2.1- 2.8 million wet tonnes per year (5,850-7,800 wet tonnes/day). This production rate range applies to mining in undisturbed ground, production rates in previously mined and backfilled areas may be expected to be less where old mine timbers and tramp iron are encountered. If, as a result of the proposed mining trial, assessed underground production rates prove to be significantly less than assumed above, an option might be to supplement underground ore production with feed, albeit probably at lower grade, from open pits. Test mining is proposed to provide more reliable production data for use at the next DFS stage of project development.



Figure 20.4 Photograph of an AM 85 Road Header machine operating in a coal mine. The

operating environment at Boléo is expected to be similar to that found in many coal mines except that the dust and gas problems associated with coal mining will not be an issue at Boléo.



20.1.4 Preliminary Cost Estimates Open Pit To reduce initial equipment capital costs, the need to purchase an open pit mining fleet could be avoided by contract mining or leasing equipment in the case of an owner operated mine. It is believed that the scale and nature of the envisaged open pit operation and the probable absence of any need to drill and blast would make contract mining attractive to a number of suitably qualified Mexican earthmoving and mining contractors with the option to revert to owner mining at some later stage. As a preliminary estimate it is anticipated that both owner and contract mining costs would be in the order of US$0.75-0.90 per tonne, exclusive of owner supervision and overland haulage to the process plant. (This estimate is lower than that used for Whittle optimization primarily because of the perceived need for only limited drilling and blasting.) Underground A 30 tonne-class road header together with two shuttle cars to haul ore to a main heading or trunk conveyor would cost in the order of US$2.2-2.5 million. For an operation using 8 road headers, the cost of the road headers and their ancillary equipment including shuttle cars, conveyors, drive heads, ventilation, electrical switch gear, and support equipment would cost in the order of US$18 – 20 million. Operating cost estimates are dependent on a variety of factors such as cost of ground engaging tools, labor productivity and above all, overall mining productivity, all of which are currently unknown for Boléo. However, high productivity road header and shuttle car operating costs in North America vary from US$3.00 – 5.00 per tonne while continuous miner operations in more complex ground in Australia are as much as US$13.10 per tonne. For preliminary evaluation purposes AMDAD has suggested an indicative and possibly conservative mine operating cost range of US$8.00-10.00 per tonne. 20.2 Pilot Metallurgical Testwork and Process Flowsheet Development Testwork by Bateman and others, principally Lakefield, has been successful in developing a process flowsheet that is simpler and potentially more economically viable than the flowsheet developed by and presented in the FDW Study. Recently completed testwork on the potentially problematic solid-liquid separation process has demonstrated the successful application of conventional CCD separation using high rate thickeners. This in itself represents a significant reduction in process risk; however, further testwork is now required to confirm earlier results, to further develop the process flowsheet and to improve confidence in the overall process. A program of further “proof of concept” testwork was undertaken in mid-November 2004, the results of which will determine whether further, longer duration pilot scale testing will be required. 20.3 Tailings Dam Location Option Study Consultant hydrologist and tailings dam specialist, Raul Orozco, has visited the site and conducted an options study of several potential tailings dam locations. Although the area is extremely arid it is subject to periodic heavy rainfall associated with cyclonic meteorological conditions in the Gulf. These irregular heavy rainfall events combined with regional seismic activity are phenomena that must be taken into consideration when making tailings dam site selection decisions. The site



selection process is on-going and will require an assessment of potential environmental impacts as well as inputs from the National Commission for Waters. 20.4 Environmental Data Collection & Studies The requirements of the environmental permitting process have been scoped out and the range of specific data gathering activities and field surveys has been identified. Flora and fauna field surveys must be carried out in specific seasons and the first of these is imminent. Because a number of design issues such as plant site, tailings dam location, and open pit footprint are currently still unresolved, the required surveys will be carried out over a larger area than might ultimately be necessary to allow for possible changes or modifications. An environmental permit is required for the proposed diamond drilling program and the underground mining trial. This permit was issued in mid-October which clears the way for these activities to start. Because of their historic significance, the Boléo Mining District and the town of Santa Rosalía are situated within the Vizcaíno Biosphere Reserve with the principal objective of affording protection to historic structures in Santa Rosalía. With commendable foresight, SEMARNAP recognized that although extensively mined in the past, future mining potential remained and the Boléo District outside Santa Rosalía and including all the area over which MMB has an interest, was classified for mining use. Thus, providing the appropriate environmental permitting process is followed, no environmental restrictions arising from the Vizcaíno Biosphere Reserve are anticipated.



21.0 INTERPRETATION & CONCLUSIONS 21.1 Exploration Apart from a long history of mining, the Boléo District mineral deposits have been subject to a significant amount of exploration and study since 1993. More than 900 exploration holes have been drilled, logged, and sampled and a further 39 holes have been drilled for geotechnical purposes. The area has been subject of two pre-feasibility studies (the first by FDW in 1997 and the second by Mintec in 2002) and several scoping or lesser level studies. Unlike a “greenfield” project, past mining operations have provided extensive and detailed information on the geology, structure, and extent of the mantos. Records from those old mining operations have provided an excellent source of detailed grade and mineralogical data while mining method descriptions and direct observations in a limited number of old, accessible underground workings has provided information on the comportment of the mantos and overlying strata that would otherwise have to be deduced from drill core or by other indirect methods. Although none of the resource estimates discussed in this technical report have been audited or validated by the author for compliance with the requirements of NI 43-101, they appear to have been prepared diligently and with appropriate care. Mehner’s revision of Rodriguez’s underground resource estimate in 2003 is considered the most thorough and painstaking. Until recently the primary focus of exploration activity has been the development and definition of geological resources. The two-dimensional, polygonal method of resource estimation used to date has demonstrated that, with a reasonable level of confidence, there exists a significant volume of mineralization which demonstrates continuity and consistency. Given the availability of abundant historical data, this resource estimation methodology has also been an adequate and useful tool in defining additional resource potential and in designing and directing further exploration. It does not, however, adequately take into consideration the distribution of copper, cobalt, zinc, and manganese; the extent of occurrence of acid consuming material (that will have a negative impact on mineral processing costs); the extensive and complex faulting known to exist from field mapping, drilling, and earlier mining records; and the variability of manto dips across the deposit. Thus, a more powerful design and planning tool is now required to shift the focus from purely exploration to a reliable definition of the economics of exploiting the resources defined thus far. 21.2 Preliminary Mining Concept The following broad concept for mining the Boléo deposit is based on the author’s site visit, the information reviewed for this report and the results of AMDAD’s recent conceptual open pit and underground mining studies. It will be the task of the DFS (which will include the proposed mining trial) to further test and develop a suitable mining method and cost estimates. (Note that AMDAD’s preliminary mining concept study is the subject of a NI 43-101 Technical Report that is due to be released in mid-2005.) Using Whittle pit optimizing software and the H&S 3-dimensional block model, AMDAD has identified a number of relatively small open cuts with high copper equivalent grades in Mantos 1 and 3 which are also in close proximity to high grade areas which are exploitable by underground



methods. These open cuts will provide points of safe, stabilized access from where portals can be constructed and access galleries can be driven directly into the mantos without the need for costly development of access declines in waste. Initially mill feed would be provided exclusively from a number of open cuts before underground production gets under way. Underground mine production rates would gradually increase with a corresponding decrease in open cut production; however, a number of high grade open cut areas would remain in production or be available to be put into production at short notice to supplement mill feed during periods when underground production may be reduced as a result of mine development activity or equipment failure. The objective would be to reduce investment risk by reducing the dependence of the mill on feed from underground sources during the period of debt repayment by maintaining both open cut and underground production capacity. It is also envisaged that underground access development would not be restricted to the base of open cuts. Underground access could also be developed directly into Mantos 1 and/or 3 where they daylight or crop out in the sides of arroyos at points that are not too high to be inaccessible from the floor of those gullies. Based on a strength analysis by equipment manufacturer Voest Alpine (that determined manto material would be cut easily by a continuous miner) and from field observations, it is reasonable to assume that both waste and mineralized mantos are sufficiently soft that they could be excavated using a conventional diesel hydraulic excavator with minimal drilling and blasting. It is also surmised that overburden could be readily dozer ripped. Hence, limited drilling and blasting is anticipated except in cemented conglomerate and in areas where dense tuffaceous sandstone overlies the mineralized mantos. Diesel hydraulic back-hoe configured excavators would provide a high degree of selectivity to enable the mantos to be excavated cleanly and with a minimum of dilution. Diesel haul trucks would be used to haul material from the open cuts directly to the processing plant or to some intermediate stockpile for transshipment and haulage by another means to the plant. More study will be required to optimize overland haulage to the process plant. However, it is recognized that ore quality will be variable in terms of copper and cobalt grade distribution, zinc and manganese content, and acid consuming capacity and stockpiling and blending arrangements will be required for optimizing process plant performance. In some areas an alternative to excavators and haul trucks for overburden removal would be to use tracked dozers to push overburden off the underlying manto and into adjacent gullies or topographic depressions in much the same way as in contour strip mining of coal (e.g. the Appalachians.) Back-hoe excavators would be used for ore lifting with conventional truck haulage. Underground operations would use road header type continuous miners in conjunction with electrically powered (via trailing cable) shuttle cars operating to a main trunk extensible conveyor. Alternatively, conventional underground diesel powered LHDs in conjunction with either a trunk conveyor or underground diesel haul trucks could be used. Because the road header will produce relatively fine grained cuttings there will be no requirement for primary crushing before belt conveying.



In some places, faulting or erosion may result in areas that are amenable to underground mining and accessible from the highwall of an open cut but are too small to justify development of a regular continuous miner operation. In these cases a form of punch mining from the highwall may be possible. Punch mining may also be applicable in areas of limited ore extent that daylight in arroyos. Because of the soft and possibly swelling nature of the rock mass and the effect of faulting, ground support may be a critical cost item. Selection of appropriate ground support when mining through old backfilled stopes will be particularly important. Prior to more detailed geotechnical studies, it is thought that rock bolts in conjunction with steel strapping or wire meshing and possibly shotcrete would provide suitable support, would be quick and safe to install and hence cost effective. The use of passive steel or timber set supports would preferably be avoided as they are labor intensive to install, and possibly less effective than active methods of support. 21.3 Underground Mining Trial A key element of the DFS will be to define, quantify and provide mitigation for the technical and investment risks associated with exploiting this deposit and central to this will be the need to present a convincing and well supported case for productivity and cost assumptions used in the DFS for the mining operation. A mining trial along the lines of that originally proposed by Parkes (see section 18.1.2 above), will be an excellent means of testing the proposed mining method and gathering the site specific operating data necessary to develop reliable mine design, realistic production schedules and cost estimates. Parkes’ recommendation was for a 4-6 month trial to be included as part of a feasibility study at an estimated cost of between US$1.5 and 1.8 million. While the concept of a mining trial remains valid and fully supported, MMB proposes a 4-6 week trial using a 30 tonne-class road header. The road header trial would be preceded by the development of an access portal and excavation of up to 100m of main heading using the type of mining and excavation methods commonly used in Mexican underground coal mines. Initial access development would commence before the end of 2004 with the main road header trial taking place during 2005. The principal objectives of this proof-of-concept mining trial will include the following:

• To demonstrate and prove the use of a continuous miner in Boléo specific conditions; • To test the selective mining capability of a continuous miner under Boléo conditions; and • To establish realistic production and cost parameters for the DFS.

A variety of different continuous miners have been assessed. Based on site observations and current understanding of likely ground conditions and extent of faulting, a 30 tonne class of road header (rather than a rotating drum continuous miner) has been identified as most suitable because of its greater flexibility in handling irregular face shapes, minor faulting and the variable dips expected at Boléo. The trial will determine this machine’s suitability for future production mining.

Other suggested objectives include:



• definition of production capability parameters (productivity, ground engaging tool wear

rates, adequacy of power and machine reactive force, sources of down-time, etc.) for a DFS input;

• to test up- and down-dip mining capability; • to test the ability and possible constraints of mining through previously mined and backfilled

areas; • to determine geotechnical design parameters for the DFS; • to determine ground support requirements and to test and demonstrate support options; and • to test hanging- and foot-wall variability with respect to mining.

In addition, advantage would be taken of the resultant openings to carry out:

• detailed geological mapping, and face and sidewall sampling to better define short range grade variability;

• to collect large samples for geotechnical testing along with samples for crushing, grinding, and work index determinations;

• to measure closure rates in swelling ground; and • to observe pillar comportment and, possibly, to carry out destructive pillar testing to

determine optimum pillar dimensions. Underground mining is often regarded by potential investors as having greater risk and uncertainty than open pit mining, despite being less environmentally intrusive. A proof-of-concept mining trial such as the one recommended would provide a rare opportunity to demonstrate the viability of a proposed mining method before major capital commitment and at the same time provide site specific operating data which would otherwise have to be estimated, factored or projected from other operations. In preparation for the proposed mining trial two access portals and about 100m of initial access gallery have been developed by a local Mexican contractor. 21.4 Mineral Processing Since their involvement in the Boléo project, Bateman process design engineers have significantly simplified the process flow sheet originally proposed by the FDW Study. From earlier metallurgical testwork it was known that Boléo ores were amenable to an acid leach process for extracting the valuable metals into solution. However, when ground, the high clay content of the ore produced viscous slurries from which it originally proved difficult to separate leached solids and the leachate. Metal recoveries possible from the FDW process flowsheet were also unsatisfactory. Recently completed testwork (October 2004) at Lakefield successfully demonstrated the use of a CCD method for solid-liquid separation. In addition, testing of an extraction system developed by CSIRO also proved successful for the recovery of zinc and cobalt into solution from which zinc sulfate can be precipitated and cobalt cathode can be recovered by electrowinning. This most recent Lakefield testwork resulted in a significant improvement in metal



recoveries compared with the earlier FDW work. Moreover, to a large extent, the success of this recent testwork has removed an element of technical risk from the flowsheet and further pilot testing will now be designed to confirm design parameters and add confidence to the process flowsheet selected. 21.5 Conclusion The broad objective of pre-feasibility study and related investigative work carried out at Boléo since 1993 has been the development of an economic mining and mineral processing operation. To a large extent, each successive phase of work has been carried out as a progression and development of previous work. Over time, this has resulted in some changes to the underlying study concepts; for example, significant modification and simplification of the process flowsheet and a change in emphasis from large scale open pit mining to smaller scale underground mining using mechanized methods typical of coal mines. Notwithstanding that the current resource estimate is not yet sufficiently well defined to support a major investment decision, it is nevertheless sufficiently well defined to suggest that with additional work, a resource of sufficient grade, structural integrity and continuity to support a mining operation can be defined. Recent digital block modeling of the resource and preliminary conceptual mining studies based on that block model have supported this assertion with estimated economic cut-off grades for both underground and open cut mining that are well within the average estimated grade of the resource. Although only limited and, at this stage, preliminary environmental impact assessment work has been carried out, and much detailed investigation remains to be completed for full permitting, the author is not aware of any environmental issues that cannot be resolved with careful evaluation and appropriate engineering or that are likely to prevent permitting. From a review of the work to date it is concluded that the Boléo Project has reached the stage where further development is justified and that the next logical step is to carry out the proposed underground mining trial before continuing with other activities relating to the preparation and completion of a full DFS to a standard that will meet the requirements of construction capital funding. This conclusion is based on and justified by the following: Multiple episodes of exploration work including mapping, trenching and the logging and analysis of samples from some 900 drill holes combined with the evidence and documentation of historical mining activity together conclusively demonstrate the existence of extensive mineralized mantos which exhibit continuity over large areas. As a result of geological investigation, and again, supported by evidence from mining, a sound understanding has been developed of the controls on mineralization. Over time, a number of preliminary resource estimates have been developed which, although not yet to a standard that could be used to support major investment decisions, have nevertheless provided a consistent indication of the location, scale, and quality of a resource that has potential to be mined either by open cut or underground methods.



A conceptual level mine plan, based on the extensive existing drill hole database, has been developed that indicates the potential viability of exploiting the resource by both open cut and underground methods. Preliminary analysis suggests that the size and quality of the resource is sufficient to support a mining operation in the order of 10-15 years at a production rate that is both practically achievable (given the nature of the deposit and the characteristics of the location) and sufficient to provide a return on investment. Metallurgical bench scale testing of drill hole and trench samples has provided indicative process and cost parameters. In addition, pilot scale testwork has led to improvements in the process flowsheet and has resulted in a reduction in the level of associated technical risk.

Although not investigated in detail, there do not appear to be any environmental issues that cannot be resolved to appropriate standards. Being located in an area where there is a substantial, but under-employed, population it is believed a new, environmentally responsible development such as contemplated would be generally welcomed by the local population and by both Provincial and Federal Governments to the extent that development incentives may be available. A substantial amount of exploration and project evaluation work has been completed over the course of several years by a number of owners and interested parties. During this time, project definition has improved and a number of key technical risks have been reduced. Having visited the project site and reviewed much of the work undertaken since 1993, the Boléo project is assessed as having sufficient potential to develop a mining and mineral processing operation such that the preparation of a DFS to confirm the project’s technical, environmental, and economic viability is now recommended. Essential components of the DFS are the proposed underground mining trial and metallurgical testwork though the study should also include all the other elements listed in Table 22.1 below.



22.0 RECOMMENDED COURSE OF ACTION It is recommended to proceed with the proposed underground mining trial at an estimated cost of US$1.5 million. Once the underground mining concept has been tested and the necessary planning parameters determined, an interim economic assessment is recommended to confirm that the project remains potentially economically viable before proceeding with staged project development that would include completion of a bankable DFS. The recommended DFS would be to a level of engineering definition that would provide capital and operating cost estimates to an order of accuracy of + 15% - 10% in aggregate and to a standard that would meet the requirements of both the owners and financial institutions to support major capital investment decisions. In addition to providing planning and design of the mine, process plant, and infrastructure, the DFS would also identify operational, environmental, marketing, and financial risks and propose methods for their management or mitigation. An essential part of the DFS will be the development of a project development and construction schedule. Environmental permitting requirements and timeline will also be determined. Although details of the feasibility study program and schedule have still to be finalized, the principal activities would be the following:

• Geology and resource estimation to NI 43-101 compliant standard; • Mine design and engineering based on the outcomes of the mining trial; • Development of a Reserve Statement to NI 43-101 compliant standard; • Mine, plant and civil infrastructure geotechnical assessment and design; • Mine waste characterization; • Geochemical assessment of ore and waste rock; • Metallurgical process flowsheet design; • Process plant and related infrastructure engineering and design; • Infrastructural requirements including power and water supply and bulk reagent importation

arrangements; • Tailings disposal engineering and design, including geotechnical, environmental, and

seismic stability considerations; • Whole-of-site hydrological and hydro-geological assessments with particular regard to

environmental considerations and storm event run-off management; • Environmental baseline studies and impact assessment; • Environmental permitting requirements and timeline determination; • Marketing studies; • Project risk assessment and risk mitigation/management; • Cost estimation; and • Construction schedule and commissioning plan and schedule.



In addition to the underground mining trial, the following field activities are seen as an integral part of the proposed DFS:

• Additional resource drilling; • Collection of metallurgical samples for pilot scale metallurgical testwork; • Soils and geotechnical investigation and field work including trenching and drilling of the

proposed plant and tailings dam sites; and • On-going environmental data collection.

Detailed estimates have yet to be developed, however, an indicative cost estimate for the proposed staged development of the definitive feasibility study is shown in Table 22.1 below.

Table 22.1 Recommended DFS Activities, Duration and Cost Estimates.

Activity Duration (months)

Approx. Start Date

Estimated Cost

(US$M)

Estimated Cost to Complete (US$M)

Bateman – Principal Contractor Process design & infrastructure, cost estimates and overall supervision

14 August 2004

2.080 1.355

Pilot Plant Test Work – Phase 1 3 October 2004

1.200 0

Pilot Plant Test Work – Phase 2 4 Sept 2005 2.000 2.000 Hydrology & Hydrogeology 4 July 2005 0.180 0.180 Geotechnical investigation 4 June 2005 0.120 0.120 Tailings design 3 June 2005 0.060 0.060 Infrastructure 0.180 0.180 Drilling Montado Phase 1 3 Dec 2004 0.290 0 In-fill Drilling 4 June 2005 2.300 2.300 Metallurgical sample drilling 8 June 2005 0.040 0.040 Assays 8 July 2005 0.060 0.060 Resources Resource consultant H&S 5 Nov 2004 0.070 0.020 Mining Mining consultant AMDAD 5 Nov 2004 0.112 0.112 Mine test – Phase 1 3 Nov 2004 0.175 0 Mine Test – Phase 2 2 July 2005 1.500 1.500 Environmental Field work & reports for EIS 15 Sept 2004 0.350 0.350



Activity Duration (months)

Approx. Start Date

Estimated Cost

(US$M)

Estimated Cost to Complete (US$M)

Marketing Studies External consultants 15 Feb 2005 0.025 0.025 Owner’s Costs Consultants & miscellaneous supervision 17 May 2004 0.250 0.250 TOTAL 10.992 8.552



23. REFERENCES Albinson, T., 2003. Underground Ore Reserve Calculation, Boléo District, Baja California Sur, Mexico. Unpublished company report by Minera y Metalurgica del Boléo, S.A. de C.V., Mexico, July, 2003 Australian Mine Design and Development Pty Ltd., 2004. Mining Methods for El Boléo Copper Cobalt Project. Unpublished communication for Baja Mining Corp, Vancouver, Canada, September 2004. Bateman Engineering Pty Ltd., 2002 Pre-Feasibility Study Report – BAP104 - Boléo Project. Report for Mintec International Corporation of Barbados. 2002. Fluor Daniel Wright Ltd. 1997. Pre-Feasibility Study of the Boléo Project, Santa Rosalía, Mexico. Report for International Curator Resources Ltd. Mexico. 1997. Mehner, D. 2003. Underground Resource Calculation and Review, Boléo District. Minera y Metalurgica del Boléo SA de CV. Mexico and Mintec International Corp., Barbados. November 2003. Wilson, I.F., and Rocha, V.S., 1955. Geology and Mineral Deposits of the Boléo Copper District Baja California, Mexico: U.S. Geological Survey Professional Paper 273.



24.0 DATE OF REPORT The date of this report is 15th June, 2005.



25.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT PROPERTIES AND PRODUCTION PROPERTIES

The Boléo Project is neither a Development Property, as defined in National Instrument 43-101, nor is it a Production Property. Therefore, there is no further information relevant to this section.



26.0 ILLUSTRATIONS Tables: Table 6.1 Boléo Property – Exploitation Concession Taxes, as at October 2004 Table 6.2 Boléo Property – Exploration Concession Taxes, as at November 2004 Table 6.3 Boléo Property – Surface Property Taxes Table 8.1 Historical Mining Production from the Boléo District, 1872 – 1985 Table 14.4 Density and moisture measurements for mineralized mantos – Curator Pre-

feasibility Study Table 18.1 Comparison of metal recoveries from primary ore – FDW versus Bateman

“Base Cases” Table 19.1 Underground Resource Estimate by Rodriguez (2003) for Mantos 1, 2, and 3

using 1.0% Cu cut-off, no restriction on maximum mining width and no dilution allowance.

Table 19.2 Rodriguez Revised Underground Resources, Mantos 1, 2, and 3. Table 20.1 Whittle 4X Optimization Results – Conceptual Open Pit Table 22.1 Recommended DFS Activities, Duration, and Cost Estimates Figures: Figure 6.1 Boléo – Regional Location Map Figure 6.2 Boléo – District Location Map Figure 6.3 Boléo – Exploration and Exploitation Concessions Map Figure 6.4 Boléo – Surface Ownership Plan Figure 7.1 Typical View of the Topography and Sparse Vegetation of the Boléo District. Figure 9.1 Boléo Regional Geological Setting – Transform faults and spreading centers in the Gulf of California



Figure 9.2 Boléo Formation – Typical Stratigraphic Column Figure 9.3 Boléo – computer generated orthogonal view of Manto 3 footwall with faults

(red) superimposed (not to scale) Figure 9.4 Boléo – computer generated typical east-west cross section (looking north)

showing Mantos and major Manto footwall surfaces. Figure 9.5 Geological cross sections 3400N and 1300N looking north showing

mineralized horizons, faults, and location of exploration drill holes. Figure 11.1 Mineralization and typical distribution of copper, cobalt, and zinc grades in

Mantos 3 and 3A. Figure 18.2 Boléo – Bateman’s Simplified Process Flowsheet Figure 19.1 Boléo District – Composite plan showing underground resource blocks as

determined by Mehner, major faults, drill hole locations, mined areas, and areas considered to have exploration potential.

Figure 20.1 Boléo Composite plan showing location of preliminary Whittle-generated

high grade open pits superimposed on copper equivalent grade distribution. based on H&S updated Block Model of October 2004

Figure 20.2 Photograph of a Road Header developing an entry from the highwall of a coal

mine. This is similar to the concept proposed whereby access to Mantos would be developed from the floor of an open pit

Figure 20.3 Boléo - Composite plan showing areas assessed as potentially exploitable by

underground continuous mining methods, superimposed on copper equivalent grade distribution. Old underground workings are also shown. Based on H&S updated block model of October 2004.

Figure 20.4 Photograph of an AM 85 Road Header machine operating in a coal mine.

Operating environment at Boléo is expected to be similar to that found in many coal mines except that the dust and gas problems associated with coal mining will not be an issue at Boléo.

Documents

Hunter Mine Engineering Services Pty Ltd - Infomine Inc