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Competent Persons Report for Toromocho Copper Project

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January 2017 CHINALCO MINING CORPORATION INTERNATIONAL Competent Persons Report for Toromocho Copper Project Submitted to: Chinalco Mining Corporation International Report Number. 1660234-001-R-Rev2b Distribution: REPORT 1 electronic copy – Chinalco 1 electronic copy – Golder Associates Pty Ltd – II-2 – TOROMOCHO COMPETENT PERSONS REPORT Executive Summary Golder Associates (“Golder”) was commissioned by Chinalco Mining Corporation International (Chinalco) to prepare a Competent Persons Report to assist Chinalco in its Independent technical review of the principal assets of Minera Chinalco Perú (MCP). The project is located in Peruvian Andes approximately 140 km east of Lima. In August 2007 Chinalco acquired all the shares of Peru Copper Inc., owner of Minera Peru Copper, which is now Minera Chinalco Peru S.A, and on 5 May of the following year (2008) signed the transfer of concessions and mining assets contract of the Toromocho Copper Project. The information, observations, and conclusions in this Competent Persons Report (CPR) that relate to Mineral Resource and Ore Reserve estimation and classification are provided in accordance with, and conform to the conventions of, the Australasian Code for Reporting of Exploration results, Mineral Resources and Ore Reserves (JORC Code, 2012 Edition). Dr Sia Khosrowshai reviewed the Mineral Resources for the Toromocho Copper Project. Mr Glenn Turnbull reviewed the Ore Reserves and applied modifying factors. Both Dr Khosrowshahi and Mr Turnbull are current Members of the Australasian Institute of Mining and Metallurgy (The AusIMM) and are competent persons in their respective fields under the JORC 2012 code. Mr Damian Connelly is a Principal Consulting Engineer with over 28 years’ experience as a Consultant Metallurgist. Mr Connelly is a current Member of the Australasian Institute of Mining and Metallurgy (The AusIMM) and a competent person in his respective field. The Mineral Resource and Ore Reserve estimates used in this report are information as at 31st December 2015. Chinalco has not advised Golder of any material change, or event likely to cause material change, to the Mineral Resource and Ore Reserve estimates. The project commenced ore feed to the Crusher in December 2013 with copper concentrate being produced throughout 2014 and 2015. Tonnage build up within the process plant has been rapid with some 84% of design throughput having been achieved in 2015. The annual production metrics for the process plant for 2014 to 2015 are shown below (Table A). Table A: Toromocho Project production statistics 2014-2016 2014 2015 2016 (Estimate) High Grade Mill Ore (Mt) 19.7 36.1 38.3 Low Grade Mill Ore (Mt) 1.1 0 2.7 Total Mill Ore (Mt) 20.8 36.1 41.0 Head Grade Cu (%) 0.562 0.538 0.604 Head Grade Ag (g/t) 7.31 6.416 5.416 Copper Recovery (%) 60 83.08 79.86 Recovered Metal (Cu Tonnes) 70,263 161,518 197,754 Concentrate Dry Tonnes 297,698 676,449 833,977 Arsenic Grade in conc. (%) No Data 1.047 0.865 Although tonnage build up has been relatively satisfactory, the metallurgical recovery in 2016 has been lower than expected primarily because of issues with talc in the ore feed (Table B). The high Arsenic in concentrate has resulted in high penalty costs for treatment and refining costs. The molybdenum circuit has not been commissioned to date but is understood to be well advanced. During 2016 the process plant has to date not achieved the expected recoveries and has been below expected throughput levels; it is however expected that the two are inter-related. It would appear that the estimated recovery for 2016 might also be optimistic as average recoveries during 2016 for the first five months only equated to 72.96%. The lower throughputs noted by the process plant January 2017 Report No. 1660234-001-R-Rev2b – II-3 – TOROMOCHO COMPETENT PERSONS REPORT staff in terms of SAG mill performance appears to be directly related to the proportion of potassic material in the feed. The potassic ore requires greater comminution effort in the initial phase (drilling and blasting) in order to ensure that the throughput at the SAG mill stage is not compromised. When blasting in the potassic material it is important to consider the overall total cost of operation to ensure that for example lower throughput does not result from a cost reduction in say drilling and blasting. Table B: 2016 Actual performance January to May Production 2016 Jan Feb March April May YTD Tons milled DMT (kt) 2770 2230 2401 2973 3064 13439 Head Grade – Cu % 0.61 0.51 0.58 0.60 0.64 0.59 Cu Recovery in Cu 73.63 77.03 73.08 72.22 70.61 72.96 % concentrate Head Grade – Ag g/t 6.14 6.90 5.98 7.22 7.13 6.70 Ag Recovery in Cu 59.71 69.40 64.97 58.96 55.59 61.03 % concentrate Head Grade – Mo % 0.01 0.01 0.01 0.01 0.01 0.01 Head Grade – Zn % 0.09 0.10 0.11 0.09 0.14 0.11 Head Grade – As % 0.03 0.04 0.03 0.04 0.03 0.03 Copper Concentrate 55 693 40 232 52 658 68 881 72 382 289 847 DMT Produced Grade – Cu % 22.26 21.82 19.43 18.55 19.15 20.03 Grade – Zn % 3.23 4.47 3.65 2.79 3.83 3.53 Grade – As % 0.82 1.20 0.83 0.92 0.65 0.86 Copper content DMT 12 398 8 779 10 231 12 778 13 864 58 049 Of primary concern is the continuing issue with lower than expected recovery of copper. The copper will account for some 80% of the recoverable value from the project over the life of the mine and thus maximising the metallurgical recovery from the copper is vitally important. Ramp-up and commissioning has also coincided with a decline in copper prices that has resulted in significant financial pressure on the project. Total capital cost to date for the project has amounted to some $4B including finance charges. In reviewing the Toromocho Project, Golder believes that the overall project remains technically sound, but has reservations about the ability of the project to deliver a satisfactory return on investment without the Expansion Option case. Taking the Toromocho Project as it stands today with a mill design throughput of some 42.8 Mtpa in all but the most optimistic pricing scenarios fails to meet a satisfactory level of financial return. Whilst the expanded case option, targeting some 62.0 Mtpa appears to be more financially attractive, it would seem unwise to commit to any further expansion currently until a full understanding of the talc recovery issues and future mitigation of arsenic levels in concentrate are better understood. January 2017 Report No. 1660234-001-R-Rev2b – II-4 – TOROMOCHO COMPETENT PERSONS REPORT Table of Contents 1.0 LIMITATIONS ............................................................................................................................................................ 1 2.0 INTRODUCTION........................................................................................................................................................ 1 2.1 Site visit ........................................................................................................................................................ 2 2.2 Conventions.................................................................................................................................................. 2 2.3 History .......................................................................................................................................................... 3 3.0 GEOLOGY AND RESOURCES................................................................................................................................. 6 3.1 Geological setting ......................................................................................................................................... 6 3.2 Mine geology ................................................................................................................................................ 7 3.2.1 Lithology.................................................................................................................................................. 7 3.2.1.1 Tertiary intrusives ................................................................................................................................ 7 3.2.1.2 Hornfels ............................................................................................................................................... 8 3.2.1.3 Skarns ................................................................................................................................................. 8 3.2.2 Structure and mineralisation ................................................................................................................... 9 3.2.3 Alteration................................................................................................................................................. 9 3.2.4 Enrichment and metal zoning................................................................................................................ 11 3.2.5 Summary............................................................................................................................................... 11 3.3 Drilling data................................................................................................................................................. 12 3.3.1 Drilling................................................................................................................................................... 12 3.3.2 Core recovery and core logging ...........................................................................................................
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