Small Report

TAYSAN COPPER GOLD PROJECT

PREFEASIBILITY STUDY FOR A 15 MILLION TONNE PER ANNUM MINE

Prepared By:

Alistair Barton Ass.Dip, F.Dip Geology. FAusIMM, CP (Geol.) Barton Metals Pty Ltd

Stewart Lewis BE (Civil), BE (Mining), RPEQ, M. AusIMM(CP) IMC Mining Group Pty Ltd

Grahame Binks B.Eng. (Hons Met) M.Eng.Sci, AusIMM (CP) AMEC Australia Pty Ltd.

Cameron Wylie MAusIMM, CP Mine Geotech., MIPENZ, CPEng(NZ) RDCL

For

Crazy Horse Resources Inc.

Effective Date:12/06/2012 Document No. CZH-003

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Table of Contents

1 SUMMARY ...... 1 1.1 INTRODUCTION ...... 1 1.2 PROPERTY DESCRIPTION AND LOCATION...... 1 1.3 GEOLOGY, MINERALISATION AND SEISMIC ASSESSMENT ...... 2 1.4 HISTORICAL WORK, EXPLORATION AND DRILLING ...... 3 1.5 EXPLORATION ...... 3 1.6 MINERAL RESOURCE ESTIMATE ...... 4 1.7 METALLURGY ...... 4 1.8 MINERAL RESERVE ESTIMATES ...... 5 1.9 MINING METHODS ...... 6 1.10 RECOVERY METHODS ...... 7 1.11 PROJECT INFRASTRUCTURE ...... 8 1.12 ENVIRONMENTAL AND COMMUNITY CONSIDERATIONS ...... 9 1.13 CAPITAL AND OPERATING COSTS ...... 10 1.14 ECONOMIC ANALYSIS ...... 12 1.15 INTERPRETATION AND CONCLUSIONS ...... 14 1.16 RECOMMENDATIONS ...... 15

2 INTRODUCTION ...... 16 2.1 OVERVIEW ...... 16 2.2 PURPOSE ...... 16 2.3 INFORMATION USED ...... 16 2.4 QUALIFIED PERSONS...... 17

3 RELIANCE ON OTHER EXPERTS ...... 18

4 PROPERTY DESCRIPTION AND LOCATION ...... 21 4.1 OVERVIEW ...... 21 4.2 PROPERTY LOCATION ...... 21 4.3 OWNERSHIP ...... 23 4.3.1 EP-IVA-005 ...... 24 4.3.2 EP-IVA-016 ...... 25 4.3.3 EPA-IVA-108 ...... 25 4.3.4 EPA-IVA-111 ...... 26 4.3.5 EPA IVA-081 ...... 26 4.3.6 AFTAA-IVA-14 ...... 27 4.4 INDIGENOUS PEOPLE ...... 27 4.5 WATER RIGHTS ...... 27 4.6 KEY RESULT AREAS AND TIMELINES ...... 27 4.6.1 Conversion of EP to FTAA...... 28 4.6.2 Water Rights ...... 28 4.6.3 Environmental Impact Assessment and Environmental Compliance Certificate ...... 28 4.6.4 Timber Permit ...... 28

CHZ-003 Page i

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

4.6.5 Land Acquisition ...... 29 4.6.6 Legal Review ...... 29

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ...... 30 5.1 ACCESS ...... 30 5.2 CLIMATE ...... 30 5.3 INFRASTRUCTURE AND PHYSIOGRAPHY...... 31 5.4 LOCAL RESOURCES - CORPORATE SOCIAL RESPONSIBILITY ...... 35

6 HISTORY ...... 36 6.1 DISCOVERY AND OWNERSHIP ...... 36 6.2 PREVIOUS EXPLORATION ...... 37

7 GEOLOGICAL SETTING AND MINERALIZATION ...... 39 7.1 REGIONAL TECTONIC SETTING ...... 39 7.1.1 Luzon Arc ...... 40 7.1.2 Batangas Regional Geology ...... 41 7.2 LOCAL GEOLOGY ...... 43 7.3 STRUCTURE ...... 44 7.4 MINERALIZATION ...... 45 7.5 SEISMIC HAZARD ASSESSMENT – PEAK GROUND ACCELERATION ESTIMATION ...... 47 7.5.1 Introduction ...... 47 7.5.2 Methodology ...... 48 7.5.3 Earthquake Catalogues and Seismicity Map ...... 49 7.5.4 Seismic Sources of Project Area ...... 53 7.5.5 PGA of MCE ...... 55 7.5.6 PGA Corresponding to the 475-Year Return Period ...... 55 7.5.7 Influence of Geology ...... 56 7.5.8 Conclusion and Recommendation ...... 56 7.5.9 Limits of this Report ...... 57

8 DEPOSIT TYPES ...... 58

9 EXPLORATION ...... 60 9.1 CRAZY HORSE RESOURCES – 2010 ...... 60 9.2 CRAZY HORSE RESOURCES – 2011 ...... 60 9.2.1 Geophysical Surveys ...... 60 9.2.2 CZH 2011 Drilling ...... 62

10 DRILLING ...... 63 10.1 PROJECT DRILLING ...... 63 10.2 CZH VALIDATION DRILLING PROGRAMME - 2010 ...... 63 10.3 CZH DRILLING PROGRAMME (JANUARY 2011 TO JUNE 2011) ...... 63 10.4 CZH DRILLING PROGRAMME (JULY 2011 TO DECEMBER 2011) ...... 64

11 SAMPLE PREPARATION, ANALYSES AND SECURITY ...... 65

CHZ-003 Page ii

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11.1 DRILLING PROCEDURES ...... 65 11.1.1 Historical Drilling ...... 65 11.1.2 CZH Drilling Programmes ...... 65 11.2 EXTENT OF DRILL SAMPLING ...... 66 11.3 RECOVERY AND QUALITY ...... 66 11.4 MAGNETIC SUSCEPTIBILITY MEASUREMENTS ...... 66 11.5 HISTORICAL SAMPLING PROTOCOLS ...... 68 11.5.1 Drill Sampling Protocols...... 68 11.5.2 Drill Core - Specific Gravity:...... 69 11.5.3 Extent of Sampling ...... 69 11.5.4 Recovery and quality ...... 69 11.6 QUALITY ASSURANCE/QUALITY CONTROL (QA/QC) ...... 69 11.6.1 QA/QC Program ...... 69 11.6.2 QA/QC Results – Internal Controls ...... 70 11.6.3 QA/QC Magnetic Susceptibility ...... 70 11.7 DISCUSSION ON ACCURACY ...... 71

12 DATA VERIFICATION ...... 72 12.1 REVIEW OF HISTORICAL DRILLING RESULTS ...... 72 12.2 SITE VISIT & INDEPENDENT SAMPLES ...... 72 12.3 DISCUSSION AND LIMITATIONS ...... 72

13 MINERAL PROCESSING AND METALLURGICAL TESTING ...... 73 13.1 METALLURGICAL DEVELOPMENT ...... 73 13.2 COMMINUTION TESTWORK ...... 74 13.2.1 Abrasion Indices ...... 74 13.2.2 SMC and Bond Ball Mill Work Indices ...... 74 13.2.3 Rod Mill Work Index ...... 74 13.3 FLOTATION TESTWORK...... 75 13.3.1 Metallurgical Response Curves – Copper ...... 75 13.4 METALLURGICAL RESPONSE CURVES – GOLD ...... 78 13.5 METALLURGICAL RESPONSE CURVES – SILVER ...... 79 13.6 MAGNETITE SEPARATION TESTWORK ...... 80

14 MINERAL RESOURCE ESTIMATES ...... 89

15 MINERAL RESERVE ESTIMATES ...... 92 15.1 INTRODUCTION ...... 92 15.2 MINERAL RESERVE ESTIMATE ...... 92 15.2.1 Factors affecting the Mineral Reserve Estimate ...... 93 15.3 MINE OPTIMISATION ...... 93 15.3.1 Introduction ...... 93 15.3.2 Mine Optimisation Parameters ...... 94 15.3.3 Cut-off Grade ...... 94 15.3.4 Ore Loss and Dilution ...... 95 15.3.5 Optimisation Summary ...... 95 15.3.6 Present Value and Cut-Off Grade Optimisation ...... 98

CHZ-003 Page iii

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

15.3.7 Interim Pit Shells for Mine Production Scheduling ...... 99

16 MINING METHODS ...... 105 16.1 INTRODUCTION ...... 105 16.2 GEOTECHNICAL ...... 105 16.2.1 Geotechnical Drilling ...... 105 16.2.2 Open Pit ...... 106 16.2.3 Waste Dumps ...... 106 16.2.4 Groundwater ...... 108 16.3 MINE DESIGN ...... 109 16.3.1 Open Pit ...... 109 16.3.2 Waste Dumps ...... 109 16.4 MINE PRODUCTION SCHEDULE ...... 111 16.4.1 Introduction ...... 111 16.4.2 Material Movement ...... 111 16.4.3 Ore Delivered to the Mill ...... 111 16.5 MINING FLEET ...... 114 16.5.1 Mining Fleet ...... 114 16.5.2 Estimate of Operating Time ...... 114

17 RECOVERY METHODS ...... 117 17.1 PROCESS OVERVIEW ...... 117 17.2 PROCESS AND EQUIPMENT SELECTION ...... 120 17.2.1 Input ...... 120 17.2.2 ROM Crushing ...... 121 17.2.3 Ore Storage and Reclaim ...... 121 17.2.4 SAG Mill and Pebble Crushing ...... 121 17.2.5 Ball Milling and Classification ...... 122 17.2.6 Copper Flotation ...... 122 17.2.7 Copper Concentrate Thickening / Filtration / Handling ...... 122 17.2.8 Magnetite Recovery ...... 123 17.2.9 Tailings Disposal ...... 123 17.3 PROCESS CONTROL ...... 123 17.4 PROCESSING PLANT LAYOUT ...... 124 17.5 PROCESSING PLANT POWER ...... 126

18 PROJECT INFRASTRUCTURE ...... 128 18.1 ON SITE INFRASTRUCTURE AND SERVICES ...... 128 18.1.1 Operations Village ...... 128 18.1.2 Process Plant Infrastructure and Support Facilities ...... 129 18.1.3 Roads and Earthworks ...... 129 18.1.4 Site Wide Utilities ...... 129 18.2 ACCESS ROADS ...... 131 18.2.1 Existing Primary and Secondary Roads to Project Site ...... 131 18.2.2 Export Haul Route ...... 134 18.2.3 Mine Area Roads ...... 134

CHZ-003 Page iv

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18.3 PORT ...... 137 18.4 POWER ...... 139 18.5 WATER BALANCE ...... 141 18.5.1 Climate and Topography ...... 141 18.5.2 Typhoons ...... 141 18.5.3 Regional Rainfall ...... 141 18.5.4 Site Rainfall ...... 141 18.5.5 Evaporation ...... 141 18.5.6 Watershed areas ...... 141 18.5.7 Streamflow Data ...... 142 18.5.8 Groundwater Resources ...... 142 18.5.9 Water Balance Analysis ...... 142 18.5.10 Water Balance Storage Components ...... 143 18.5.11 AWBM Model Development...... 144 18.5.12 GoldSim Water Balance Model Development ...... 144 18.5.13 Conclusions ...... 144 18.6 WATER SUPPLY ...... 145 18.7 TAILINGS STORAGE FACILITY ...... 146

19 MARKET STUDIES AND CONTRACTS ...... 150 19.1 COPPER MARKET ...... 150 19.2 GOLD MARKET ...... 150 19.3 SILVER MARKET ...... 151 19.4 MAGNETITE MARKET ...... 152 19.5 COPPER CONCENTRATE...... 152 19.6 MAGNETITE ...... 153 19.7 CONTRACTS ...... 154

20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ...... 155 20.1 ACID AND METALLIFEROUS DRAINAGE ...... 155 20.2 GENERAL ENVIRONMENTAL REQUIREMENTS ...... 156 20.3 ENVIRONMENTAL MANAGEMENT ...... 156 20.4 ENVIRONMENTAL BASELINE STUDY ...... 156

21 CAPITAL AND OPERATING COSTS ...... 163 21.1 CAPITAL COST MINING ...... 163 21.1.1 Introduction ...... 163 21.1.2 Mine Capital Cost ...... 163 21.1.3 Pre-production Cost ...... 163 21.2 PROCESS PLANT CAPITAL COST ESTIMATE ...... 167 21.3 INFRASTRUCTRE CAPITAL COSTS ...... 168 21.3.1 On Site Infrastructure and Services ...... 168 21.3.2 Access Roads and TSF Haul Roads ...... 169 21.3.3 Port Facilities ...... 170 21.3.4 Power ...... 170

CHZ-003 Page v

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

21.3.5 Water Supply ...... 170 21.3.6 Tailings Storage Facility...... 171 21.3.7 Basis of Estimates ...... 172 21.3.8 Infrastructure Indirect Costs ...... 173 21.3.9 Exclusion from Infrastructure Capital Costs Estimates ...... 173 21.3.10 Project Contingency ...... 173 21.4 OWNERS CAPITAL COSTS AND OTHER CAPITAL COSTS ...... 173 21.5 OWNER’S SUSTAINING CAPITAL COST ESTIMATES ...... 174 21.6 SUMMARY CAPITAL COSTS ...... 174 21.7 MINING OPERATING COST ESTIMATE ...... 176 21.8 PROCESS PLANT OPERATING COST ESTIMATE ...... 177 21.9 INFRASTRUCTURE OPERATING COST ESTIMATE ...... 180 21.9.1 Infrastructure Operating Cost Estimate Basis ...... 181 21.9.2 Exclusions from the Operating Cost Estimate Summary ...... 181 21.10 GENERAL AND ADMINISTRATION OPERATING COST ESTIMATE ...... 181 21.11 METAL PAYMENT TERMS, PRECIOUS METAL CREDITS AND TREATMENT AND REFINING CHARGES ...... 182 21.11.1 Copper Payment Terms and Treatment and Refining Charges ...... 182 21.11.2 Magnetite Payment Terms...... 183 21.12 TRUCKING AND SHIPPING CONCENTRATE COSTS ...... 183 21.13 ROYALTY ...... 184 21.14 SUMMARY OF OPERATING COSTS ...... 184

22 ECONOMIC ANALYSIS ...... 185 22.1 VALUATION METHODOLOGY ...... 185 22.2 KEY ASSUMPTIONS ...... 185 22.3 COPPER PRICE ...... 185 22.4 PROJECT UPSIDE POTENTIAL ...... 185 22.5 RESULTS OF VALUATION ...... 186 22.6 SENSITIVITY ANALYSIS...... 187

23 ADJACENT PROPERTIES ...... 189

24 OTHER RELEVANT DATA AND INFORMATION ...... 190 24.1 PROJECT IMPLEMENTATION SCHEDULE...... 190 24.2 PROJECT OPERATIONAL PLAN ...... 190 24.3 HEALTH SAFETY ENVIRONMENT AND COMMUNITY ...... 191

25 INTERPRETATION AND CONCLUSIONS ...... 192 25.1 RISKS AND UNCERTAINTIES ...... 192 25.2 UPSIDE POTENTIAL ...... 194 25.2.1 Tenement Exploration Potential ...... 194 25.2.2 Mineral Resource and Mineral Reserve Potential ...... 194 25.2.3 Upside Potential Associated with Inferred Mineral Resources in the Current 24 Year Pit ...... 194 25.2.4 Inferred Mineral Resources at Depth ...... 194 25.2.5 Opportunity for Concentrate Recovery Improvements ...... 194

CHZ-003 Page vi

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

25.2.6 Upside Potential for Downstream Processing of Magnetite Concentrate ...... 194

26 RECOMMENDATIONS ...... 196 26.1 RESOURCE ...... 196 26.2 GEOTECHNICAL STUDIES ...... 196 26.3 MINING ...... 196 26.4 PROCESS PLANT ...... 197 26.5 INFRASTRUCTURE ...... 197 26.6 OTHER ITEMS ...... 198

27 REFERENCES ...... 199

28 GLOSSARY OF TECHNICAL TERMS ...... 203

DATE AND SIGNATURE PAGE ...... 206

CERTIFICATES OF QUALIFIED PERSONS ...... 207

CERTIFICATES OF QUALIFIED PERSONS ...... 209

CERTIFICATES OF QUALIFIED PERSONS ...... 211

CERTIFICATES OF QUALIFIED PERSONS ...... 212

LIST OF TABLES

TABLE 1-1 DRILLING AT TAYSAN PROJECT BETWEEN 1968 AND 2011 ...... 3 TABLE 1-2 TAYSAN MINERAL RESOURCE ESTIMATE AT 0.1% CU CUT OFF, FEBRUARY 2012 ...... 4 TABLE 1-3 SUMMARY OF HISTORIC TESTWORK ...... 4 TABLE 1-4 TAYSAN MINERAL RESERVES ESTIMATE ...... 6 TABLE 1-5 CAPITAL COST SUMMARY ...... 10 TABLE 1-6 SUSTAINING CAPITAL COST ESTIMATE ...... 11 TABLE 1-7 OPERATING COST ESTIMATE SUMMARY ...... 12 TABLE 1-8 PLANNED PAYABLE PRODUCTION ...... 12 TABLE 1-9 TAYSAN PROJECT ECONOMICS, APRIL 2012 ...... 13 TABLE 3-1 RESPONSIBILITY FOR THE PREPARATION OF THE REPORT ...... 19 TABLE 4-1 TAYSAN PROJECT TENEMENT DETAILS ...... 23 TABLE 6-1 HISTORICAL DRILLING 1983 TO 2009 ...... 37 TABLE 7-1 EVENTS THAT HAVE OCCURRED AT EPICENTRAL DISTANCES OF LESS THAN 20KM FROM THE TAYSAN PROJECT SITE ...... 49 TABLE 7-2 A SUBDUCTION EARTHQUAKE WITH MAGNITUDE OF MW8.5 AND EPICENTRAL DISTANCE OF 5KM ...... 55 TABLE 7-3 A SHALLOW CRUSTAL EARTHQUAKE WITH MAGNITUDE OF MW8.0 AND EPICENTRAL DISTANCE OF 5KM ...... 55 TABLE 7-4 SUMMARY OF PGA PREDICTIONS ...... 56 TABLE 10-1 DRILLING AT TAYSAN PROJECT BETWEEN 1968 AND 2011 ...... 63

CHZ-003 Page vii

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 11-1 QA/QC INSERTS ...... 70 TABLE 13-1 SUMMARY OF HISTORIC TESTWORK ...... 73 TABLE 13-2 COMMINUTION PARAMETERS SUMMARY ...... 74 TABLE 13-3 ROUGHER FLOTATION OPTIMUM OPERATING CONDITIONS SUMMARY ...... 75 TABLE 13-4 LOCKED CYCLE AND VARIABILITY TESTWORK SUMMARY ...... 75 TABLE 13-5 MAGNETITE TESTWORK SUMMARY ...... 80 TABLE 13-6 BULK ROUGHER DRUM TESTWORK GENERAL CONDITIONS ...... 83 TABLE 13-7 HIGH COPPER TO SULPHUR COMPOSITE ROUGHER DRUM TESTWORK RESULTS (TEST 77)...... 83 TABLE 13-8 LOW COPPER TO SULPHUR COMPOSITE ROUGHER DRUM TESTWORK RESULTS (TEST 73)...... 83 TABLE 13-9 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – LOW COPPER-TO-SULPHUR COMPOSITE ...... 85 TABLE 13-10 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – LOW COPPER-TO-SULPHUR COMPOSITE - CONTINUED ...... 85 TABLE 13-11 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – HIGH COPPER-TO-SULPHUR COMPOSITE ...... 86 TABLE 13-12 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – HIGH COPPER-TO-SULPHUR COMPOSITE - CONTINUED ...... 86 TABLE 13-13 MAGNETITE SEPARATION CLEANER TESTWORK GENERAL CONDITIONS ...... 87 TABLE 13-14 HIGH COPPER TO SULPHUR COMPOSITE MAGNETITE SEPARATION CLEANER TESTWORK RESULTS (TEST 172) ...... 88 TABLE 13-15 FINAL MAGNETITE CONCENTRATE ASSAY ANALYSIS (T172) ...... 88 TABLE 14-1 MINERAL RESOURCE ESTIMATE JANUARY 2012...... 89 TABLE 15-1 TAYSAN MINERAL RESERVES ESTIMATE ...... 93 TABLE 15-2 KEY PIT OPTIMISATION PARAMETERS ...... 94 TABLE 15-3 FACTORS USED TO ESTIMATE COPPER EQUIVALENCE ...... 95 TABLE 15-4 TAYSAN OPTIMISATION SUMMARY – PHYSICALS ...... 96 TABLE 15-5 VARIABLE CUT-OFF STRATEGY OF THE TAYSAN PFS ...... 99 TABLE 15-6 OPTIMISATION RESULTS – BY PIT STAGE AND VARIABLE CUT-OFF GRADE ...... 100 TABLE 16-1 DRILLHOLE COORDINATES ...... 105 TABLE 16-2 GEOTECHNICAL RECOMMENDATIONS FOR PIT SLOPE ANGLES ...... 106 TABLE 16-3 GENERALISED ENGINEERING GEOLOGY MODEL...... 107 TABLE 16-4 WRD DESIGN OPTIONS ...... 108 TABLE 16-5 TAYSAN PIT DESIGN TONNAGES ...... 109 TABLE 16-6 MINE PRODUCTION SCHEDULE – SUMMARY (YEAR 1 TO 12) ...... 112 TABLE 16-7 MINE PRODUCTION SCHEDULE – SUMMARY (YEAR 13 TO 24) ...... 113 TABLE 16-8 TAYSAN PRIMARY MINE EQUIPMENT FLEET (NUMBER OF UNITS)...... 114 TABLE 16-9 MANNING REQUIREMENT – YEAR 1, 5, 10 AND PEAK ...... 116 TABLE 17-1 OPERATING DAYS AND THROUGHPUT ...... 120 TABLE 17-2 ROM GRADE ...... 120 TABLE 17-3 GENERAL ORE CHARACTERISTICS ...... 120 TABLE 17-4 COMMINUTION CHARACTERISTICS 80TH PERCENTILE ...... 120 TABLE 17-5 CONCENTRATE PRODUCTION ...... 121 TABLE 17-6 POWER COSTS BY AREA SUMMARY ...... 127 TABLE 18-1 PROCESS WATER DEMAND ...... 142

CHZ-003 Page viii

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 18-2 MINING OPERATION DATA ...... 143 TABLE 18-3 WATER STORAGE ...... 143 TABLE 18-4 RAISE SCHEDULE ...... 148 TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS ...... 157 TABLE 21-1 EXCHANGE RATE BASIS OF ESTIMATE ...... 163 TABLE 21-2 PRE-PRODUCTION COST ESTIMATE (EXCLUDING MINING FLEET PURCHASE) ...... 164 TABLE 21-3 TAYSAN PURCHASE AND REPLACEMENT CAPITAL SCHEDULE (K$) ...... 166 TABLE 21-4 PROCESS PLANT CAPITAL COST SUMMARY ...... 167 TABLE 21-5 PROCESS PLANT MECHANICAL EQUIPMENT CAPITAL COST ESTIMATE ...... 167 TABLE 21-6 INITIAL CAPITAL EXPENDITURE – ON-SITE INFRASTRUCTURE SITE WORKS ...... 169 TABLE 21-7 SUMMARY OF ROAD CAPITAL COST ESTIMATES...... 169 TABLE 21-8 ESTIMATED COSTS CAPEX – OVERALL DEVELOPMENT ...... 170 TABLE 21-9 WATER SUPPLY CAPITAL COSTS ...... 171 TABLE 21-10 SUSTAINING CAP-EX ESTIMATE ...... 171 TABLE 21-11 ESTIMATES FOR THE OWNERS CAPITAL COSTS ...... 174 TABLE 21-12 SUSTAINING CAPITAL EXPENDITURE OVER THE 24 YEAR MINE LIFE ...... 174 TABLE 21-13 CAPITAL COST SUMMARY ...... 174 TABLE 21-14 SUSTAINING CAPITAL COST ESTIMATE ...... 176 TABLE 21-15 UNIT OPERATING COST ESTIMATE – YEAR 1 TO 24 ($/TOTAL TONNE) ...... 177 TABLE 21-16 PROCESS PLANT OPERATING COST ESTIMATE ...... 178 TABLE 21-17 PROCESS PLANT OPERATING COST BREAKDOWN ...... 178 TABLE 21-18 PLANT OPERATING COST SOURCE DATA ...... 179 TABLE 21-19 INFRASTRUCTURE OPERATING COST ESTIMATE ...... 180 TABLE 21-20 SUMMARY OF GENERAL AND ADMINISTRATION COSTS – TAYSAN COPPER PROJECT ...... 182 TABLE 21-21 COPPER CONCENTRATE TC/RCS AND METAL PAYABILITY FACTORS ...... 183 TABLE 21-22 OPERATING COST ESTIMATE SUMMARY ...... 184 TABLE 22-1 RESULTS OF VALUATION OF TAYSAN PROJECT ...... 186 TABLE 22-2 LIFE OF MINE PRODUCTION ...... 186

LIST OF FIGURES

FIGURE 1-1 REGIONAL LOCATION OF TAYSAN PROJECT TENEMENTS ...... 2 FIGURE 1-2 METALLURGICAL RESPONSE CURVE – OVERALL COPPER RECOVERY AGAINST COPPER HEAD GRADE ...... 5 FIGURE 1-3 SIMPLIFIED TAYSAN FLOW SHEET ...... 8 FIGURE 1-4 SENSITIVITY ANALYSIS ON THE POST-TAX NPV OF THE PROJECT ...... 14 FIGURE 1-5 LOOKING NORTH - SECTION 19500N (LOCAL GRID): OPTIMIZED PIT SHELLS ...... 15 FIGURE 4-1 REGIONAL LOCATION OF TAYSAN PROJECT TENEMENTS ...... 21 FIGURE 4-2 TAYSAN PROJECT TENEMENTS...... 22 FIGURE 4-3 PLANNED INFRASTRUCTURE IN RELATION TO EP-IVA-005 ...... 25 FIGURE 5-1 RAINFALL, TEMPERATURE AVERAGES FOR BATANGAS, PH ...... 30 FIGURE 5-2 HISTORY OF TYPHOONS 1906 TO 2009 ...... 31 FIGURE 5-3 TAAL VOLCANO BASE SURGE HAZARD MAP (SOURCE: PHILVOLCS) ...... 32 FIGURE 5-4 LAND USE WITHIN EP-IVA-005, 016 ...... 34

CHZ-003 Page ix

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 6-1 TAYSAN COPPER-GOLD DEPOSIT – DISCOVERY OUTCROP ...... 36 FIGURE 7-1 TAYSAN LIES WITHIN THE WESTERN LUZON MAGMATIC ARC ...... 39 FIGURE 7-2 THE WESTERN ARC (WVC) OF THE LUZON ARC ...... 41 FIGURE 7-3 SHUTTLE RADAR TOPOGRAPHIC MISSION (SRTM) DATA ...... 42 FIGURE 7-4 REGIONAL STRUCTURES IN THE SOUTHERN BATANGAS MINERAL DISTRICT ...... 42 FIGURE 7-5 REGIONAL GEOLOGY OF THE TAYSAN PROJECT ...... 43 FIGURE 7-6 E-W CROSS-SECTION OF THE GEOLOGY AND MINERALIZATION OF THE TAYSAN DEPOSIT ...... 46 FIGURE 7-7 TAYSAN PROJECT SITE ...... 48 FIGURE 7-8 REGIONAL HISTORICAL SEISMICITY (1907-2011) WITH M≥ 4 ...... 51 FIGURE 7-9 HISTORICAL SEISMICITY (1907-2011) WITH M≥ 4 LOCATED AT EPICENTRAL DISTANCES OF LESS THAN 200KM FROM THE TAYSAN PROJECT SITE ...... 52 FIGURE 7-10 CUMULATIVE NUMBER OF THE SELECTED EARTHQUAKES AS A FUNCTION OF TIME ...... 53 FIGURE 7-11 HISTOGRAM AS A FUNCTION OF DEPTH ...... 53 FIGURE 7-12 HISTORICAL SEISMICITY (1600-2006) AND ACTIVE FAULTS IN THE PHILIPPINES (FROM WONG ET AL., 2008) ...... 54 FIGURE 7-13 TECTONIC SETTING OF ACTIVE FAULTS IN NORTHERN AND CENTRAL LUZON (FROM RIMANDO AND KNUEPFER, 2006) ...... 54 FIGURE 8-1 SCHEMATIC OF TYPE 20C MODEL OF PORPHYRY CU-AU FOR TAYSAN ...... 59 FIGURE 9-1 2010 AREA OF GROUND MAGNETIC SURVEY ...... 61 FIGURE 9-2 2010 GROUND MAGNETIC SHOWING POTENTIAL TARGETS ...... 62 FIGURE 11-1 CZT001 TO CZT093 DRILL HOLE LOCATION MAP ...... 66 FIGURE 13-1 METALLURGICAL RESPONSE CURVE- FINAL CONCENTRATE GRADE AGAINST COPPER HEAD GRADE ...... 76 FIGURE 13-2 METALLURGICAL RESPONSE CURVE – OVERALL COPPER RECOVERY AGAINST COPPER HEAD GRADE ...... 77 FIGURE 13-3 OVERALL COPPER RECOVERY AGAINST DEPTH ...... 77 FIGURE 13-4 METALLURGICAL RESPONSE CURVE - GOLD IN CONCENTRATE GRADE VERSUS HEAD GRADE ...... 78 FIGURE 13-5 METALLURGICAL RESPONSE CURVE - OVERALL GOLD RECOVERY VERSUS HEAD GRADE ...... 79 FIGURE 13-6 SILVER TO COPPER RELATIONSHIP IN FEED AND FINAL CONCENTRATE PRODUCTS ...... 80 FIGURE 13-7 METALLURGICAL RESPONSE CURVE – FINAL CONCENTRATE GRADE AGAINST MAGNETIC HEAD GRADE...... 81 FIGURE 13-8 METALLURGICAL RESPONSE CURVE – OVERALL MAGNETIC RECOVERY AGAINST MAGNETIC HEAD GRADE...... 82 FIGURE 13-9 REGRIND TIME VS IRON AND SILICA GRADE ...... 87 FIGURE 15-1 OPTIMISATION SUMMARY – ORE, WASTE AND AVERAGE PV ...... 97 FIGURE 15-2 VARIABLE CUT-OFF STRATEGY ...... 99 FIGURE 15-3 OPTIMISED PIT SHELLS (LOCAL GRID) ...... 101 FIGURE 15-4 OPTIMISED PIT SHELLS – OBLIQUE VIEW ...... 101 FIGURE 15-5 19500N CROSS-SECTION: RESOURCE CLASSIFICATION ...... 102 FIGURE 15-6 19500N CROSS-SECTION: COPPER % ...... 102 FIGURE 15-7 19500N CROSS-SECTION: GOLD G/T ...... 103

CHZ-003 Page x

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-8 19500N CROSS-SECTION: SILVER G/T ...... 103 FIGURE 15-9 19500N CROSS-SECTION: MAGNETITE % ...... 104 FIGURE 16-1 TAYSAN WASTE ROCK DUMP LOCATION (24 YEAR FOOTPRINT) ...... 110 FIGURE 16-2 MINE PRODUCTION SCHEDULE – TOTAL MOVEMENT BY MATERIAL TYPES ...... 111 FIGURE 17-1 SIMPLIFIED TAYSAN FLOW SHEET ...... 118 FIGURE 17-2 TAYSAN OVERALL PROCESS FLOW DIAGRAM ...... 118 FIGURE 17-3 TAYSAN PROCESS PLANT LAYOUT ...... 125 FIGURE 17-4 TAYSAN MINE LAYOUT ...... 125 FIGURE 18-1 SITE ACCESS ROADS ...... 133 FIGURE 18-2 MINE AREA SITE ROADS (STARTER STAGE) ...... 135 FIGURE 18-3 MINE AREA ROADS (ULTIMATE) ...... 136 FIGURE 18-4 CONCEPTUAL LAYOUT – MATERIALS HANDLING SYSTEM ...... 139 FIGURE 18-5 LAYOUT OF THE PROPOSED TRANSMISSION LINES ...... 140 FIGURE 18-6 STORAGE CAPACITY CURVE FOR TSF OPTION 1 ...... 147 FIGURE 21-1 CAPITAL COST BREAKDOWN BY EQUIPMENT TYPE ...... 165 FIGURE 21-2 PURCHASE AND REPLACEMENT COST ESTIMATE – YEAR 1 TO 24 ...... 165 FIGURE 22-1 SENSITIVITY ANALYSIS ON THE POST-TAX OF THE PROJECT ...... 187 FIGURE 22-2 SENSITIVITY ANALYSIS ON THE POST-TAX IRR OF THE PROJECT ...... 188

CHZ-003 Page xi

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

1 SUMMARY

1.1 INTRODUCTION

Crazy Horse Resources Incorporated, (CZH) have engaged AMEC Australia Pty Ltd (AMEC) as the lead Consultant and other Consultants to complete a Prefeasibility Study, (PFS) to evaluate the potential of a 15 million tonne per annum mining and processing operation at Taysan.

The Taysan Project is located on the south western segment of the island of Luzon in the province of Batangas, 100 km south of Manila and 20 km east of the provincial capital of Batangas City. Batangas City is a major commercial centre and is 1.5 hours away from Manila via the South Luzon Expressway and STAR Tollway. The city hosts a deep water port facility and is a principal storage and distribution centre for oil and petro-chemical products.

Crazy Horse Resources Incorporated interest in the Project is 100% held through its wholly owned subsidiaries with the Philippine subsidiary Asian Arc Mining Resources Incorporated (Asian Arc) as the registered owner of the two approved Exploration Permits, three Exploration Applications and an application for a Financial or Technical Assistance Agreement, (FTAA).

The PFS has been prepared by the following independent consultants under the lead of AMEC of Brisbane, Australia: Consultant Areas of Responsibility Metallurgical test work, Metallurgy, Process and Study AMEC Australia Pty Ltd Management GAIA South Incorporated Socio-Environmental Assessment Tailings Storage Facility, Infrastructure, Hydrology, Water GHD Engineering Supply, Communications, Site Buildings and Camp, Power and Ports IMC Mining Group Pty Ltd Mineral Reserves, Mining Studies and Optimization Mining Associates Pty Ltd Geology and Resource Estimation Resource Development Geotechnical, Hydrogeology and Pit Stability Consultants Ltd.

A number of groups and companies providing engineering services, supplies, logistics equipment and other services including Aboitiz provided quotations and other information.

1.2 PROPERTY DESCRIPTION AND LOCATION The Taysan Project is comprised of two mining exploration permits and three mining exploration permit applications (permits: EP-IVA- 005 and EP-IVA-016, and permit applications: EPA-IVA-108, EPA-IVA- 111 and EPA-IVA-081) over five partly contiguous claim blocks covering a combined total area of 11,254 hectares. The Taysan copper-gold porphyry deposit is located on the core granted exploration permit (EP-IVA–005) which covers an area of approximately 4,086 hectares. Application for conversion of EP-IVA-005 to an FTAA has been made. Figure 1-1 displays the location of the tenements.

CHZ-003 Page 1

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The deposit occurs in undulating topography in what is largely cleared farmland and is of a topography that is readily amenable to conventional open cut mining methods.

FIGURE 1-1 REGIONAL LOCATION OF TAYSAN PROJECT TENEMENTS

(Source: Asian Arc, 2010)

1.3 GEOLOGY, MINERALISATION AND SEISMIC ASSESSMENT

The Taysan Project hosts a large and only partly explored copper-gold porphyry deposit similar to other copper-gold porphyry deposits previously mined in the Philippines. The project area contains two known deposits; the major Taysan Copper-Gold Deposit which is a porphyry style deposit; one of a number of porphyry deposits which have developed along the spine of the Philippine island system and the smaller Antipolo Epithermal Gold Prospect.

The Taysan copper gold mineralization is hosted in potassically altered hornblende diorite and hornblende quartz diorite porphyries. The mineralization occurs as disseminated chalcopyrite and bornite in the altered porphyry and as stockwork hosted mineralization within quartz veins and breccias. The deposit outcrops as a small hill with the majority of the mineralization covered by 10 to 55 metres of recent volcanic ash.

The copper mineralization is controlled by fault zones dipping between 30 and 60 degrees that crosscut the intrusive bodies. There is potential to expand resources at depth along this structural zone

CHZ-003 Page 2

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The seismic hazard of the Taysan project site has been reviewed. The estimated Peak Ground Acceleration (PGA) corresponding to the 475-year return period are also summarised in the study. Based on this analysis, the following recommendations are made: • The worst-case scenario earthquake at the project site is estimated to be a subduction earthquake with magnitude of Mw8.5 and epicentral distance of 5km. • The rock site PGA at the surface of 0.40g corresponding to the 475-year return period is recommended for the Taysan project site.

1.4 HISTORICAL WORK, EXPLORATION AND DRILLING The Project has been extensively drilled since 1968, with 302 holes for 82,583 meters, of which the Company has drilled 99 drill holes for 36,445 meters between October 2010 and October 2011 as shown in Table 1-1 below: Previous work included considerable metallurgical testwork and various preliminary economic assessments.

TABLE 1-1 DRILLING AT TAYSAN PROJECT BETWEEN 1968 AND 2011

Company Drill Hole Type No. of Drill Holes Drill Meters

Resource 91 34,709

Crazy Horse Exploration 2 828

Geotechnical 6 908

Resource 141 36,253 Previous Companies Exploration 62 9,885

Total Drilling 302 82,583

Extensive use of previous exploration results, including metallurgical testwork has been made in the preparation of this Prefeasibility Study.

1.5 EXPLORATION

CZH undertook a ten drill hole programme (5,812.7m) between October and December 2010, to confirm the interpretation of the historic drilling. Subsequent to this initial drilling, CZH continued exploration and validation drilling at Taysan, completing an additional 35 holes in the first half of 2011, CZH continued resource drilling at Taysan during the second half of 2011, completing 47 drill holes (CTZ001-046 to CTZ001-093) for a total of 15,912.9 metres, as well as six geotechnical drill holes totalling 908.3 metres.

Drill core recoveries, sampling protocols, analytical techniques and QA/QC standards are all to industry standards.

CHZ-003 Page 3

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

1.6 MINERAL RESOURCE ESTIMATE

The following Table 1-2 summarizes the Mineral Resource estimate by Mining Associates at the 0.1% copper cut-off grade used, including the estimates for gold, silver and magnetite.

TABLE 1-2 TAYSAN MINERAL RESOURCE ESTIMATE AT 0.1% CU CUT OFF, FEBRUARY 2012

M Cu Au Ag Magnetite Cu Au Ag Magnetite Resource tonnes (%) (g/t) (g/t) (%) (M lbs) (M oz) (M oz) (Mt) Measured 156 0.31 0.12 1.2 3.3 1,077 0.61 5.80 5.20 Indicated 303 0.23 0.09 0.7 3.2 1,502 0.85 6.54 9.69 Inferred 509 0.18 0.08 0.5 2.7 2,065 1.24 7.81 13.59

The large Measured and Indicated Mineral Resource of 459 Mt at 0.26% Cu, 0.10 g/t Au, 0.8 g/t Ag and 3.3% magnetite, which contains 1.2 Mt of copper (2.6 billion lbs) provides the basis for the Stage 1 project (15 Mtpa operation for 24 years) that can be followed by the Stage 2 expansion to potentially double the throughput rate or extend the mine life to up to 40 years.

1.7 METALLURGY

AMEC managed the metallurgical testwork program for the Taysan Prefeasibility study at the request of CZH. The testwork program, designed by AMEC, includes comminution, viscosity analysis, flotation optimisation, bulk magnetite separation and settling testwork. The testwork completed is satisfactory to produce a process design criteria for a prefeasibility study. The major outcomes for the testwork program are discussed in section 13 of this report.

Historic testwork undertaken by Optimet in 1995 and Metcon in 2010/2011 are both also examined. A summary of the historic testwork for the Taysan Project is given in Table 1-3.

TABLE 1-3 SUMMARY OF HISTORIC TESTWORK

Date Company Testwork Summary Comminution tests, oxide and sulphide flotation, oxide 1995 Optimet leaching 2010/2011 Metcon Suphide flotation, magnetite recovery of flotation tails

The copper recovery has a high recovery rate independent of the grade of copper and this is recorded in the copper recovery response curve displayed below in Figure 1-2.

CHZ-003 Page 4

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 1-2 METALLURGICAL RESPONSE CURVE – OVERALL COPPER RECOVERY AGAINST COPPER HEAD GRADE

1.8 MINERAL RESERVE ESTIMATES

The Mineral Reserve estimate for the Taysan Project is consistent with the definition standards set-out by the Canadian Institute of Mining (CIM, November 2010) and in the 2004 Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves (the JORC Code).

The following long term commodity prices have been used to estimate the Mineral Reserves: • Copper: $3.0/lb • Gold: $1000/oz • Silver: $26/oz • Magnetite: $100/t

The marginal cut-off grade on a copper only basis is 0.14% Cu based on a processing cost of $7.11/t and long term copper price of $3.0/lb.

CHZ-003 Page 5

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Mineral Reserves estimate, however, is based on an elevated and variable cut-off grade strategy ranging from 0.28% CuEq1 to 0.18% CuEq1 during the life of the mine. A copper equivalent cut-off grade has been used to define the Mineral Reserves due to the significant revenues associated with the gold and magnetite. All material below the cut-off grade has been treated as waste rock for this project. Inferred Mineral Resources have also been treated as waste and have had no influence on the pit designs.

The waste to ore ratio for the stated Mineral Reserves is approximately 1:1 for the life of mine.

Due to the preliminary nature of the mining, processing, logistics and marketing studies, all Mineral Reserves have been classified as Probable. Table 1-4 provides the estimate.

TABLE 1-4 TAYSAN MINERAL RESERVES ESTIMATE Tonnes Cu Au Ag Magnetite Category (Mt) % g/t g/t % Probable 353 0.27 0.11 0.9 3.4

Nine pit stages were chosen with the purpose of improving the project value by deferring waste and targeting higher grade and higher margin areas earlier in the mining schedule while providing regular mine stages with a minimum mining width of 50 meters.

High grade starter pits give an average grade (before recovery) of 0.39% Cu, 0.17 g/t Au, 1.5 g/t Ag and 4.2% magnetite for the first five years, compared to the averages of 0.27% Cu, 0.11 g/t Au, 0.9 g/t Ag and 3.4% magnetite over the life of the mine.

1.9 MINING METHODS

The Taysan project is planned to be a conventional truck and excavator open pit mine using bulk mining techniques to mine approximately 30Mt per year (ore + waste). The mineralisation is covered by an approximately 50m thick blanket of volcanic Tuff which will not require drill and blast. The fresh material (below historical weathering profile) will require drill and blast. The LOM strip ratio is approximately 1:1.

It is proposed that the primary mining fleet will consist of 15m3 and 12m3 excavators and a fleet of 140t capacity off-highway diesel trucks.

1 CuEq = Cu % + 0.35 x Au (g/t) + 0.004 x Ag (g/t) + 0.016 x Mt% The copper equivalence formula is based on the relative metal price, recovery and payability of each element. The LOM average recoveries and payabilities have been used to simplify the reporting on a copper equivalence basis. The metal prices, recoveries and payabilities used to derived the copper equivalence formula are shown in the table below: Element Metal Price Avg. LOM Recovery Avg. LOM Payability Cu $3.0/lb 91% 87% Au $1000/oz 70% 82% Ag $26/oz 56% 40% Magnetite $100/t con 95% 89%

CHZ-003 Page 6

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

1.10 RECOVERY METHODS

The proposed Taysan Copper-Magnetite concentrator will be designed to treat 15 million tonne per annum. The concentrator will utilise the following principal process areas for the recovery of the copper and magnetite concentrates: • Primary crushing (Gyratory Crushers) • Crushed ore stockpile and reclaim • SAG milling • Pebble crushing (cone crushers) • Ball mill grinding and classification • Copper rougher flotation and regrind • Two-stage copper cleaner flotation • Magnetite rougher magnetic separation and regrind • Magnetite hydroseparation • Magnetite cleaner magnetic separation • Copper concentrate thickening, filtration, storage and load-out • Magnetite concentrate thickening, filtration, storage and load-out • Tailings thickening, disposal and decant water return

The proposed plant design is a single train process plant to treat ore to a maximum head grade of 0.6% copper with an expected LOM copper recovery of 90% producing copper concentrates with an average grade of 24.5% copper that contain gold and silver credits. Gold has a LOM recovery of 69% and silver has a LOM recovery of 55%. Magnetite concentrate is produced as a by–product and has a LOM recovery rate of 94%.

The Taysan flowsheet is assembled from unit processes used commonly throughout the minerals processing industry and are all considered conventional in design. A simplified version of the Taysan flow sheet is shown in Figure 1-3.

The crushing and comminution flow sheets are conventional in design, based on both historical testwork and metallurgical testwork performed during the prefeasibility phase. In addition, a benchmarking exercise was performed using data from other similar operations as a design check.

The copper flotation circuit design consists of rougher flotation, regrind and two stages of cleaning, which is again based on both historical testwork and metallurgical testwork performed during the prefeasibility phase. Preliminary flotation tails settling testwork was performed to estimate the size of the flotation tails thickener. The preliminary data was benchmarked with other operations of a similar size.

The remaining unit processes in the flow sheet such as magnetite recovery, concentrate thickening, filtration, tailings disposal and air and water services are based on design data from similar plants and are considered by AMEC to be suitable for the Taysan Process Plant at a prefeasibility study level of accuracy.

CHZ-003 Page 7

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 1-3 SIMPLIFIED TAYSAN FLOW SHEET

The plant is designed to process a nominal rate of 45,000 dry t/d of ore (15.0 Mt/a at 91.3% plant availability) with the maximum design rate, incorporating a 20% design allowance, is 54,000 dry t/d. The processing plant operates 52 weeks per year, 7 days per week, 24 hours per day, at 91.3% availability. The expected Taysan Copper Project mine life is 24 years.

The estimated process power demand is 66.5 MW installed capacity with an average operating load of 50.5 MW. The process plant has a requirement for close to 92 ML per day of process water. The majority of process water is made up from recycle process plant streams and TSF decant water. The process plant requires just under 9 ML/d of raw makeup water to account for losses in the TSF, concentrates and evaporation.

1.11 PROJECT INFRASTRUCTURE Located on Southern Luzon, the Taysan Project is accessible from Manila by 106 km of expressway followed by 23 km on sealed provincial roads. It is 20 km from the provincial capital on sealed provincial roads. Close to Batangas, a major industrial area and port of the Philippines, the Project benefits from existing infrastructure and from the nearby availability of a skilled workforce.

The Project is designed as largely self-contained, with mine, mill, maintenance facilities, administration and fully serviced accommodation camp located in close proximity to the mine site.

Existing sealed roads will be used for site access and for concentrate export. Some upgrading of road surfaces and bridges will be required to be done in cooperation with the provincial and municipal

CHZ-003 Page 8

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 governments, particularly with regard to the export road to Batangas Port. Within the mine site, 14.2 km of roads will be built during the construction phase of the Project, including haul roads within the pit and from the pit to the TSF. Other access roads suitable for general mine equipment will also be constructed. Another 16.3 km of haul and access roads will be built in Year 5 to extend access to the TSF embankment areas and provide access around the TSF perimeter to allow tailings disposal and monitoring activities.

Sufficient water is available within the mine area. The estimated water requirement for a 15 Mtpa operation is approximately 31,820 m3/day. It is proposed that 75% of the process water demand will be met through return of decant water from the TSF and the remaining 25% will be supplied from available fresh water sources. The TSF will be built immediately to the south of the open pit in a wide valley that allows for slurry transport and a short pumping distance for return make-up water to the plant. A water supply dam will be built to the southwest of the Project site that will supply fresh makeup water for the plant and will be used to replace the water supply of any communities who are affected by groundwater drawdown in the areas surrounding the open pit mine. A capital expenditure allowance has also been made for a bore field to supplement the water from the water supply dam.

Electric power is available from the local grid, and there is sufficient excess power produced in Batangas Province to supply the Project’s operations. There is an existing 69kV line and right of way to the Taysan Municipality currently servicing the local population, and this right of way may potentially be used to build a second 69kV line. There also exists a 69kV substation at the mine site and, although this substation is unsuitable for the mine operation, there is potential to use this facility during construction. The plan is to construct a 69kV power line of 18.6 km length from the Batangas substation to the mine site.

The Company holds an option to purchase a 16 hectare deep water port facility on a major transport route. The site has existing concrete pads ready for construction of magnetite concentrate storage buildings. A new copper concentrate storage shed and load out facility will have to be constructed. The existing jetty and loading dolphins will be replaced with a more cost effective facility.

The close proximity of the tailings dam to the open pit source, as does the availability of waste rock from tailings, reduces capital costs for construction of the TSF embankments. Two TSF starter embankments will be constructed in narrow valleys in the headwaters of the Rosario River catchment. The two ponds will join to form a single pond in subsequent raises. A longer embankment will be constructed on the catchment divide to the north. The TSF is largely bounded by natural surfaces to the east and south. At mine closure, the tailings surface will be stabilized and re-vegetated, potentially into productive cropping areas such as rice growing. The tailings have a low potential to form acid mine drainage which will be controlled by sub-aerial deposition. The mine closure plan envisages a central clean water pond discharging to the pit to be flooded to form a pit lake on closure.

1.12 ENVIRONMENTAL AND COMMUNITY CONSIDERATIONS The mine site is situated in an area of agricultural land with low density inhabitation owing to the poor agricultural performance of the soil, which is comprised of tuff (volcanic ash). There is no potential for destruction of sensitive habitats and no unique or endangered animal species or community within the project site that might be affected. The Project has been planned to meet the highest standards of environmental protection, and World Bank standards have been applied to all planned aspects of environmental protection and social responsibility.

CHZ-003 Page 9

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

A preliminary assessment of available data and testwork on waste rock and tailings samples of the risk of development of Acid Mine Drainage (AMD) and saline drainage from waste rock and tailings at the site indicates there is potential for acid neutralisation and limited potential for AMD. Copper to sulphur ratios indicated that chalcopyrite is the dominant source of sulphur in some areas. Overlying volcaniclastic rocks showed relatively low sulphur. Samples of tailings were subjected to NAG and NAPP testing and water leaching. The results indicate the tailings were unlikely to generate acid if exposed to the air and may hence be suitable for subaerial deposition and also presented a low risk of metallic leachate generation if not oxidised.

1.13 CAPITAL AND OPERATING COSTS

Capital Cost Estimates

Table 1-5 provides the capital cost estimate for the Taysan Prefeasibility Study as well as defining the source of the capital cost estimate. The overall accuracy of the Prefeasibility capital cost estimate is ± 25% and contingency elements are applied.

TABLE 1-5 CAPITAL COST SUMMARY

Item Capital Cost USD Millions Source

Initial Capital Costs

Preproduction Mining Costs 4.5 IMC

Mining Prestrip 15.8 IMC

Mining Equipment 44.5 IMC

Process Plant 215.6 AMEC

Buildings

Workshop and Offices 5.5 JCL

Permanent Camp 1.8 JCL

Construction Camp 1.5 JCL

Laboratory Fit out and General 0.4 JCL Requirements

On Site Infrastructure and Services

General Requirements 0.5 GHD

Operations Village 2.1 GHD

Process Plant 1.4 GHD

Electrical Infrastructure 17.7 GHD

Telecommunications 1.1 GHD

Fuel Depot 0.3 GHD

CHZ-003 Page 10

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 1-5 CAPITAL COST SUMMARY

Item Capital Cost USD Millions Source

Explosive Magazine 0.2 GHD

Water Supply 12.0 GHD

TSF Year 0 Local Borrow Option 2 13.7 GHD

TSF Access Road Option 2 5.2 GHD

Port Facility 15.7 GHD

Transmission line and Right of Way 1.6 GHD

Mobile Equipment 3.2 IMC/AMEC/GHD

Owners Costs and Working Capital CZH Year -1 16.2

Owners Costs and Working Capital CZH Year 0 31.3

Sub-Total 412.7

Process Plant EPCM (18%) 38.8 AMEC

Infrastructure EPCM (7.5%) 5.1 GHD

Contingency (9.9%) 45.3

Sub-Total 89.2

Total 501.9

Table 1-6 provides a summary of the life of mine sustaining capital costs.

TABLE 1-6 SUSTAINING CAPITAL COST ESTIMATE

WBS Item Capital Cost USD Millions Source

Sustaining Capital

1000 Mining Fleet Additional Capacity 63.6 IMC

1000 Mining Fleet Replacement 138.4 IMC

1000 Haul Road Construction 8.2 IMC

3000 TSF 103.1 GHD

Mobile Equipment 13.1 CZH/AMEC

Land Acquisition 6.0 CZH

General Other 11.5

Sustaining Capital Total 343.9

CHZ-003 Page 11

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Operating Cost Estimates

The operating cost estimates were developed based on materials cost and unit rates, supplier quotations from various external sources as well as historical rates from similar projects.

The Taysan Project Operating Cost estimate is summarised in Table 1-7.

TABLE 1-7 OPERATING COST ESTIMATE SUMMARY

Area LOM Average Annual Cost 1000 US$ LOM Average US$/t Ore Milled

Mining 52 200 3.48

Process plant 88 077 5.87

Infrastructure 4 332 0.29

General and administration 8 296 0.55

Total 152 905 10.19

The operating cost estimate for the Taysan Project has a level of accuracy of ±25% and is expressed in US dollars.

On a LOM Project basis, the average unit operating cost for the Taysan Project is estimated to be US$10.19 per tonne of ore milled.

1.14 ECONOMIC ANALYSIS

The planned payable production of copper, gold, silver and magnetite (net of deductions) over the twenty-four year mine life is as shown in Table 1-8.

TABLE 1-8 PLANNED PAYABLE PRODUCTION Recovered Metal Payable Production# Cu Cu Avg/Year Total Avg/Year Total Equivalent* Equivalent* LOM LOM LOM LOM (M lbs) (tonnes) Copper (M lbs) 79 1,899 76 1,822 1,822 826,356 Gold ('000 oz) 35 833 30 720 240 108,798 Silver ('000 oz) 233 5,604 93 2,242 19 8,815 Magnetite ('000 t) 476 11,416 476 11,416 381 172,612 Total Copper Equivalent (LOM) 2,462 1,116,581 # Payable production is the amount of metal produced net of treatment and metal refining deductions. * Copper equivalent is calculated on the basis of payable production (net of deductions) and commodity prices of US$3.00/lb Cu, US$1,000/oz Au, US$26/oz Ag and US$100/t magnetite. LOM = Life of Mine

CHZ-003 Page 12

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The estimated initial capital costs are US$502 million and, including value-added taxes (VAT), are estimated at US$521 million. Average operating costs per pound of copper equivalent* are forecast at US$1.68 for the life of mine and US$1.18 for the first five years of production.

Total gross revenue comprises 74% from copper, 15% from magnetite, 10% from gold and 1% from silver, based on prices of US$3.00/lb (US$6,614/tonne) for copper, US$100/tonne for magnetite, US$1,000/oz for gold and US$26/oz for silver.

The Taysan Project is financially attractive and robust with an NPV (after tax and at a 10% discount rate) of US$503 million and an IRR of 49.2%, both calculated on leveraged cash flow assuming a 65:35 debt to equity ratio, which produces adequate debt service coverage to be able to secure project financing. In addition, the financial analysis assumes a fiscal regime under a Financial or Technical Assistance Agreement (FTAA) with the government of the Philippines, which has been applied for in respect of the Project. The Project is currently operating under an exploration permit.

Table 1-9 summarizes the economics of the Taysan Project at various metal prices:

TABLE 1-9 TAYSAN PROJECT ECONOMICS, APRIL 2012

Copper Price US$/lb $2.50 $3.00 $4.00

Gold Price US$/oz $850 $1,000 $1,400

Silver Price US$/oz $24 $26 $28

Magnetite Concentrate Price US$/tonne $80 $100 $110

Discount Rate % 10% 10% 10%

Project Pre-tax NPV US$M $245 $695 $1,506

Project Pre-tax IRR % 20.1% 33.5% 53.3%

Project Post-tax NPV US$M $185 $512 $978

Project Post-tax IRR % 18.6% 30.4% 44.2%

Project Post-finance** NPV US$M $175 $503 $969

Project Post-finance** IRR % 26.6% 49.2% 77.6%

** Calculated on net cash flow after taking into account debt financing at a debt-to-equity ratio of 65:35.

A sensitivity analysis was undertaken on the post-tax cash flows of the Taysan-an Project. Figure 1-4 show that the post-tax NPV (at 10%) of the Taysan Project is sensitive to changes in revenue, and less so to operating and capital costs.

CHZ-003 Page 13

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Taysan Project: Post-Tax NPV (10%) Sensitivity

$700

$600

$500

$400 tax NPV at 10% (US$M) - $300

Post -10% -5% 0% +5% +10% Percentage Change

Revenue Opex Capex

FIGURE 1-4 SENSITIVITY ANALYSIS ON THE POST-TAX NPV OF THE PROJECT

1.15 INTERPRETATION AND CONCLUSIONS

Risks and uncertainties are reviewed and relate to typical factors common in the mining industry.

Considerable upside potential has been identified in the following areas: • Exploration potential to discover new resources within the CZH tenements. • Potential to significantly expand Mineral Reserves by drilling out the large Inferred Resource and the deeper mineralized zones which can potentially double the throughput rate or extend the mine life to up to 40 years. • Potential to improve current project economics by drilling out the Inferred resources within the pit and immediately below the pit floor. As illustrated in Figure 1-5 below, Measured and Indicated Mineral Resources virtually fill the entire 24-year pit shell. However, some of the resources in the overall pit are in the Inferred category, which is not included in the Mineral Reserve base and is classified as waste. A minimal drilling program may convert this material to Indicated Mineral Resources, allowing the resources to be converted to Mineral Reserves. This potential conversion of waste to Mineral Reserves would decrease the strip ratio, thereby potentially lowering capital and operating costs. • Potential to metallurgically test the oxidised, mineralised zones above the ore zones and convert this material from waste into Mineral Reserve categories, and • Potential to upgrade the magnetite concentrate product to pelletised product or specialised fine ground product.

CHZ-003 Page 14

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 1-5 LOOKING NORTH - SECTION 19500N (LOCAL GRID): OPTIMIZED PIT SHELLS

1.16 RECOMMENDATIONS

There are a large number of recommendations from all study participants focussing on future feasibility studies and the upside potential of the Taysan Project.

CHZ-003 Page 15

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

2 INTRODUCTION

2.1 OVERVIEW

Crazy Horse Resources Incorporated, (CZH) have engaged AMEC as the lead Consultant and other Consultants to complete a Prefeasibility Study, (PFS) to evaluate the potential of a 15 million tonne per annum mining and processing operation at Taysan.

The Taysan deposit lies within the municipality of Taysan (population 33,454) and the project tenement group straddles the municipalities of Taysan, Rosario, Ibaan, and Lobo. Access to the Taysan Project area is good in dry weather with sealed roads to within several kilometres. The project site is located 20 km east of Batangas City via the National road to Lipa City and the town of Taysan. Local industry in the immediate Taysan area is primarily agricultural and includes rice, coconut, banana and mango farming as well as cattle grazing.

2.2 PURPOSE

CZH intends that this report be used as an Independent Technical Report for the Prefeasibility economic assessment which satisfies NI43-101 Standards of Disclosure for Mineral Projects. The related Scoping Study assessment completed in December 2011 (NI43-101 report dated 16 December 2011 prepared by Barton Metals Pty Ltd) provided the necessary direction for this Prefeasibility Study (“PFS”) on the Taysan Project.

2.3 INFORMATION USED

This report is based on historical technical data provided by CZH. CZH provided open access to all available records to enable a proper assessment of the 15 Mtpa project. It also relies on information provided in previous NI43-101 reports and the Taysan Project PFS Report as compiled by the lead Consultant AMEC as detailed in section 3.

CZH has written to all consulting parties indicating that full disclosure has been made of all material information and that, to the best of CZH’s knowledge and understanding, such information is complete, accurate and true.

CHZ-003 Page 16

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The references (section 27) at the end of this report lists the sources consulted. Site visits to the Taysan copper project area and the related Batangas port facility has been conducted by the various Consultants including Mr Alistair Barton of Barton Metals and the GHD engineers. Details of visits by the Qualified Persons signing this report are provided in the Certificates of Qualified Persons located at the back of this report.

Section 3 and Table 3-1 of this report details the contributions made by the team that completed this PFS. Parts of other sections of the Report have been extracted from previous NI43-101 reports prepared or arranged by CZH or other contributors, as detailed in this document.

The team of Consultants have, in preparing this Report, followed methodology and procedures, and exercised due care consistent with the intended level of accuracy, using their professional judgment and reasonable care.

The quality of information and conclusions contained herein, are consistent with the level of effort involved in the Consultant’s services, based on: • information available at the time of preparation; • data supplied by outside sources; and • the assumptions, conditions and qualifications set forth in this report.

CZH have requested that Barton Metals Pty Ltd compile this NI43-101 Report with contributions from AMEC, the team of Consultants involved and CZH.

This NI43-101 report is to be read as a whole and sections or parts thereof should therefore not be read or relied upon out of context. This notice must accompany every copy of the IER, which is an integral document and must be read in its entirety.

2.4 QUALIFIED PERSONS

The Prefeasibility Study on the Taysan Project was reviewed by a number of Qualified Persons who are: • Mr Alistair Barton of Barton Metals Pty Ltd. Mr Barton will sign off on sections 1 to 12 (inc. but excluding section 7.5), section 14, sections 18 to 20 (inc.), sections 21.3 to 21.6 (inc.) 21.9 to 21.14 (inc.) and sections 22 to 28. • Mr Stewart Lewis of IMC Mining Group Pty Ltd will sign off on the Mining study segments including Capex and Opex costs (sections 15, 16, 21.1, and 21.7 but excluding section 16.2 which is the responsibility of Mr Cam Wylie of RDCL. • Mr Grahame Binks of AMEC who will sign off on the metallurgy and process sections - Report sections 13, 17, 21.2 and 21.8. • Mr Cam Wylie of RDCL, who will sign off on the geotechnical section 16.2 and the seismic assessment section 7.5.

The above sections constitute the entire report. Qualified Person’s Certificates and Date and Signature pages are provided at the back of the report.

CHZ-003 Page 17

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

3 RELIANCE ON OTHER EXPERTS

This report is composed of a number of summary sections or chapters which have been taken directly from previous NI43-101 reports and these references are mentioned as they are quoted. The previous NI43-101 reports on the project are as follows: • “January 2012 Update of the Mineral Resource Estimate”. Taysan Project, Batangas Province, Philippines, prepared by Ian Taylor of Mining Associates Pty Ltd. Document No: MA 1172-2-2, Effective date 16 March 2012. • “Revised Preliminary Economic Assessment for a 15 Million tonne per annum Mine with Higher Magnetite Recoveries” dated 28 February 2012 and prepared by Barton Metals Pty Ltd. (“February 2012 NI43-101 Report”) • “Revised Preliminary Economic Assessment for a 15 Million tonne per annum Mine”, Taysan Copper Gold Project prepared by Barton Metals Pty Ltd and dated 16/12/2011. • “Update of the Mineral Resource Estimate and Preliminary Economic Assessment for the Taysan Project” prepared by Mining Associates Pty. Ltd. and AMEC Minproc and dated 10th October, 2011. • “Mineral Resource Estimate and Preliminary Economic Assessment, Taysan Project, Batangas Province, Philippines” for Crazy Horse Resources Inc., dated 11 March 2011” and authored by Mining Associates Pty Ltd and AMEC Minproc, (“11 March 2011 NI43-101 Report”). • 04 June 2010 NI43-101 Report entitled “A Technical Review of Exploration and Resource Estimates of the Taysan Project, Batangas Province, Philippines”, dated 04 June 2010 and authored by Geosynthesis Pty Ltd, (“Geosynthesis NI43-101 Report”)

The PFS is based on the January 2012 resource estimate by Ian Taylor of Mining Associates as listed above.

The following consultants (and CZH) have supplied information to the PFS for the 15 Mtpa Project:

AMEC Australia Pty Ltd. – Process Engineering including process operating and capital costs and PFS management; Mining Associates Pty Ltd – Resource Estimations, QA/QC (previous NI43-101 report – March 2012), IMC Mining Group Pty Ltd – Mineral Reserve Estimates and Mining Studies; GHD – Infrastructure studies and capital costs; Gaia South Inc. – Environmental and Community; Regent Advisors LLC – Financial modelling and copper marketing studies; RDCL – Geotechnical studies; and CZH* – General and administration and minor infrastructure operating costs, land and port acquisition capital costs, owner’s costs and tenement holding costs.

A number of suppliers, service providers, equipment manufacturers and construction groups including Aboitiz (logistics) contributed to the studies and cost estimates by providing quotations and other relevant information.

CHZ-003 Page 18

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Many of the chapters of this report have been directly quoted from previous CZH NI43-101 reports regarding Taysan. The details of each chapter are listed below in Table 3-1. Note that CZH are responsible for conducting exploration, drilling, geological mapping, sampling and analytical work. This has been reported in previous NI43-101 reports as indicated above.

The opinions expressed in this report have been based on information supplied to the Consultants by CZH, its associates and their staff, as well as various Filipino government agencies and other consultants. The Consultants have exercised all due care in reviewing the supplied information. The accuracy of the results and conclusions drawn from the studies are reliant on the accuracy of the supplied data. The Consultants have relied on this information and have no reason to believe that any material facts have been withheld or that a more detailed analysis may reveal additional material information.

TABLE 3-1 RESPONSIBILITY FOR THE PREPARATION OF THE REPORT

Chapter Heading Author Source of Chapter Material

1 Summary Barton Metals Pty Ltd New Chapter 2 Introduction Barton Metals Pty Ltd New Chapter 3 Reliance on Other experts Barton Metals Pty Ltd New Chapter NI43-101 report. June 2010 4 property Description and Location Geosynthesis and CZH Report. Minor changes Accessibility, Climate, Local NI43-101 report. June 2010 5 Geosynthesis and CZH Resources, etc. Report. Minor changes NI43-101 report. June 2010 6 History Geosynthesis Report NI43-101 reports. June 2010, March 2012 Report and new 7 Geological Setting and Mineralisation Geosynthesis and CZH section 7.5- Seismic hazard assessment NI43-101 report. June 2010 8 Deposit Type Geosynthesis and CZH Report NI43-101 report. March 2012 9 Exploration MA and CZH Report NI43-101 report. March 2012 10 Drilling MA and CZH Report. Sample Preparation, Analyses & NI43-101 report. Oct 2011 and 11 MA and CZH Security March 2012 Reports NI43-101 report. Oct 2011 and 12 Data Verification Mining Associates March 2012 Reports New Chapter and NI43-101 13 Mineral Processing and Met. Testing AMEC report October 2011. NI43-101 report. March 2012 14 Mineral Resource Estimates Mining Associates Report 15 Mineral Reserve Estimates IMC New Chapter 16 Mining Methods IMC Mining Group Pty Ltd New Chapter 17 Recovery Methods AMEC New Chapter 18 Project Infrastructure GHD New Chapter Barton Metals/ Regent 19 Market Studies and Contracts New Chapter Advisors LLC

CHZ-003 Page 19

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Environmental Studies, Permitting, GHD (AMD only) and Gaia 20 New Chapter AMD South Inc. 21 Capital and Operating Costs AMEC, GHD, IMC, CZH New Chapter 22 Economic Analysis Regent Advisors New Chapter New Chapter and NI43-101 23 Adjacent Properties Geosynthesis, CZH report. June 2010. 24 Other Relevant Data and Information Barton Metals Pty Ltd new Chapter 25 Interpretation and Conclusions Barton Metals Pty Ltd New Chapter 26 Recommendations Barton Metals Pty Ltd New Chapter Previous NI43-101 reports and 27 References All Groups additional references.

CHZ-003 Page 20

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

4 PROPERTY DESCRIPTION AND LOCATION

4.1 OVERVIEW

The Taysan Project is comprised of two mining exploration permits and three mining exploration permit applications (permits: EP-IVA- 005 and EP-IVA-016, and permit applications: EPA-IVA-108, EPA-IVA- 111 and EPA-IVA-081) over five partly contiguous claim blocks covering a combined total area of 11,254 hectares. The Taysan copper-gold porphyry deposit is located on the core granted exploration permit (EP-IVA–005) which covers an area of approximately 4,086 hectares (Figure 4-1). Application for conversion of EP-IVA-005 to an FTAA has been made.

4.2 PROPERTY LOCATION

The Taysan Project is located the province of Batangas on the island of Luzon in the Republic of the Philippines, some 100km south of Manila and 20 km east of the provincial capital of Batangas City. The Taysan deposit lies within the municipality of Taysan (population 33,454) and the project tenement group straddles the municipalities of Taysan, Rosario, Ibaan, and Lobo.

Figure 4-1 displays the location of the tenements.

FIGURE 4-1 REGIONAL LOCATION OF TAYSAN PROJECT TENEMENTS

(Source: Asian Arc, 2010)

CHZ-003 Page 21

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The tenement group is detailed in Figure 4-2 and Table 4-1.

FIGURE 4-2 TAYSAN PROJECT TENEMENTS with EP-IVA-005 & EP-IVA-0016 highlighted (Source: TCC)

CHZ-003 Page 22

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 4-1 TAYSAN PROJECT TENEMENT DETAILS

Holder Group Licence Licence Tenement Holder Status Comments Interest Interest Expiry Date Area (Ha) Covers the 10 February EP-IVA- Resources and Asian Arc 100% 100% Development 2013 4,085.92 005 infrastructure (2nd renewal) sites EP-IVA- 26 May 2012 Kumakata 100% 100% Exploration 3,499.66 Contiguous 016 (1st term) Application 2 Block Areas EPA-IVA- Kumakata 100% 100% Development being 333.92 Parcel Nos. 1 and 081 processed 2 Application EPA-IVA- Kumakata 100% 100% Development being 1,167 Contiguous 108 processed Application EPA-IVA- Kumakata 100% 100% Development being 2,168 Contiguous 111 processed

4.3 OWNERSHIP

FORTUN NARVASA & SALAZAR provided legal due diligence for Crazy Horse in 2010 that the Taysan tenements were in order and that the companies Kumakata and Asian Arc were legally able to hold the tenements and legally able to assign them from Kumakata to Asian Arc. Based on their evaluation of the Mining Tenements, they are of the opinion that:

• Each of the Mining Tenements is in good standing, except EPA IVA-081 Amended, with respect to all applicable Philippine laws, rules and regulations, and with respect to all applicable Philippine governmental agencies, subject to continued compliance with the terms of the EPs and to further compliance with the requirements of the Mining Act in respect of the EP Applications. • Asian Arc, as assignee of the Application registered under the name of Kumakata by virtue of the Deed of Assignment dated August 13, 2010 between Asian Arc and Kumakata and registered with MGB Regional Office No. IV-A on October 13, 2010, must pursue the Motion for Reconsideration that it filed on February 21, 2011 in order to be able to obtain a reversal of the earlier denial of EPA IVA-081, Amended. • Except for the protest filed against EPA No. IVA-108 by the Office of the City Legal Officer of Batangas City on the ground that certain portions of the applied area fall within the designated special zone, SAFDZ and SCLIDZ, there is no pending or threatened or contemplated, suit, action, legal proceeding, litigation or governmental investigation of any sort which would: - In any manner restrain or prevent Kumakata from effectually or legally transferring the Taysan Project to Crazy Horse (Asian Arc) in accordance with the Agreements; - Cause any encumbrance to be attached to the Project;

CHZ-003 Page 23

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

- Divest title to the Project; or - Make Taysan (Asian Arc) liable for damages to any third party. • No claim has ever been asserted and there are no present circumstances which could reasonably form the basis for the assertion of any claim against Kumakata for losses of any kind as direct or indirect result of the presence on or under or the escape, seepage, leakage, spillage, discharge, emission or release from the Taysan Project of any hazardous substance. • There are no outstanding work orders or actions required or reasonably anticipated to be required to be taken in respect of the rehabilitation or restoration of the Taysan Project or relation to environmental matters in respect of the Project or any operations thereon. • No notice of any condemnation, expropriation or similar proceedings affecting the Taysan Project have been issued or commenced.

4.3.1 EP-IVA-005

EP-IVA-005 is in good standing with respect to all applicable Philippine laws, rules and regulations, and with respect to all applicable Philippine Governmental agencies. It was applied for on 20th December 2005 and granted on 7th January 2009 and has been renewed twice, the latest being 18 February 2012. It expires on 10th February 2013.

Taysan Copper Project resources and all proposed infrastructure except the fresh water dam and segments of the ultimate tailings storage facility area occur within tenement EP-IVA-005 (Figure 4-3). The Antipolo gold mine prospect also occurs within EP-IVA-005.

EP-IVA-005 has five holes within it which are not held under any mining tenement but which once covered quarry permits. These un-tenemented areas underlie the proposed plant site, south waste rock dump and southern Tailings Storage Facility (TSF”) dam sites. They were left un- tenemented by Kumakata when they applied for the area as at that time they were covered by quarry permits. The recent FTAA Application covers all these “holes” as indicated further below in section 4.3.6.

There is also one hole to the south of the deposit and the Tailings Storage Facility that is held under EPA by Mindoro Resources Ltd (“MRL”). The upstream area of the TSF will eventually flood an area under EP Application by MRL. The fresh water dam lies within EPA-IVA-081 and a small area of the fresh water dam toe and upstream flooded areas lie partly within an EP application by MRL.

Discussions have begun between Crazy Horse and MRL to gain control of these areas and MRL has made a spoken commitment that they will allow transfer of ownership of these areas to Asian Arc at no cost after CZH has carried out sterilisation work in the area to the reasonable satisfaction of both parties. A US$1 million capex cost has been included in Owners costs to carry out this sterilisation drilling.

CHZ-003 Page 24

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 4-3 PLANNED INFRASTRUCTURE IN RELATION TO EP-IVA-005

4.3.2 EP-IVA-016

EP-IVA-016 is in good standing with respect to all applicable Philippine laws, rules and regulations, and with respect to all applicable Philippine governmental agencies. It was applied for on 7th Jan 2008 and was granted on 27th May 2010 (Appendix 12) and is due for its first renewal on 26 May 2012.

Work has been delayed on this tenement as the deed of assignment between Kumakata and Asian Arc is still in process and has been ratified to the secretary of the Department of Environment and Natural Resources (“DENR”)

The PFS into the development of the Taysan Deposit indicates that the project development requirements have no impact on EP-IVA-016.

4.3.3 EPA-IVA-108

EPA-IVA-108 is in good standing with respect to all applicable Philippine laws, rules and regulations, and with respect to all applicable Philippine governmental agencies. The application was made by Kumakata on 5th September 2007.

CHZ-003 Page 25

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The PFS into the development of the Taysan Deposit indicates that the project development requirements have no impact on EPA-IVA-108.

4.3.4 EPA-IVA-111

EPA-IVA-111 is in good standing with respect to all applicable Philippine laws, rules and regulations, and with respect to all applicable Philippine governmental agencies. The application was made by Kumakata on 05th September 2007 (Appendix 21).

The PFS into the development of the Taysan Deposit indicates that the project development requirements have no impact on EPA-IVA-111.

4.3.5 EPA IVA-081

The application for this ground was made by Kumakata on 05th September 2007. This EPA area is being considered for a water dam site and therefore further tenement details are provided below.

On January 24 2011, MGB Regional Office No. IV-A Calabarzon, issued an Order denying EPA-IVA- 081 on the following grounds: (i) failure to secure proof of consultation with the Sanggunian concerned within two (2) years from the acceptance of the mining application; and

(ii) failure to comply with the publication, posting and radio announcement requirements within one (1) year from the date of acceptance of the mining application.

The Order was received by Kumakata on February 9, 2011 and was forwarded to Asian Arc on February 11, 2011.

On February 21, 2011, Asian Arc filed a Motion for Reconsideration of the order of denial and argued that

(i) Kumakata and/or Asian Arc were not given any of the required three (3) letter-notices that state in particular that it needs to submit proof of consultation with the Sanggunian concerned and that it should comply with the publication, posting and radio announcement requirements;

(ii) Asian Arc, as Kumakata’s assignee, cannot yet comply with the publication, posting and radio announcement requirements considering that under Section 21 of Department Administrative Order (DAO) No. 2010-21 dated June 28, 2010, such requirements may only be complied with upon issuance of an area status clearance and notice of application and that since no area status clearance and notice of application have been issued yet for the Application as there are unresolved issues relating to the areas covered by it, this cannot yet be complied with; and

(iii) the period of compliance for the submission of proof of consultation with the Sanggunian concerned has not yet lapsed because under Section 28 of DAO 2010-21, the applicant may still file proof of consultation with the concerned Sanggunian within one (1) year from issuance of its Exploration Permit (if granted) and it would be premature for Asian Arc to undertake project

CHZ-003 Page 26

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

presentation at this stage considering that it cannot yet establish with certainty the local government units which will be affected by the Application on account of the issue on the areas covered by it.

The motion for reconsideration was denied by the MGB Regional Office on 22 March 2011. An appeal of denial was made to the MGB through Fortun Narvasa Salazar pointing out the deficiencies and non- compliance by MGB and that the cancellation is contrary to Philippines law and current MGB internal rules and regulations. A ruling is yet to be determined by the MGB.

A deed of assignment has been signed between Kumakata and Asian Arc and has been accepted by the Regional office of the MGB. The grant of this tenement is also awaiting action by the MGB.

4.3.6 AFTAA-IVA-14

On 4th April 2012, Asian Arc filed a letter of intent to apply for a Financial or Technical Assistance Agreement application (“AFTAA”) over EP-IVA-005 as well as the “holes” around the quarry permits. This application has been made as a conversion of EP to FTAA rather than a new FTAA. On 10th April 2012, an AFTAA was lodged with MGB Regional Office IVA by Asian Arc (as tenement holder) covering 4,085.92 ha (entire area of the EP including “holes”). A letter of inclusion has been submitted with this application for the inclusion of the five “holes” in the EP to be included in the granted FTAA. No application is able to be made over active quarry permits at this time. The quarry areas will be included once the land is purchased during the land purchase phase of the project.

This application covers all of the Taysan resource and infrastructure other than the fresh water dam that is within EPA-IVA-081 and the ultimate TSF catchment area.

4.4 INDIGENOUS PEOPLE

A Field Based Investigation (FBI) by the National Commission of Indigenous People (NCIP) during applications by Kumakata confirmed that there are no indigenous people within the tenements held by Asian Arc or Kumakata.

4.5 WATER RIGHTS

Under Presidential Decree (PD) No. 1067, otherwise known as the “Water Code of the Philippines” integrated and multipurpose management of water resources is controlled through the National Water Resources Board (NWRB).

A water rights application for Taysan is in process.

4.6 KEY RESULT AREAS AND TIMELINES

A number of specific tasks with respect to government permits and ownership or control of land are required to be completed before the Taysan Project can be operated as a mine. It is considered strategic to streamline the tasks of the Tenement-Permitting Management Team into six Key Result Areas (KRAs) or Key Initiatives. These are:

CHZ-003 Page 27

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

1. Tenement Compliance 2. Conversion of EP-IVA-005 to FTAA 3. EIA and Environmental Compliance Certificate (ECC) 4. Water Rights 5. Timber Permits 6. Land Acquisition

4.6.1 Conversion of EP to FTAA

The application for conversion of EP to FTAA has been made. A letter of inclusion has been submitted with this application for the inclusion of the 5 “holes” (less quarry permits) in the EP. This will be progressed during 2012 and is expected to be completed by late December 2012.

4.6.2 Water Rights The application for water rights has been made with the NWRB and will also be progressed during 2012 and is expected to be completed by late December 2012.

Items 3, 5 and 6 above are on hold at the time of writing and will be started with the start of the Bankable Feasibility Study (BFS). This assumes that the project is fully funded through BFS and construction to the start of mining.

4.6.3 Environmental Impact Assessment and Environmental Compliance Certificate

The Environmental Impact Assessment (“EIA”) and Environmental Compliance Certificate (“ECC”) require a number of studies that will be started with the next phase of funding. In the meantime, baseline sampling is continuing including stream flow, well water level and quality measurements and stream water quality. The baseline study has been written by Gaia South and comprises a section within the Taysan Prefeasibility Study.

The remaining process for the EIA will be scoped at the start of the BFS, starting with an evaluation of current baseline data. Impact identification and mitigation would be examined in conjunction with the Environmental Management Plan (EMP). Final EIA Documentation will be submitted to the DENR as application for the ECC to construct and operate the mine. It is estimated that the studies will take approximately seven months and the processing by government departments will take approximately three months, consecutively.

4.6.4 Timber Permit

Timber cutting permits are only required on land classed as forestry lands. Only 19 ha or 0.7% of the land required for the project are classed as forestry land and these occur in the area of the proposed fresh water dam. These forestry lands only will require a survey of number, density and species of trees before the application can be made. Timber rights including studies and the processing of the application will be completed in conjunction with the EIA.

CHZ-003 Page 28

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

4.6.5 Land Acquisition

Consecutively with the start of the BFS, the timber cutting permit and ECC applications, land acquisition will begin. This process will require the involvement of the LGU’s and the local people affected and will require public meetings, further studies and planning on the part of the company including a study of cash payments vs. relocation, long term lease of some areas and other options. This process including purchase of lands to allow construction to begin is expected to take 24 months before and during the construction period. Later land requirements such as land to be used later in the life of the TSF will be purchased over a five year period.

4.6.6 Legal Review

It is recommended that a full review of all mining laws and related environmental and land title laws is carried out early in the BFS to ensure that all permits and land acquisition processes are on track.

CHZ-003 Page 29

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

This section was copied from the Geosynthesis Pty Ltd NI43-101 Report, “A Technical Review of Exploration and Resource Estimates of the Taysan Project in Batangas Province, Philippines for Taysan Copper Corporation and Crazy Horse Resources Inc., June 2010”.

5.1 ACCESS

Taysan is located approximately 20km east of the provincial capital, Batangas City, on the south coast of Luzon. Batangas City is 100km and 1.5 hours away from Manila via the South Luzon Expressway and STAR Tollway. The project site can be reached via the National road to Lipa City and the town of Taysan. Access is good in dry weather with sealed roads to within several kilometres of the project area.

There is no existing airport in Batangas City however Ninoy Aquino International Airport is just 1.5 hours by road. Alternatively, there is a government-operated airport, the Fernando Airbase in Lipa City, approximately 20km north northwest of Taysan.

5.2 CLIMATE

The dry season extends from November to April and the wet season for the rest of the year. The area falls within the Type 1 climate, with two pronounced seasons: dry from December to April and wet from May to November with average temperatures around 25ºC with April/May being the hottest months when temperatures can reach 35 – 40ºC. The average annual rainfall is 1.6m with a monthly average of about 14cm (see Figure 5-1). The main atmospheric systems affecting rainfall are the southwest monsoon from June to September, the northeast monsoon from October to February and the easterly winds from March to April.

FIGURE 5-1 RAINFALL, TEMPERATURE AVERAGES FOR BATANGAS, PH (SOURCE: MSN WEATHER)

CHZ-003 Page 30

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Typhoons, local thermal convections and inter-tropical convergence zones contribute significantly to the total annual rainfall. At least 27 tropical cyclones have been recorded tracking within 50 km of Taysan over the 104 year period 1906 to 2009, corresponding to an average of about one tropical cyclone every 4 years (Figure 5-2).

FIGURE 5-2 HISTORY OF TYPHOONS 1906 TO 2009

within 50km radius of Batangas City (Source: Kitamoto, 2010)

5.3 INFRASTRUCTURE AND PHYSIOGRAPHY

The province of Batangas, which is situated at the intersection of 14º north latitude and 121º east longitude in the southwestern Luzon in the midst of the Southern Tagalog Region. It ranks sixth among the largest provinces of the Region. It is bounded on the north by Cavite, on the east by the province of Quezon and Laguna, on the south by the Verde Island Passage and on the west by the South China Sea. It has a land area of 316,166 sq. kilometers and a population of approximately 1.7 million distributed over 31 municipalities and three cities.

Batangas City is a major commercial centre. The city hosts a deep water port facility and is a principal storage and distribution centre for oil and petro-chemical products.

The Batangas International Port serves both local and foreign passengers and cargo requirements. It is equipped with elevated passenger tubes and ample berthing facilities that make it the most modern port facility in the country. In addition, the 42-kilometer, 4-lane Southern Tagalog Access Road (also known as South Luzon Expressway Extension) is now directly linked from the Batangas City International Port to Metro Manila. Further, there are plans to revive the railway network from the port of Manila to Batangas City. Batangas also has a government-operated airport - the Fernando Airbase, in Lipa City. Industrial development is focused within the port areas that include the petrochemical plants and oil refineries.

CHZ-003 Page 31

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Power in Batangas Province is supplied by the National Power Corporation with the Manila Electric Corporation and the Batangas Electric Cooperative (Batelco).

Telecommunication facilities and landlines are provided by the Philippine Long Distance Telephone Company (PLDT), Globe Telecom, Digitel, Smart, Mobiline, Telecommunication Office (Telof), and the Government Telephone System (GTS).

Local industry in the immediate Taysan area is primarily agricultural and includes rice, coconut, banana and mango farming as well as cattle grazing. A large limestone quarry and cement manufacturing facility is located 4km west of Taysan at the Fortune Cement Factory (La Farge-Republic Cement, Batangas Operations).

In May 2011, CHZ entered into an agreement with a private Philippine company, to acquire its 15.94- hectare port facility in Batangas, Philippines. The facility includes a six-metre-by-147-metre T pier with two dolphins, licensed foreshore lease, administrative buildings, security fencing and site services, including power and water. The port facility is accessible from the Taysan Project via a 24-kilometre paved road.

Batangas Province is characterized mainly of rolling plains and the rest are hilly and mountains. In the central part is Mt. Makulot with a summit of 1,145 meters above sea level. The world-famous Taal Volcano is in Batangas, lying within Taal Lake, north of Batangas City. The volcano is active, showing signs of activity since 1991, with strong seismic activity and ground fracturing events. The Philippine Institute of Volcanology and Seismology (PHILVOLCS) regularly issues notices and warnings about current activity at Taal, including ongoing seismic unrest. As such Taal’s main crater is off-limits to the public and declared a high-risk area and a Permanent Danger Zone (“PDZ”). The PDZ does not extend beyond the Lake Taal area, some 35km from Taysan (Figure 5-3).

FIGURE 5-3 TAAL VOLCANO BASE SURGE HAZARD MAP (SOURCE: PHILVOLCS)

Within the immediate area, the Taysan landscape consists of low hills and open plains with elevations ranging from 120m to 260m RL. Photo 5-1 and Photo 5-2 display the typical topography. Average elevation of the project area is 142m ASL.

CHZ-003 Page 32

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

PHOTO 5-1 VIEW LOOKING NORTH OVER THE TAYSAN DEPOSIT

(Source: GPL. May 2010)

PHOTO 5-2 VIEW LOOKING WEST OVER THE TAYSAN DEPOSIT

(Source: GPL, May 2010)

Land usages within the granted tenement areas include orchards, rice cultivation, other cultivation and grassland with small areas of coconut groves and bushland and Figure 5-4 Land use within EP-IVA- 005, 016 displays this land usage.

CHZ-003 Page 33

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 5-4 LAND USE WITHIN EP-IVA-005, 016

(Source: KMCI 2009)

CHZ-003 Page 34

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

5.4 LOCAL RESOURCES - CORPORATE SOCIAL RESPONSIBILITY

In May 2011, CZH received a formal resolution of support to develop its Taysan Project from the Provincial Board of Batangas, Republic of the Philippines, and a formal resolution of appreciation from the Taysan municipal council. Provincial resolution 253 was passed supporting the Company as "a responsible mining company and an active player in the private government partnership (a key initiative by President Aquino to spur development growth) in bringing about continued development and industrialization to the province of Batangas”.

Resolution 253 manifests government support of the Company’s approach and mining methods to be used in the development of Taysan Copper Gold Project. The Resolution recognizes that to achieve sustainable development, “it is imperative that the Province of Batangas and the Municipalities of Taysan and Lobo welcome and encourage the presence of foreign and local investors in the Province in the mineral industry such as Crazy Horse Resources Inc.”.

Municipal Resolution 2011-006 was passed by the Taysan Municipal Counsel Board, expressing gratitude to the Company and its officers for the invaluable support they have extended to the Taysan municipality.

CHZ-003 Page 35

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

6 HISTORY

The following summary of the History of Exploration (sections has been taken from the Geosynthesis NI43-101 Report, “A Technical Review of Exploration and Resource Estimates of the Taysan Project in Batangas Province, Philippines for Taysan Copper Corporation and Crazy Horse Resources Inc., June 2010”. It is recommended that a review of the Geosynthesis report is conducted in conjunction with a review of this report because of the reliance on historical data in establishing and developing the PFS results.

6.1 DISCOVERY AND OWNERSHIP Southern Batangas Province, the location of the Taysan porphyry copper deposit has long been known as a mineralized district. Gold was panned in the early 19th century on the west side of Mt. Banoy and both vein- and Kuroko-type copper deposits were mined on the flanks of Mt. Banoy during World War II. Gold was produced from the Antipolo mine located 2 km west of the Taysan Copper-Gold Deposit. While pits had been dug on the central ridge of Taysan this mineralization was first recognized as a porphyry copper outcrop by JA Wolfe in 1968.

FIGURE 6-1 TAYSAN COPPER-GOLD DEPOSIT – DISCOVERY OUTCROP (Source: GPL, May 2010)

Near the south western portion of the batholith and to the southeast of Taysan, the El Paso disseminated deposit of two million tons was developed (Wolfe et al., 1978). Also to the south of Taysan, the Lobo mine on the western side of Mt. Lobo produced enargite with silver in a barite gangue from a Pleistocene vein deposit. Elsewhere galena with silver was produced from veins at Mainit and from a breccia pipe at Looc in western Batangas Province.

CHZ-003 Page 36

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

6.2 PREVIOUS EXPLORATION Copper and gold mineralization has been recognised in the Taysan area since at least World War 2. During the Second World War, the Japanese selectively mined malachite bearing exposures. Following the war, the Soriano Group operated a small underground gold mine at Antipolo, 2km west of the Taysan Copper-Gold Deposit. The Taysan area had been explored and drilled by previous companies since it was claimed in 1968. The project tenement area had been investigated and drilled by four companies since 1968. A total of 195 drillholes had been drilled up to 2009 with a total meterage of about 44,531 of which 144 holes totalling 36,562m were drilling at or nearby the Taysan Copper-Gold Deposit. Details are provided in Table 6-1 below.

TABLE 6-1 HISTORICAL DRILLING 1983 TO 2009

Drill Series Prefix Date Holes Type Meterage Company TY 1983 2 DH 328 TCI NT 1970s 19 DH 6,356 Newmont WT 1970s 23 DH 2,293 TCI BT 1977-85 66 DH 18,595 Benquet CT 1992-1993 25 DH 7,183 Chase MT 1996 7 DH 606 Chase/Magma TDH 2007 10 DH 3,520 KMCI TRC 2006-2007 41 RC 4,449 KMCI TDH 2009 2 DH 1,200 KMCI Total 195 44,531

The following is a chronological list of companies & work programs completed on the project:

• 1968 - Dr. John Wolfe recognized the copper porphyry style mineralization and laid claim to the ground through Taysan Copper Inc (“TCI”). • 1969 - Occidental Minerals optioned the ground and completed an IP survey followed by diamond drilling. No information or data concerning Occidental's exploration program is available. • 1970 - The property was returned to TCI, which was controlled by Dr. J. Wolfe. • Early 1970’s - TCI completed ground magnetic and Induced Polarization surveys, followed with 20 drill holes for a total of 2,130m. • The property was optioned to Newmont who drilled an additional 17 holes, totalling 5,532m, which were assayed for copper only. The property was returned to TCI due to change in corporate policy. • 1977-mid 1980's - Benquet Corp entered into an agreement with TCI and completed 66 diamond drill holes (18,595), metallurgical and engineering studies. Benquet suspended their activities on the Taysan property to pursue another project. • 1991 Chase acquired an option over the shares of TCI.

CHZ-003 Page 37

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• 1992 - 1995 - Chase completed 30 diamond drill holes (7,784m) and commissioned Snowden & Associates to complete a reserve estimate and geostatistical study, and Optimet Laboratories Pty Limited to complete a metallurgical study. • Oct. 1995 - The Batangas project, including the Taysan copper/gold deposit was joint ventured to Magma Copper Company • 1996 - IP survey, soil geochemistry, and 11 drill holes. • 1998 - Chase terminated agreement with TCI. • 2004 EP IVA-005 was applied for by Phelps Dodge. Airborne magnetic survey undertaken in 2005 and ground magnetic survey undertaken in 2006. • 2007 Freeport takeover of Phelps Dodge, regional exploration program undertaken by Kumakata Mining (Freeport) including IP surveys, stream sediment sampling and a program of RC and Diamond drilling of regional targets. • 2009 JOGMEC Resource Estimate

CHZ-003 Page 38

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

7 GEOLOGICAL SETTING AND MINERALIZATION

The following sections have been summarised from the Geosynthesis NI-43-101 Report (R Sowerby, June 2010) Section 6 and Section 8.

7.1 REGIONAL TECTONIC SETTING The Philippines comprises a series of island arc terranes that have been accreted during the Pliocene (1.6 – 5.3 Ma). These terranes comprise a variety of oceanic arcs that were translated from the south since the Middle Miocene (5.3 – 23.7 Ma) through the rotation of the Philippine Sea Plate, and juxtaposed in their present position sometime in the Pliocene. The archipelago comprises a NNW trending mobile zone which is bound to the southwest by a stable cratonic zone (Palawan, Malaysia) and to the east by the Philippine Trench. The Island of Luzon is bound to the east and west by the Manila Trench and East Luzon Trench respectively. The Philippine Mobile Belt occupies the zone of deformation and magmatic activity that occurs between these trenches and covers most of the Philippines. This belt is interpreted as a collage of island arc terrains. The Philippine Fault occurs within this zone and forms an arcuate set of fault structures extending from northern Luzon to southern Mindanao. (Figure 7-1 )

FIGURE 7-1 TAYSAN LIES WITHIN THE WESTERN LUZON MAGMATIC ARC (SOURCE: GARWIN ET AL, 2005)

CHZ-003 Page 39

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

7.1.1 Luzon Arc

The Taysan Copper Deposit is located on the south-western segment of the island of Luzon in the province of Batangas. It is tectonically situated along the Western Luzon Arc (magmatic-plutonic belt) that extends through Batangas to and beyond the island of Marinduque (Figure 7-2). The Luzon arc represents a composite arc system that extends 1,200 km southward from the Coastal Range of south- eastern Taiwan through the volcanic islands north of Luzon, the Luzon Central Cordillera, and the Western Luzon arc, and terminates in the vicinity of southern Marinduque Island (above figure). The Mount Pinatubo stratovolcano forms part of the Quaternary portion of the western Luzon arc. Older portions of the arc occur in the Luzon Central Cordillera and include Eocene to Miocene basaltic to andesitic volcanic breccias, volcaniclastic rocks, limestones, shales, and conglomerates.

Porphyry copper-gold deposits and related high and intermediate sulphidation epithermal systems are abundant in the Luzon Central Cordillera and western Luzon arcs. These deposits are predominantly centred in Neogene to Pleistocene quartz diorite-diorite intrusions hosted by coeval volcanic suites.

Central Cordillera

The Central Cordillera hosts the intermediate-sulphidation gold lode systems of Acupan, Antamok, and Itogon, and the Santo Thomas II porphyry in the Baguio district, where an estimated 800 t Au have been produced.

The Lepanto high sulphidation enargite-gold deposit, the Victoria and Teresa intermediate-sulphidation vein systems, and the Far South East and Guinaoang porphyry deposits, occur in the nearby Mankayan district which contains a minimum of 700 t Au in combined past production and current resources. There is a clear genetic association between porphyry and epithermal styles of mineralization in Mankayan. Both the Mankayan and Baguio districts occur in zones of structural complexity near major north-northwest–trending fault splays of the sinistral strike-slip Philippine fault.

Western Luzon Arc

The gold-rich Dizon copper porphyry deposit in the Zambales region and the Taysan copper-gold porphyry deposit in the Batangas area occur in the western Luzon arc. Both porphyry deposits are located in Miocene to Pliocene windows in Quaternary volcanic cover.

CHZ-003 Page 40

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 7-2 THE WESTERN ARC (WVC) OF THE LUZON ARC

(Source Garwin et al, 2005).

7.1.2 Batangas Regional Geology

Regional structures in the Southern Batangas Mineral District have been interpreted from SRTM (shuttle radar topographic mission) topographic data (Figure 7-3, Cox 2010). The deeply eroded terrain to the northeast comprises the San Juan Batholith of Early Miocene age. The batholith is bound on its southern side by the Laiya Fault Zone, a major crustal discontinuity that separates older terrain to the north from younger volcanic sequences to the south. Two (2) deeply eroded stratovolcanic centres lie south of the Laiya Fault Zone, the Mt Talahib volcanic centre and the Mt. Lobo volcanic centre. A major east-northeast trending structural lineament (C-1) separates the Talahib and Lobo volcanic centres and passes near the southern edge of the Calo and El Paso prospects. Sub-parallel structural lineaments pass along the edge of the Taysan porphyry deposit and also define the Archangel trend along which the Balibago, Pulang Lupa, Kay Tanda, Lumbangan, Marita and Bootin prospects are arrayed. These northeast trends, at the scale of the Batangas district, are parallel to structures that comprise the extensional Macolod Corridor (Figure 7-4, Cox 2010).

CHZ-003 Page 41

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 7-3 SHUTTLE RADAR TOPOGRAPHIC MISSION (SRTM) DATA

(Source: after Cox 2010, Rohrlach, 2008)

FIGURE 7-4 REGIONAL STRUCTURES IN THE SOUTHERN BATANGAS MINERAL DISTRICT

Interpreted from SRTM Data (Source: after Cox 2010, Rohrlach, 2008)

The copper mineralization in Taysan deposit was emplaced during the waning stage of formation of the diorite batholith and associated with the formation of the younger dacite porphyry. The exposed and drilled portion of the copper deposit is localized at what appears to be the northwest tail-end of the

CHZ-003 Page 42

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 batholith. The volcanic events during the latter stage of Pleistocene, covered most of the Taysan district with young tuff deposit and pyroclastics.

As the area is covered with young tuff deposit, the extent of the copper mineralization and possible extensions along fringes of the diorite are discernible in the aeromagnetic survey.

7.2 LOCAL GEOLOGY

Pleistocene Tuff covers approximately 70% of the tenement particularly in areas with flat and gently rolling topography. This tuff has a thickness of between 0 and 50 metres over the Taysan copper deposit. The tuff is characterised by having lapilli and lithic fragments supported by a fine matrix of ash and crystal fragments. (Figure 7-5 Shows the Regional Geology of the Taysan Project).

FIGURE 7-5 REGIONAL GEOLOGY OF THE TAYSAN PROJECT

(Source: CZH, 2011)

Metavolcanics, conglomerate, and diorites are exposed in the south to southeast portion of the tenement in areas with rolling to moderately rugged topography. Hornblende diorite occurs as a northwest trending elongate body protruding from the northwest margin of the San Juan batholiths. The bulk of the diorite exposed is the medium to coarse-grained biotite hornblende diorite batholith. Compositional varieties of the batholith recognized are hornblende diorite in Taysan and tonalite in Rosario. The diorite is similar in composition to those associated with porphyry deposits throughout the Philippines

CHZ-003 Page 43

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Fine to medium-grained hornblende diorite dikes intruded the batholith at the southeast portion of the tenement. The dacite porphyry exposed near the central portion of the tenement likewise intruded the batholith. The emplacement of this porphyry together with the reported earlier narrow quartz diorite porphyry dikes in the batholith is believed to coeval with the mineralization at the Taysan copper deposit.

At Taysan, the diorite is intruded by hornblende dacite porphyry which is known primarily from drilling data. This porphyry occurs as a generally tabular body striking northwest and dipping 30-60o to the northeast. Andesitic metavolcanics and sediments occur along the north-western and southern margins of the diorite batholiths.

As described by Chase (Erceg, 1995), the Taysan deposit is located on the western margin of the Tolos (San Juan) Batholith near its intrusive contact with the San Juan metavolcanics. The batholith is dominantly a quartz diorite. Intruding the quartz diorite is a series of porphyritic quartz diorite stocks or dykes. Late stage porphyritic andesite occurs as narrow dykes cutting both the quartz diorite and porphyritic quartz diorite. Associated with the porphyritic quartz diorite stocks and the mineralization is a series of breccias. At least four types are recognised. The breccias are common and some have played an important role in the localisation of the mineralization. The breccias are particularly well developed along the contacts of the porphyritic quartz diorite and in particular at the apices of the stocks, but are difficult to recognise due to intense alteration (Figure 7-6). The different breccias are: • Intrusive breccias are a group of pre-mineralization breccias developed along the margins of the porphyritic quartz diorite, characterised by an intrusive matrix and xenoliths of the adjacent wallrock. Although considered by Wolfe et al (1979) as host to the ore, generally Chase considered these are pre-mineralization and relics of the original intrusive stoping. Adjacent to these xenoliths, the porphyritic quartz chlorite often displays a primary intrusive rhythmic banding ("brain" rock) indicating high and variable vapour pressures; • Hydrothermal breccias are polymictic breccias comprising angular to sub-rounded clasts of intrusive phases and common quartz fragments. The breccia composition appears to reflect the wallrock composition implying little lateral or vertical movement during formation. The breccias are strongly altered, usually sericitised, and are host to chalcopyrite and bornite mineralization. The geometry of these breccias is poorly understood but probably are fingers extending down into the stocks and coalescing at higher elevation into a massive composite breccia “pipes"; • Pebble dykes are not common but are recorded peripheral to the deposit. They are generally well defined narrow structures (~ 1 metre width) containing well rounded clasts; • Fault breccias are interpreted from abundant brecciation associated with mainly post mineral faulting that is generally logged as a fault zone. The fault breccias consist of abundant angular clasts in a silty sheared matrix.

7.3 STRUCTURE

According to Chase geologists (Erceg, 1995), the structural elements at Taysan indicate a dilational regime similar to the present situation along the Philippine fault has been operating since the Miocene. Evidence for this includes:

1. Elongation of the Tolos (San Juan) batholith in a northwest-southeast direction within a dilation zone;

CHZ-003 Page 44

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

2. Elongation of the porphyritic quartz diorite dykes in a similar direction; 3. A conjugate subvertical quartz vein set with dominant orientation of 350 and 070 implying horizontal compression from the northwest and southeast.

Several faults oriented generally north-south, are inferred to truncate and displace the Taysan deposit. Air photo lineaments suggest cross cutting features at 045 degrees dislocating topographical features however a major sub-vertical shear zone on Taysan ridge was measured as striking 260". Faults of unknown orientation are frequently logged in drill core (Erceg, 1995).

7.4 MINERALIZATION

Mineralisation at Taysan is a typical porphyry copper-gold style occurring at between 1-2 km below the paleo-surface. Mineralisation comprises chalcopyrite and bornite with associated pyrite and Fe-Ti oxides (magnetite, sphene, ilmenite and rutile). Fe-Ti oxides and biotite-chlorite alteration assemblages are intimately associated with copper mineralisation (De los Santos, 1995).

Various authors have suggested that two separate mineralising events may have taken place: 1. An initial porphyry style mineralising event associated with the cooling of the parent quartz diorite porphyry intrusion (circa 14.8 MA) and; 2. Reactivation of porphyry copper mineralisation with later volcanic events at Mt Banoy (7.8 MA) and intrusion of porphyritic andesite and Dacite dykes.

At Taysan copper mineralization has been observed to occur as: 1. Disseminated or fine fracture filling chalcopyrite and bornite with biotite and magnetite, as potassic alteration products of original hornblende phenocrysts and sometimes associated with orthoclase veining or alteration/flooding of the diorite. 2. Coarse chalcopyrite deposited with quartz-magnetite stockwork veins in the centre of the orebody. 3. Late copper ± bornite mineralisation also occurs as vein swarms and hydrothermal matrix-fill in late potassic stage hydrothermal breccias, often below of cross cutting quartz magnetite veins. Due to their porosity these breccias are usually overprinted by late stage retro argillic alteration.

Phase 1 is the oldest and Phase 3 is the youngest copper mineralising phase as observed from cross cutting relationships in core. These mineralising events are logged as K1, K2 and K3 alteration phases. The upper portions of the ore body and at depth within the quartz-magnetite stockwork and breccia zones have been subject to a late stage phyllic alteration comprising sericite (illite)-quartz-pyrite- chlorite-hematite-anhydrite to argillic alteration comprising sericite (smectite)-chlorite-calcite-epidote- pyrite±kaolinite/dickite. This is interpreted as late stage retrograde acidic/sulphate fluids refluxing down the more porous sections of the ore body.

T.M. Leach (1999) conducted a study of the mineralization at Taysan from which the following descriptions were extracted: “Copper +/- gold mineralization at Taysan occurred during the waning stages of the porphyry system associated with moderately low temperature (<250-300C) chlorite-epidote-sericite- laumontite retrograde events. Ore grade (>0.25% copper) occurs in two sigmoidal, easterly dipping zones that are not related to the distribution of the dacite porphyry stocks, the Stage I potassic or

CHZ-003 Page 45

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 the Stage II porphyry quartz veins. It is interpreted that these dilational features have formed in response to sinistral rotation on the NE-structures (Figure 7-6). It is speculated that the late stage mineralising fluids have exsolved from the deep parent melt to the dacitic porphyry stocks and migrated up the NE-structures. Cooling and/or dilution of these fluids within the dilational structures resulted in copper-gold mineralization.

FIGURE 7-6 E-W CROSS-SECTION OF THE GEOLOGY AND MINERALIZATION OF THE TAYSAN DEPOSIT

(Source: after Leach, 1999)

Chalcopyrite is the main copper mineral and was deposited almost exclusively during late stage (Stage IV) replacement and deposition. It occurs as: • As disseminated grains that fill open cavities in the wallrock, commonly associated with chlorite (+/- sericite) alteration of mafics • In thin discontinuous to sheeted fractures that cut the dacite porphyry and the diorite/granodiorite; and • In fractures and cavities in Stage II quartz and less commonly in Stage III K-feldspar-biotite veins associated with disseminated mineralization

The chalcopyrite typically overgrows, but in places is intergrown with chlorite, epidote and sericite; and is overgrown, but locally intergrown with, calcite and rarely laumontite.

Bornite is rare at Taysan and like chalcopyrite is almost exclusively associated with the Stage IV event. It is common where sericite alteration is intense and occurs as intergrowths with, and overgrowing chalcopyrite. Idaite locally co-exists with bornite.

Pale yellow (iron poor) sphalerite occurs in sericite-chlorite veinlets at shallow levels and co- exists with chalcopyrite and trace galena. Traces of bismuth sulphosalts also are locally

CHZ-003 Page 46

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

associated with chalcopyrite mineralization. Pyrite is rare, and is commonly absent from drill core at Taysan, and is only encountered in moderate quantities where sphalerite mineralization is present.

Native gold is observed in trace amounts as inclusions in chalcopyrite hosted in sheeted Stage IV chlorite-carbonate+/- epidote +/- sericite veinlets.”

Gold mineralization is broadly associated with copper mineralization. Highest gold grades are associated with the quartz magnetite stockwork zone A study of gold distribution undertaken by Chase resources indicated gold copper ratios approached 1 (ppm Au):1 (% Cu) in the stockwork zone but outside this zone the ratio fell to between 1:2 and 1:3.

The area of mineralized zone is approximately 1.5km long in NW-SE direction and 0.5km wide and the depth as defined by drilling is approximately 400m from the outcrop at elevation 150mASL to - 300mBSL.

7.5 SEISMIC HAZARD ASSESSMENT – PEAK GROUND ACCELERATION ESTIMATION

This report section has been copied from the GHD report “Seismic Hazard Assessment. Peak Ground Acceleration Estimation” prepared by J Liang for Crazy Horse Resources, Inc. for the Taysan Prefeasibility Study and dated 30/5/2011. Heading numbers, Figure numbers and Table numbers have been changed to conform with this report. References are included in section 27.

7.5.1 Introduction

The objective of the proposed seismological desk study is to estimate seismic hazard in the Taysan project area based on available published sources and provide an estimation of Peak Ground Acceleration (PGA) corresponding to both the 475-year return period event and the maximum credible earthquake (MCE). The results of this report have been based on the coordinates of Taysan project site (13º45’00"N and 121º10’00"E) as shown in Figure 7-7. The scope of this study is as follows: • Review of public domain seismic records and associated papers from available published sources; • Review of the latest references on structural geology and tectonics of the region; • Review of available seismic studies within the vicinity of the project area; • Assessment of PGA corresponding to both the 475-year return period event and the maximum credible earthquake (MCE level).

CHZ-003 Page 47

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 7-7 TAYSAN PROJECT SITE

7.5.2 Methodology

To estimate seismic design parameters, it is important to evaluate the earthquake hazards predicted for the study site. Two basic methodologies used for the purpose of seismic hazard analysis are the “deterministic” (DSHA) and the “probabilistic” (PSHA) approaches. In the deterministic approach, the strong-motion parameters are estimated for MCE, are assumed to occur at the closest possible distance from the site of interest, without considering the likelihood of its occurrence during a specified period. On the other hand, the probabilistic approach integrates the effects of all the earthquakes expected to occur at different locations during a specified life period, with associated uncertainties and randomness taken into account. As this study is mainly based on the studies of historical events, seismotectonics and seismic zonation in the literature, DSHA is adopted to estimate PGA for MCE at the project area. The employed procedure of DSHA was as follows: • Determining seismic sources around the study site based on the previous studies in the literature together with the updated regional seismicity; • According to the previous studies in the literature, the expected maximum earthquakes of each seismic source are derived; • Selecting an appropriate attenuation model and calculating the minimum distance between the study site and the seismic sources; • Calculating the PGA at the study site based on the expected maximum earthquake of each seismic source and the distance; • Choosing the maximum PGA at the study site as the worse scenario.

It should be noted that there is no probabilistic assessment done in the DSHA process and hence there is no associated recurrence interval we can apply to the MCE. Accordingly, the PGA for 475-year return period is defined based on the regional PSHA presented in the literature.

CHZ-003 Page 48

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

7.5.3 Earthquake Catalogues and Seismicity Map

The Taysan project site is located on the south western part of Luzon in the Philippines which is one of the most seismically active regions of Asia. Historical records show that this region has frequently experienced earthquakes of all magnitude. Based on the recorded data during the period of 1907 - 2011 collected by the International Seismological Centre (ISC), there are about 15,000 earthquakes with Mw4 and larger located at this region. The earthquake catalogue compiled by ISC is used as a basis for the hazard analysis in this study. Moment magnitude (Mw) is chosen as a measurement to quantify the size of earthquake. Other types of magnitude, i.e. surface wave magnitude (Ms) and P wave magnitude (mb) are converted to Mw by using empirical correlations (Ekstrom and Dziewonski, 1988, Hanks and Kanamori, 1979 and Nagamune, 1972). The regional historical seismicity is plotted in Figure 7-8. Figure 7-9 shows epicentres within about 200km of the site. It is evident from Figure 7-10 that only very large events are reported before 1964 and the data reporting increases after 2000. The resulting FIGURE 7-11 shows that earthquake depths are generally shallow (less than 70km) and exhibit two peaks, namely 0-10km and 30-40km. There exists a trough in the 20-30 km depth range may be indicative of a separation between the crustal and the intraslab activity.

During the period between 1907 and 2011, more than 4,000 events with magnitude larger than ML4 have occurred at distances of less than 200km from Taysan project site. Among them, 36 events occurred at less than 20km from the site (Table 7-1).

TABLE 7-1 EVENTS THAT HAVE OCCURRED AT EPICENTRAL DISTANCES OF LESS THAN 20KM FROM THE TAYSAN PROJECT SITE

Year Month Day Latitude Longitude Magnitude Distance(km) 1983 7 4 13.7332 121.2698 5.5 11.26 1983 12 29 13.8005 121.0184 5.2 17.00 1984 8 17 13.5876 121.2435 5.5 19.86 1985 12 31 13.6949 121.0657 5.3 12.54 1989 11 9 13.8761 121.1656 4.8 14.02 1994 11 15 13.6158 121.0583 6.0 18.99 1994 11 20 13.5872 121.2128 5.4 18.77 1994 11 22 13.7000 121.1210 5.5 7.46 1995 7 12 13.6302 121.1911 5.3 13.57 1995 10 31 13.7930 120.9912 5.2 19.58 1996 5 30 13.7100 121.3100 4.4 16.07 1996 11 20 13.6907 121.0403 4.6 15.19 1997 4 15 13.6809 121.0135 4.1 18.28 1998 3 18 13.8869 121.2828 5.1 19.70 1998 7 28 13.6895 121.0044 4.8 18.81 1998 10 18 13.8702 121.0491 4.6 18.46 1999 5 20 13.7450 121.0350 4.4 14.27 2000 2 3 13.6800 121.1800 4.1 7.91 2002 9 17 13.8275 121.0656 4.6 13.93

CHZ-003 Page 49

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 7-1 EVENTS THAT HAVE OCCURRED AT EPICENTRAL DISTANCES OF LESS THAN 20KM FROM THE TAYSAN PROJECT SITE

Year Month Day Latitude Longitude Magnitude Distance(km) 2003 4 22 13.8735 121.1890 4.7 13.94 2005 9 1 13.7388 121.1153 4.7 5.72 2006 2 16 13.8029 121.1926 4.6 6.50 2007 1 25 13.6957 121.0208 4.7 16.91 2008 11 1 13.7321 121.3379 4.2 18.57 2009 1 23 13.6137 121.0828 4.6 17.68 2009 1 26 13.6540 121.1890 4.6 10.94 2009 3 3 13.6762 121.0011 4.5 19.71 2009 3 24 13.8032 121.0297 4.5 15.96 2009 11 15 13.7358 121.1824 4.5 2.29 2009 12 18 13.6629 121.1442 4.5 9.99 2010 3 31 13.6568 121.1195 4.3 11.56 2010 5 29 13.7310 121.2096 4.3 5.06 2010 9 9 13.8044 121.2644 4.1 12.13 2010 9 10 13.8615 121.2167 4.3 13.51 2010 10 7 13.7080 121.0270 5.0 15.83 2010 12 6 13.7339 121.1744 4.6 1.96

CHZ-003 Page 50

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Detail shown in Fig. 3

FIGURE 7-8 REGIONAL HISTORICAL SEISMICITY (1907-2011) WITH M≥ 4

CHZ-003 Page 51

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 7-9 HISTORICAL SEISMICITY (1907-2011) WITH M≥ 4 LOCATED AT EPICENTRAL DISTANCES OF LESS THAN 200KM FROM THE TAYSAN PROJECT SITE

CHZ-003 Page 52

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Depth Histogram 9000 3000 8000 2500 7000

2000 6000 5000 1500 4000 Number Number 3000 1000 Number Cumulative

2000 500 1000

0 0 0 50 100 150 200 1900 1920 1940 1960 1980 2000 2020 Depth Time in years

FIGURE 7-10 CUMULATIVE NUMBER OF THE FIGURE 7-11 HISTOGRAM AS A FUNCTION OF DEPTH SELECTED EARTHQUAKES AS A FUNCTION OF TIME

7.5.4 Seismic Sources of Project Area

The Philippines archipelago lies in a zone of convergence between the Philippine Sea Plate and the Sunda Plate. Convergence between two plates is estimated to be about 90-100mm/a (Bird, 2003). The Philippine Sea Plate subducts west-northwest along the East Luzon Trough and the Philippine Trench in the east. The western margin is defined by Manila-Negros-Sulu-Cotabato Trench system, along which the South China Sea, Sulu Sea are subducting. The 1200km-long Philippine fault zone transects the whole Philippine archipelago from north-western Luzon to south-eastern Mindanao. Based on information of seismicity, topography and geology, Rangin et al. (1999) proposed two small plates in the Philippine Islands, namely Luzon plate in the north and Visayas plate in the southwest. Rangin et al. (1999) also presented the evidence of high strain rates and differential velocities in the proposed small plates at the level of 13-20mm/a. This tectonic feature generates a very high annual rate of earthquakes in and near the Philippines. Active faults in the Philippine Islands and regional historical seismicity from 1600 to 2006 are plotted in Figure 7-12. It can be seen that these major faults are the key seismic generators in the region. Many other faults have also been traced in the region.

The seismic sources around the Philippine archipelago have been investigated and defined in many previous studies, e.g. Willis (1944), Acharya (1980), Su (1988), Knittel et al. (1988), Barrier et al. (1991), Sajona et al. (1993), Thenhaus et al. (1994) and Torregosa et al. (2001). Based on available studies in the literature together with an examination of historical events, seismotectonics and seismic zonation, five major potential seismogenic sources within a radius of 200km from the project site are identified. Those outside this radius are not expected to significantly influence the PGA at the project site. These seismic sources are defined as follows: • The West Marikina Valley fault (WMVF). The WMVF is one of the closest faults to the project site and represents the most likely near-field source of large damaging earthquake. The closest distance between the WMVF and the project site is estimated to be approximately 50km. Rimando and Knuepfer (2006) estimated a slip rate of 5 to 7mm/a for the WMVF. The maximum

CHZ-003 Page 53

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

expected magnitude was estimated to be Mw7.7 in Rimando and Knuepfer (2006) and Koo et al. (2009). • The Lubang fault. The Lubang fault extends 130km from west of Lubang Island through Puerto Galera to east of Verde Island. The closest distance between the Lubang fault and the project site is estimated to be less than 50km. The maximum magnitude was set at Mw8.0±0.5 in Koo et al. (2009). • The Philippine fault zone (PFZ). The Philippine Fault is a left-lateral strike-slip fault with more than 10 earthquakes greater than M7 in the last century. Earthquakes that occur in the Philippine Fault zone may be considered as crustal (shallow) earthquakes. The slip rate along the Philippine Fault has been estimated from historical seismicity to be about 68mm/a (Acharya, 1980). The closest distance between the PFZ and the project site is estimated to be approximately 100km. The maximum expected magnitude was estimated to be Ms8.0 in Torregosa et al. (2001) and Mw8.0±0.5 in Koo et al. (2009). • The Manila Trench. The closest distance between the Manila Trench and the project site is estimated to be approximately 150km. The maximum expected magnitude at the Manila Trench was estimated to be Ms8.3 in Torregosa et al. (2001) and Mw8.0±0.5 in Koo et al. (2009). Wong et al. (2008) indicated that the Manila Trench may cause a M8.8 earthquake at its full rupture. • Seismic Zone. The Taysan project site is located in the seismic zones defined in many previous studies. Manila Trench South zone with the maximum expected magnitude of Mw8.0±0.5 was identified in Koo et al. (2009). The seismic zone 9 with the maximum expected magnitude of Ms7.7 designated by Torregosa et al. (2001) is located in the vicinity of the project area.

FIGURE 7-12 HISTORICAL SEISMICITY (1600- FIGURE 7-13 TECTONIC SETTING OF ACTIVE FAULTS IN 2006) AND ACTIVE FAULTS IN THE PHILIPPINES NORTHERN AND CENTRAL LUZON (FROM RIMANDO AND (FROM WONG ET AL., 2008) KNUEPFER, 2006)

CHZ-003 Page 54

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

7.5.5 PGA of MCE

Based on the studies of historical events, seismotectonics and seismic zonation in the literature, the Taysan project site may be affected by subduction earthquakes occurred in Manila Trench zone or shallow crustal earthquakes caused by the adjacent active faults. Based on the seismic zonation presented by the previous studies and historical events which have occurred close to the study site, it is possible that high-magnitude (greater than Ms 8.0) earthquake could occur in the adjacent area (less than 10km) or directly under the site. Hence, the MCE can be considered as a subduction earthquake with magnitude of Mw8.5 or a shallow crustal earthquake with magnitude of Mw8.0 and epicentral distance of 5km. Because of insufficient strong ground motion recordings in the Philippines, a ground motion attenuation model in the study region has not been developed. Consequently, those empirical relations developed at other sites with similar tectonic and geophysical conditions are adopted in this study. The PGA’s for the selected MCE at the project site on rock, predicted by these attenuation models, are listed in Table 7-2 and Table 7-3. According to the calculated PGA values, the worst-case scenario earthquake at the project site is estimated to be a subduction earthquake with magnitude of Mw8.5 and epicentral distance of 5km. The average PGA of mean and mean plus one standard deviation are 0.57g and 1.06g, respectively. However, it should be noted that the shallow crustal earthquake with magnitude of Mw8.0 has more high frequency spectral content than the defined subduction event, which may induce higher damage in stiff structures.

TABLE 7-2 A SUBDUCTION EARTHQUAKE WITH MAGNITUDE OF MW8.5 AND EPICENTRAL DISTANCE OF 5KM

Attenuation model Mean Mean plus one Standard deviation

Gregor et al. (2002) 0.58g 1.20g

Fukushima and Tanaka (1990) 0.56g 0.91g

Average 0.57g 1.06g

TABLE 7-3 A SHALLOW CRUSTAL EARTHQUAKE WITH MAGNITUDE OF MW8.0 AND EPICENTRAL DISTANCE OF 5KM

Attenuation model Mean Mean plus one Standard deviation

Sadigh et al. (1997) 0.60g 0.88g

Idriss (2008) 0.51g 0.88g

Chiou and Youngs (2008) 0.54g 0.90g

Average 0.55g 0.89g

7.5.6 PGA Corresponding to the 475-Year Return Period

The regional PSHA for the Philippines have been performed in many previous studies, i.e. Thenhaus et al. (1994); Torregosa et al. (2001) and the USGS. The estimated PGA values corresponding to the 475- year return period at the project site are listed in Table 7-4, which are derived by interpolating from the

CHZ-003 Page 55

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

PGA values presented in the contour maps of these previous studies. It can be seen that the upper values in these previous studies are 0.27g, 0.45g and 0.48g, respectively. The mean estimate of these upper limited PGA is 0.40g and hence, based on these previous seismic hazard assessment studies, a PGA of 0.40g corresponding to the 475-year return period on rock site condition is recommended for the Taysan project site.

TABLE 7-4 SUMMARY OF PGA PREDICTIONS

PGA (g) Site condition

Thenhaus et al. (1994) 0.25-0.27 Rock site

Torregosa et al. (2001) 0.30-0.45 Rock site

USGS 0.40-0.48 Rock site

7.5.7 Influence of Geology

Earthquake ground ruptures can occur anywhere. However, it is more likely the “recent” ruptures (or “active” faults) will reactivate in preference to “ancient” ruptures (or “inactive” faults) or areas where there is no previous evidence of movement. In view of the potential for large events to occur at this site, it would be prudent to site important infrastructures away from active faults.

7.5.8 Conclusion and Recommendation

The seismic hazard of the Taysan project site has been reviewed. Based on available studies in the literature together with an examination of historical events, seismotectonics and seismic zonation, MCE is estimated. From this estimation the PGA of MCE on rock site condition is estimated using attenuation models found in the literature. The estimated PGA corresponding to the 475-year return period are also summarised in the study. Based on this analysis, we offer the following recommendations: • The worst-case scenario earthquake at the project site is estimated to be a subduction earthquake with magnitude of Mw8.5 and epicentral distance of 5km. The average mean and mean plus one standard deviation rock site PGA at the surface corresponding to this event are 0.57g and 1.06g, respectively. It should be noted that the shallow crustal earthquake with magnitude of Mw8.0 has more high frequency spectral content than the defined subduction event, which may induce higher damage in stiff structures. • The rock site PGA at the surface of 0.40g corresponding to the 475-year return period is recommended for the Taysan project site. • More reliable and site specific results can be obtained only by performing a Probabilistic Seismic Hazard Analysis (PSHA) of the site with a full updated seismicity database. • It is considered prudent that a geological mapping study is conducted utilising both aerial and satellite imagery and field investigation in attempt to identify any active faults that may be presented at the site.

CHZ-003 Page 56

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

7.5.9 Limits of this Report

The earthquake hazard results in this study are based on many assumptions and simplifications of parameters during the process of Seismic Hazard Analysis. The assumptions and uncertainties that are thought to strongly influence the results were in the estimation of magnitude and PGA of design earthquake. The estimation in this study was based on limited information and in view of the lack of historical earthquake data and geophysical information, the prediction of the design earthquake are based on available data and published studies.

CHZ-003 Page 57

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

8 DEPOSIT TYPES

This section has been summarised from Section 7 of the Geosynthesis NI-43-101 Report, June 2010 Taysan is classified as a porphyry copper-gold deposit; one of a number of porphyry deposits which have developed along the spine of the Philippine island magmatic arc systems. Porphyry deposits are very large, relatively low grade deposits that occur in the roof zones of igneous intrusions in island arc and continental margin settings. The mineralization is fracture controlled and comprises Cu and Cu-Fe sulphides with variable concentrations of gold and/or molybdenum. Porphyry deposits occur throughout the world in a series of extensive, relatively narrow, linear metallogenic provinces. They are predominantly associated with Mesozoic to Cenozoic orogenic belts in western North and South America, around the western margin of the Pacific Basin, and in the Tethyan orogenic belt in eastern Europe and southern Asia. However, major deposits also occur within Paleozoic orogens in Central Asia and eastern North America and, to a lesser extent, within Precambrian terranes (Sinclair, 2007). Of the know porphyry deposits and prospects in the Philippines, about three quarters have been emplaced within 4km of the margin of a large equigranular pluton. While there is a close relationship between batholiths and porphyry stocks, it is less common for porphyry deposits to have been emplaced within plutonic host rocks. In many cases (e.g. Northern Luzon) there is a significant time break (>10Ma) between early batholith emplacement and late porphyry intrusion, and the spatial superposition of the intrusives suites is related to the erosion that occurred during this time interval. It may be that crystalline plutonic rocks and batholiths provides effective barriers to later high level intrusions, which are, therefore, emplaced around the weaker (usually fractured) margins of the phaneritic intrusions. (Cook, et al, 1998) Subtypes of porphyry copper deposits are defined in Cox and Singer (1992) as: porphyry Cu-Au (Type 20c) if the Au/Mo content ratio is greater than or equal to 30, porphyry Cu-Mo (Type 21a) if Au/Mo content ratio is less than or equal to 3, and porphyry Cu (Type 17) otherwise, where gold is in parts per million and molybdenum is in percent. According to Cox (1998), Taysan is classified as Type 20c (Figure 8-1 below), porphyry copper-gold: i.e. defined by stockwork veinlets of chalcopyrite, bornite, and magnetite in porphyritic intrusions and coeval volcanic rocks, with a ratio of Au (ppm) to Mo (percent) greater than 30 (i.e. low Mo content).

CHZ-003 Page 58

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 8-1 SCHEMATIC OF TYPE 20C MODEL OF PORPHYRY CU-AU FOR TAYSAN (SOURCE: COX, D.P., 1998)

CHZ-003 Page 59

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

9 EXPLORATION

Exploration by CZH has been confined to magnetics surveys and drilling programmes. A very brief summary of the magnetics will be provided below. The drilling programmes are briefly described in section 10 of this report. Full details of the exploration programme are provided in the following reports: • “January 2012 Update of the Mineral resource Estimate, Taysan Project”. Prepared by Mining Associates Pty Ltd for Crazy Horse Resources, Inc. Author: Ian Taylor. (10th April 2012 NI43- 101 Report). • “Update of the Mineral Resource Estimate and Preliminary Economic Assessment for the Taysan Project” prepared by Mining Associates Pty. Ltd. and AMEC Minproc and dated 10th October, 2011. • “Mineral Resource Estimate and Preliminary Economic Assessment, Taysan Project, Batangas Province, Philippines” for Crazy Horse Resources Inc., dated 11 March 2011” and authored by Mining Associates Pty Ltd, (“11 March 2011 NI43-101 Report”).

9.1 CRAZY HORSE RESOURCES – 2010

MA was requested to delineate a first pass resource estimate and this was completed in July 2010, A recommendation out of that report called for validation drilling, to determine which historic drill programmes are reliable, Drill holes were assayed for copper, gold and molybdenum as a minimum suite of elements.

A planned 6,000 metre diamond drilling programme (10 drill holes) was commenced at Taysan in October 2010. The drilling being carried out by United Philippines Drilling (UPD) a subsidiary or Quest Exploration Drilling (QED) utilising three Edson 1000 and two LF70’s.

The initial programme focused on validating the previous drill results, (six twin holes). The second phase (four holes) of the programme aimed to validate the section interpretations and geological model. Holes are collared with PQ through the oxidized material, and are completed with HQ, leaving the option to case of and drill to completion with NQ should drilling complications arise. Drill holes are considered twinned if they are collared within 10m of each other and are drilled at the same dip and azimuth (same direction).

The initial ten diamond holes drilled by CZH have validated the historical copper data. The results of the initial 10 hole drill programme have also confirmed the tenor of the historically defined copper mineralisation to be correct and that the drilling has also proved the deposit is open to depth.

9.2 CRAZY HORSE RESOURCES – 2011

9.2.1 Geophysical Surveys

During late 2010 and early 2011, detailed ground magnetic surveys were conducted over the Taysan deposit and areas to the north, west and south of the deposit (Figure 9-1, Figure 9-2) to determine whether this method could help locate potassic, quartz magnetite “high grade” mineralisation.

This survey was undertaken at 5m centres on lines trending 240o and 60m apart. The north western area comprises 102 km of survey and the south eastern area comprises 30 km (Figure 9-1).

CHZ-003 Page 60

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

This survey gave higher resolution and less noisy results than previous in-house surveys on lines 120m apart by Kumakata Corp. A re-interpretation of regional aeromagnetics and radiometrics results obtained by Geodiscovery in 2005 also resulted in significant improvements in anomaly resolution, partly due to advancements in visualisation software and micro-levelling of data.

FIGURE 9-1 2010 AREA OF GROUND MAGNETIC SURVEY (SOURCE: AA 2011)

The 2010 Geodiscovery RTP (reduced to pole) re-interpretation was shown to have been undertaken with a significant NW filter which obscured the true nature of some anomalies. The 2011 Austhai micro- levelled RTP data shows more realistic anomalies. In particular, the anomaly that extends north of the proposed Taysan pit is shown to be much less significant than first thought (Figure 9-2).

This north western oriented survey provided better resolution than previous surveys and considered useful for determining fault traces and offsets. A magnetic high occurs over the quartz magnetite zone in the proposed open pit however magnetic highs also occur over areas of un-mineralised recent volcanics on the western side of the survey.

CHZ-003 Page 61

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 9-2 2010 GROUND MAGNETIC SHOWING POTENTIAL TARGETS (SOURCE: AA 2010)

A ground magnetics survey at 5m centres on lines trending 240o and 60m apart was also carried out over the anomalous area to the south east of the proposed Taysan pit in the area of CZT038 (Figure 9-1) and the interpretation of the results suggested that copper anomalies in this area are probably less important than first thought. Full details of these surveys are provided in the 11 March, 2011 report.

9.2.2 CZH 2011 Drilling

Subsequent to the 2010 drilling programme, CZH continued exploration and validation drilling at Taysan, completing an additional 35 holes by June 2011 which was reported in the October NI43-101 Report. Since June 2011, an additional 48 holes have been drilled (for an additional 15,912.9m of drilling), the results for which are described in the 10th April 2012 Mining Associates NI 43-101 report.

CHZ-003 Page 62

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

10 DRILLING

The drilling programmes are briefly described in this report section below. Full details of the drilling programmes conducted by CZH are provided in the following reports: • January 2012 Update of the Mineral resource Estimate, Taysan Project. Prepared by Mining Associates Pty Ltd for Crazy Horse Resources, Inc. Author: Ian Taylor. (10th April 2012 NI43- 101 Report). • “Update of the Mineral Resource Estimate and Preliminary Economic Assessment for the Taysan Project” prepared by Mining Associates Pty. Ltd. and AMEC Minproc and dated 10th October, 2011. • “Mineral Resource Estimate and Preliminary Economic Assessment, Taysan Project, Batangas Province, Philippines” for Crazy Horse Resources Inc., dated 11 March 2011” and authored by Mining Associates Pty Ltd, (“11 March 2011 NI43-101 Report”). Full details of the historical drilling are provided in the Geosynthesis NI43-101 report dated June 2010.

10.1 PROJECT DRILLING The Project has been extensively drilled since 1968, with 302 holes for 82,583 meters, of which the Company has drilled 99 drill holes for 36,445 meters between October 2010 and October 2011 as shown in the Table 10-1 below:

TABLE 10-1 DRILLING AT TAYSAN PROJECT BETWEEN 1968 AND 2011 Company Drill Hole Type No. of Drill Holes Drill Meters Resource 91 34,709 Crazy Horse Exploration 2 828 Geotechnical 6 908 Resource 141 36,253 Previous Companies Exploration 62 9,885 Total Drilling 302 82,583

10.2 CZH VALIDATION DRILLING PROGRAMME - 2010

During the acquisition process for the Taysan Project, a drilling program of 10 drill holes was undertaken between 1st October and 24th December 2010. These drill holes were planned to twin various drill holes from the Benguet Corp, Newmont and Chase drilling programs, to check the copper, gold and silver assays reported previously and to check block models based on these earlier drill programs. In addition, field exploration involving geophysical surveys was also conducted. Results are reported in the March 2011 NI43-101 Report.

10.3 CZH DRILLING PROGRAMME (JANUARY 2011 TO JUNE 2011)

The first half 2011 drilling programme completed an additional 45 holes totalling 19,624 to June 2011. The drilling was carried out by United Philippines Drilling (UPD) a subsidiary or Quest Exploration Drilling (QED) utilising three Edson 1000 and two LF70’s. 35 holes were drilled to bolster the mineral resource categories to satisfy NI43-101 guidelines permitting an updated resource to be estimated by

CHZ-003 Page 63

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

MA. This resource estimate was reported in the October 2011 NI43-101 Report prepared by AMEC and MA.

10.4 CZH DRILLING PROGRAMME (JULY 2011 TO DECEMBER 2011)

CZH continued resource drilling at Taysan during the second half of the year and holes drilled included an additional 48 drill holes (CTZ046 to CTZ093) for a total of 15,912.9 metres of resource drilling and six geotechnical drill holes totalling 908.3 metres.

The drilling of the additional holes focused on the central portion of the ore body, to develop confidence in a suitably large copper resource and define the associated gold, silver and magnetite potential.

Details of the drilling programme are provided in the MA 10th April 2012 NI43-101 report on the revised resource estimate.

CHZ-003 Page 64

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11 SAMPLE PREPARATION, ANALYSES AND SECURITY

11.1 DRILLING PROCEDURES

11.1.1 Historical Drilling

The following section has been extracted from the Geosynthesis NI-43-101 Report (R Sowerby, June 2010) Section 6 and Section 8. There is little information available on detailed procedures for the various phases of drilling at Taysan prior to Chase’s drilling. Details of the Benguet drilling program are limited to the hand written logs. The core diameter and sampling regimen is not recorded on these logs. Similarly no details of the Newmont or Taysan Copper Inc drilling programs are available. Chase drill core was collected in galvanised steel trays with lids fabricated in Manila. On site processing included core photography, geotechnical logging, geological logging and sampling for assay. Core was stored in covered racks at the Taysan field office. Drill logs combining both geotechnical and geological data were used in all drilling. Geotechnical parameters recorded included core recovery, RQD, rock strength and weathering. Geological logging included compulsory descriptions for geology, alteration, mineralization and structure. In order to standardize drill core processing, a Drill core Logging Manual was produced in 1994 for field use. Only major lithological codes and descriptive prefixes are entered into the computer database (Erceg, 1995).

11.1.2 CZH Drilling Programmes

This section was summarised from Section 11 of the 10 October, 2011 NI43-101 Report compiled by AMEC and Mining Associates. Please also refer to Section 14 and Section 15 of the March 2011 NI43- 101 Report for details of drilling and sampling protocols.

Drilling was carried out by Quest Exploration Drilling (Philippines) Inc. using Edson 3000 and LF70 drill rigs and a triple tube diamond core drilling system. All holes are started in PQ (150-200m) then continued in HQ. All core is split using a diamond-bladed drill-core saw and always sampled from the (true) left side of the core. The remaining half of the core is sealed in plastic bags in a nitrogen atmosphere and stored in a covered, guarded core shed. Core samples are bagged in new polyethylene, UV stable plastic bags, sealed with a plastic tie, numbered outside and have a tag placed inside the bag. All samples are accompanied by CZH personnel from site to the McPhar Geoservices (Phil), Inc. laboratory (“McPhar Laboratory”) under secure “Chain of Custody” procedures. McPhar Laboratory is ISO 17025:2005 accredited and is a member of the International Intertek Laboratory Group.

At the McPhar Laboratory, samples are crushed to 85% < 2 mm then 1 kg is split out and pulverised in an LM2 Puck and Bowl Pulveriser to 90% <75 um. Gold is assayed by Fire Assay (50g charge) with AAS finish (PM6). Cu, As, Mo, Fe and S are assayed by ore grade analysis, 3 Acid (HCl / HNO3 / HClO4) Digest with ICPAES finish (ICP-2). Ag is analysed by ore grade analysis (HNO3 / HClO4) digest with AAS finish (2A1/AAS). Sample rejects are returned from the McPhar Laboratory under secure “Chain of Custody” procedures by CZH staff and also stored in the core shed in heat sealed plastic bags in a nitrogen atmosphere.

CHZ-003 Page 65

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11.2 EXTENT OF DRILL SAMPLING

Figure 11-1 illustrates the spread of the CZH drilling relative to the historical drill collars.

FIGURE 11-1 CZT001 TO CZT093 DRILL HOLE LOCATION MAP (Source: CZH, 2011)

11.3 RECOVERY AND QUALITY

Core recovery for the CZH holes drilled after June 2011 was consistent with that for the first 45 holes with 95.5% of the samples logged as 80-100% core recovery (April 2012, NI43-101 report by Ian Taylor).

11.4 MAGNETIC SUSCEPTIBILITY MEASUREMENTS

This section 11.4 is summarised from the October 2011 NI43-101 Report by AMEC and MA.

A program of Magnetic Susceptibility measurements was conducted to determine the magnetic content of the copper and gold mineralised material through the use of Magnetic Susceptibility (“MagSus”) meter. Magnetic susceptibility is the degree of magnetization of a material in response to an applied magnetic field. The MagSus measurement procedures are described in the October 2011 NI43-101 Report.

CHZ-003 Page 66

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The MagSus measurement procedure covers a range of information, including magnetic susceptibility principle, sample handling and operational details of the relevant specific procedures. To determine the amount of magnetite the MagSus meter measures (i.e. excluding the response from other magnetic iron bearing minerals such as pyrrhotite), a linear correlation was determined using Davies Tube Recovery results (“DTR”).

DTR testing involves passing small samples of finely crushed ore in a water suspension through a glass tube and past a powerful electromagnet. The DTR test results give a percent mass recovery of magnetic material for a given weight of ore and the recovered magnetic and non-magnetic portions can be analysed for chemical composition to give the percent recovery of magnetite expected in an industrial scale magnetic separation process.

The fine calibration of the DTR bench tests also allowed back calibration of the field magsus measurements, taken using a magsus meter on bags of fine reject samples, to give percentage magnetite recovery expected for each sample. Many such tests were run using various ore types to give average results for alteration and ore types that can be used in a resource model.

Davis tube tests by ALS Perth were carried out on 107 samples using a 20g subsample in a bench test set up. Correlation between the Davis tube results from ALS and magnetic susceptibility measurements by CZH staff on site was 0.997. This is considered justification for the simplified method set out below for measuring MagSus of fine rejects inside the sample bag: 1. Sample bags to be used are simple plastic bags designed to be heat sealed with no metallic ties or other components; 2. Clear the sample bag from staples and/or any metallic objects; 3. Record weight of the entire sample; 4. Hold the sample ensuring no void spaces inside the bag and the bag is tightly packed; 5. Each sample is measured using a scanner, with the display result recorded.

The Geologist has the responsibility of performance of this procedure, unless those operations are assigned to other trained personnel in which case the geologist is responsible for the oversight of the operations. A laboratory notebook will record activities performed on each sample.

Magnetic susceptibility readings are being taken at the field office when fine rejects are returned from the laboratory. The field office is not set up as a laboratory and staffs are not trained to handle sample pulps outside the sealed plastic bag therefore no measurement of subsamples was carried out. All measurements were of ~0.5 – 1kg of fine rejects (90% <75um) inside the laboratory sealed plastic bag. This method gave excellent repeatability and correlation with DTR readings.

A routine insertion of a standard reference material (standard), blank and duplicates is used for each batch of samples to be measured. Results from these samples are continuously monitored to assure the quality of analyses and to allow an estimate of accuracy of the method and provide batch failure criteria. A ‘failure table’ will be maintained to document departures from the accepted limits and to track corrective action. Measurements exceeding the acceptable limits will be examined to determine if there has likely been a sample mix-up in the field or laboratory, or whether it is likely an analytical issue that will require corrective action. Where necessary, the batch is re-measured.

CHZ-003 Page 67

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11.5 HISTORICAL SAMPLING PROTOCOLS

The following section 11.5 is summarised from the Geosynthesis NI43-101 Report, June 2010.

11.5.1 Drill Sampling Protocols

There is limited information available relating to the earlier drill programs completed by Newmont, Benguet and Taysan Copper Inc. Drill logs from the Benguet drilling indicate core was sampled on 4 metre intervals and assayed initially for Copper. The core was subsequently re-assayed selectively for gold and molybdenum. Details of sampling and analytical procedures have not been recovered.

Chase reported (Erceg, 1995) that for 1992-93 drilling samples were collected at 4 metre intervals from the base of the tuffaceous overburden. Core was cut in half on site using a core saw and dispatched to ASPAC sample laboratory in Pasig for sample preparation. The approximately 6 kg samples were oven dried and crushed to minus 10 mesh (1.70mm) and a 3 kg split pulverised initially to minus 80 mesh (180 microns) then a further 1.5 kg split pulverized to minus 200 mesh (75 microns. A final 2009 split was dispatched to Analabs (Perth, Australia) and assayed for gold (50 g fire assay) and copper and silver (AAS). No reconciliation of check samples appears to have been determined.

For 1994-1995 drilling, sample interval of 2 metres were used because of the change in emphasis toward gold and the targeting of a near surface higher grade copper-gold zone.

The core was cut in half using a core saw on site. Samples were sent to McPhar Laboratories in Manila for sample preparation and assay. Samples were oven dried and crushed using a jaw crusher to minus 6mm, then coarse pulverised to minus 20 mesh (850 microns, 90% pass). A 1 kg split was fine pulverised to minus 200 mesh (80 microns, 90% pass). Samples were assayed for copper by AAS following concentrated acid leach and HCI/HNO3/HClO4 leach in the latter stages on 1 g sample. Gold was determined by 50g fire assay with AAS finish.

Core was split on site and half core samples were submitted to the ASPAC laboratory for sample preparation. Core samples were initially crushed in a jaw crusher then by a cone crusher to pass - 10mm mesh. This sample was subsequently pulverised and sieved to -200# mesh. The proportion of material passing this mesh size from pulverising is not stated in the Chase report. A 200g split of each pulverised sample was dispatched to Analabs Laboratories in Perth, Australia and assayed for gold (fire assay), copper and silver (AAS).

Drill core from the KMCI drilling program was processed at the Taysan office compound. HQ core was split on-site and sampled on 1 metre intervals. A total of 1,471 samples consisting of 1,433 sampling intervals and 38 standards/ blanks were assayed at Intertek Lab in Jakarta. Check assays for twenty- nine (29) samples with good Au values from TRC-19 were done by McPhar Lab in Manila. Check samples were obtained from a 29 metre interval from drill hole TRC-19 which intersected gold mineralization. A comparison of the primary sample assay vs check sample assay indicates reasonable correlation on gold assays and strong correlation for copper however the dataset is too small to be statistically relevant.

CHZ-003 Page 68

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11.5.2 Drill Core - Specific Gravity:

No specific gravity (“SG”) determinations have been in the records examined to date except for measurements taken from head assay samples for the six composite samples conducted during preliminary metallurgical testing by Optimet Laboratories in 1995 The Chase resource estimate assumed an average SG of 2.6 for fresh ore and the JOGMEC resource estimate assumed an SG of 2.5 for fresh ore. Drill core viewed during the field trip was typical intermediate intrusive lithologies with typical porphyry alteration characteristics. The SG assumptions used by Chase and JOGMEC are considered reasonable and conservative (as evidenced by the composite SG results determined in 1995) however detailed SG determinations will be required to report NI43-101/JORC compliant resources for this project.

11.5.3 Extent of Sampling

For the majority of resource drilling undertaken at Taysan, all drill core was sampled from each hole and assayed for copper in 4 metre composites. The potential for gold mineralization was not recognised until the end of the Benguet drilling program. Gold analyses were undertaken selectively of Benguet drillholes. In subsequent drilling programs by Chase, analysis for gold was undertaken on a systematic basis. No gold analysis was undertaken on Newmont drill core. Analysis for Molybdenum has been sporadic for all resource drilling.

11.5.4 Recovery and quality

Core recovery records exist for the Benguet, Chase and KMCI drilling programs. Benguet records indicate that core recoveries were generally >90%, however intervals of poor recovery (50-60%) were noted in a number of holes within the highly fractured stockwork zone of the Taysan copper deposit. Chase reported that they has taken considerable care to achieve high core recoveries and employed HQ triple tube drilling in the high grade and fractured core of the deposit. Core recoveries were consistently above 90% with the exception of the near surface oxide zone where drilling difficulties impacted recoveries. .No core recovery data has been identified for the Newmont drilling.

11.6 QUALITY ASSURANCE/QUALITY CONTROL (QA/QC)

Quality Assurance (“QA”) concerns the establishment of measurement systems and procedures to provide adequate confidence that quality is adhered to. Quality Control (“QC”) is one aspect of QA and refers to the use of control checks of the measurements to ensure the systems are working as planned. The QC terms commonly used to discuss geochemical data are: • Precision: how close the assay result is to that of a repeat or duplicate of the same sample, i.e. the reproducibility of assay results. • Accuracy: how close the assay result is to the expected result (of a certified standard). • Bias: the amount by which the analysis varies from the correct result.

11.6.1 QA/QC Program

According to CZH’s QA/QC procedures, the following samples are taken or inserted into the sample stream.

CHZ-003 Page 69

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Certified Reference Materials (“CRM”): CRM for various grades of copper, gold, molybdenum, silver and sulphur and a certified blank were added at the planned rate of one every 20 samples. CRM assess accuracy. • Field Blank: Samples of a “blank”, known to contain low level of economically interesting metals are randomly inserted into the sample stream to replace every 4th CRM (i.e. 1 in 80). Blanks assess contamination. • Field Duplicate Samples (“FD”): Every 30th sample is cut twice into ¼ core. Both samples are inserted into the sampling stream and prepared and assayed like any other sample. The results can be examined as a duplicate sample. The results are combined and averaged to give the value that goes into the resource database. This sample is used to monitor sample batches for poor sample management, contamination and tampering and laboratory precision. FD assess precision.

CZH also instructed the McPhar Laboratory to conduct duplicate assaying and repeats: • Laboratory Duplicates (“LD”): The assay lab is instructed to prepare a split of the crushed samples. Every 20th sample is to be pulverised and assayed for comparison with the original assay. LD assesses precision. • Laboratory Repeats: The assay lab also runs duplicate assays on every 10th pulverised sample as an internal check. Laboratory repeats assess precision and bias.

11.6.2 QA/QC Results – Internal Controls

Table 11-1 lists the actual insertion rate statistics for QA/QC material added to the sample stream by CZH staff as recorded in the database for the samples from July to December 2011.

TABLE 11-1 QA/QC INSERTS

Type # of insertions Insertion Rate * Rate CRM 670 9.2% 1 in 11 Field Duplicates 249 3.4% 1 in 30 Blanks 192 2.6% 1 in 38 Total Insertions 1111 15.2% 1 in 7 Field Samples 7319 100% * based in total Field Samples

11.6.3 QA/QC Magnetic Susceptibility

Davis tube tests were carried out on samples by ALS in a bench test set up. Correlation between the Davis tube results from ALS and magnetic susceptibility measurements by CZH staff on site was 0.997. Procedures and results are described Section 11 of the October 2011 NI43-101 Report.

Duplicate measurements were conducted for the new drill holes. The results indicate there is no bias trend in the results and good precision with 94% of the duplicate values within 50% range.

CHZ-003 Page 70

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

11.7 DISCUSSION ON ACCURACY

Sample protocols, including sample methodology, preparation, analyses and data verification have been conducted in accordance with industry standards using appropriate quality assurance/quality control procedures since the inception of CZH work in 2010 under the direct supervision of the Geology Manager. MA was impressed with the high level of professionalism with which the field programs were organised and executed, being to international standards.

McPhar internal laboratory repeat assay results indicate the laboratory is reporting precise results. The results of the CZH inserted CRM indicate that the McPhar assay results are accurate for mineralised material.

MA notes that Oreas 22c blank standard returned gold values within tolerance limits; and copper values generally within tolerance limits, with poorer results for molybdenum (which was a function of the assay technique’s detection level). Although these results are an improvement on the consistent overcall for copper with the previous blank standard (Oreas 22a), the accuracy of the analytical process for copper in very low grade material should be discussed with the laboratory to resolve this issue.

For the regular Oreas standards, all elements are consistently within tolerance level for the post June 2011 drilling sample insertions.

Results from 249 field duplicates introduced in the sample stream indicate that overall the precision is good for copper and less so for gold, silver and molybdenum for material with grades above 10 times the assay method detection level. The precision for these elements is less than that for the copper possibly due to the heterogeneity nature of mineralisation or the less precision of the assay method for these elements relative to copper.

The field blanks values for Cu were totally outside the tolerance levels indicating that the background Cu of the field blank is too high to be used as a blank, although the Au, Mo and Ag results were satisfactory.

Duplicate measurements of the magnetic susceptibility measurements were conducted for the new drill holes. Results indicated no obvious bias trend in the results and good precision with 94% of the duplicate values within 50% range.

CHZ-003 Page 71

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

12 DATA VERIFICATION

The following section (section 12) is taken directly from the CZH NI43-101 Report entitled “January 2012 Update of the Mineral Resource Estimate. Taysan Project” prepared by Mining Associates Pty. Ltd. and dated 16th March, 2012.

12.1 REVIEW OF HISTORICAL DRILLING RESULTS CZH undertook a ten drill hole programme between October and December 2010, to confirm the tenor of the historic drilling. The results of this study were reported in the March 2011 NI43-101 Report by MA. The initial ten diamond holes drilled by CZH have validated the historical copper data. In addition, the CZH gold results have confirmed the historical Chase gold data to be correct and that the historical Benguet gold data was reporting inflated gold values. As a result of these findings, MA recommended using historical data only to identify the high grade gold mineralisation trend (tonnes) and not to use historical Benguet and Newmont gold data for the purpose of estimating resources.

12.2 SITE VISIT & INDEPENDENT SAMPLES As reported in the March 2011 NI43-101, there were two site visits to the Taysan Project area conducted by Mr Ian Taylor for MA, on 20 October 2010 and again on 22 January 2011. At the time of Mr Taylor’s first visit, two core holes had been started and a third rig had arrived on site although it was being commissioned. Mr Taylor’s second visit (22 January 2011) coincided with the completion of the initial 10 hole 6,000m programme and the five drill rigs commencing the drill out phase of the project in preparation for the Prefeasibility Study.

12.3 DISCUSSION AND LIMITATIONS No independent samples were collected due to the advanced stage of the project and the previous sampling which had been conducted for the Geosynthesis NI43-101 Report (June 2010).

Due to the confirmatory results of the test drilling (detailed in the 31 March 2011 NI43-101 report by MA) and site visit inspections and procedure audits, it is MA’s opinion that the data is adequate for the mineral resource estimation update described in this report.

CHZ-003 Page 72

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

13 MINERAL PROCESSING AND METALLURGICAL TESTING

13.1 METALLURGICAL DEVELOPMENT

AMEC managed the metallurgical testwork program for the Taysan Prefeasibility study at the request of Crazy Horse Resources, Inc. The testwork program, designed by AMEC includes comminution, viscosity analysis, flotation optimisation, bulk magnetite separation and settling testwork. The testwork completed is satisfactory to produce a process design criteria for a prefeasibility study. The major outcomes for the testwork program are discussed in the following sections.

The details of the historical mineral processing and metallurgical testing have been described in Section 16 of the Geosynthesis June 2010 NI43-101 Report, the Mining Associates Pty. Ltd. and AMEC Minproc NI 43-101 reports in March and October 2011 and the Barton Metals Pty. Ltd NI 43-101 report in February 2012.

Historic testwork undertaken by Optimet in 1995 and Metcon in 2010/2011 are both also examined. A summary of the historic testwork for the Taysan project is given in Table 13-1..

TABLE 13-1 SUMMARY OF HISTORIC TESTWORK

Date Company Testwork Summary Comminution tests, oxide and sulphide flotation, oxide 1995 Optimet leaching 2010/2011 Metcon Suphide flotation, magnetite recovery of flotation tails

The historic testwork programs provided valuable information on the metallurgical performance of the Taysan resource. There were however some shortcomings which included the use of composites not representative of the resource and utilisation of chemicals (e.g. cyanide in flotation) which are impractical by modern Occupational Health and Safety standards.

Five hundred and seven (507) individual samples of core rejects and five hundred and four (504) individual quarter core samples were selected and supplied to form 54 coarse reject samples to be used for flotation testwork and 53 quarter core variability samples to be used for comminution testwork. Sample selection took into account variations in lithology, mineralisation type and grade providing: • A representative cross section of copper mineralogy • A representative selection of lithology and domain type • A representative selection of copper grade • A representative selection of magnetic susceptibility readings

Continuous core runs within the ore body that met the sample selection criteria were identified. From the available suitable core, the sample set provides broad spatial representation and is relevant to the likely mine plan for the ore body.

From the 54 coarse reject variability samples provided two composites based on copper-to-sulphur ratio. Samples with a copper-to-sulphur ratio equal to or less than 0.52 were used to make up the low

CHZ-003 Page 73

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 copper-to-sulphur composite whilst samples with a copper-to-sulphur ratio greater than 0.52 were used to make up the high copper-to-sulphur composite.

Tests conducted using the composite samples included rougher flotation optimisation tests, open circuit cleaner evaluation, locked-cycle tests, bulk flotation, bulk magnetite separation and settling tests. The composites used for rougher flotation determined the optimum conditions to be used in the locked cycle and variability flotation testwork.

The major outcomes for the testwork program are discussed in the following sections.

13.2 COMMINUTION TESTWORK

13.2.1 Abrasion Indices

The abrasion indices impact on the operating cost of the comminution circuit in both the SAG and Ball Mills. The abrasion indices are relatively low meaning that standard wear mitigation techniques can be employed.

13.2.2 SMC and Bond Ball Mill Work Indices

The comminution indices provided by both the SMC and Bond Ball Mill Work Index Test are used in the design of the SAG and Ball Mill. The value used for design is an 80th percentile value taken from the 53 variability samples tested.

13.2.3 Rod Mill Work Index

The Rod Mill Work Index can be used to determine whether there will be a large amount of critical sized pebbles (scats) produced from the SAG Mill. This is done by analysis of the RWi: BWi ratio which if greater than 1.2 indicates that there will be a large amount of scats produced by the SAG Mill in which case a pebble crusher may need to be installed. As the 80th percentile of the RWi:BWi is greater than 1.2 a recycle pebble crusher should be installed. The major testwork outcomes for the comminution program are summarised in Table 13-2.

TABLE 13-2 COMMINUTION PARAMETERS SUMMARY

Description Value Axb – 80th Percentile 45.4 Drop Weight Index (kWh/m3) – 80th Percentile 5.66 Bond Abrasion Index – 80th Percentile 0.19 Ball Mill Work Index (kWh/t) – 80th Percentile 14.3 Rod Mill Work Index (kWh/t) – 80th Percentile 16.1 Rod Work Index: Bond Work Index – 80th Percentile 1.24

CHZ-003 Page 74

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

13.3 FLOTATION TESTWORK

The flotation testwork determined the optimum rougher flotation operating conditions which are provided in Table 13-3.

TABLE 13-3 ROUGHER FLOTATION OPTIMUM OPERATING CONDITIONS SUMMARY

Operational Variables Optimum Condition Target Grind Size (µm) 106 Collector Type PAX Collector Dosage (g/t) 10 pH 9 - 10 Regrind Energy (kWh/t) 10-15

Application of the optimum flotation conditions in the locked cycle tests gave recoveries from 87% to 90%. The average grades and recoveries achieved in the locked cycle and variability testwork are shown in Table 13-4.

TABLE 13-4 LOCKED CYCLE AND VARIABILITY TESTWORK SUMMARY

Description High Cu:S Composite Low Cu:S Composite Locked Cycle - Recleaner Copper Grade (last three cycles) 24.60% 24.63% Locked Cycle - Overall Copper Recovery (last three cycles) 87.0% 90.3% Variability Testwork – Average Copper Head Grade 0.34% Variability Testwork - Average Copper Rougher Grade 5.72% Variability Testwork – Average Copper Rougher Recovery 90.0%

13.3.1 Metallurgical Response Curves – Copper

The metallurgical response curves for copper flotation are shown in Figure 13-1 and Figure 13-2 and confirm the original scoping study metallurgical response.

Figure 13-1 represents the estimated final copper concentrate grade and copper head grade relationship, which has been derived based on the two locked cycle tests that were performed. The red data points on the curve in Figure 13-1 represent the actual final copper concentrate grades from the two, two stage cleaning locked cycle tests that were performed. The response curves confirm the original response curve relationship derived in the scoping study.

Figure 13-2 represents the calculated overall copper recovery and copper head grade relationship, which has been derived based on the variability rougher flotation testwork and an assumed cleaning circuit recovery of 97.2% as determined from the two locked cycle tests. The red data points on the curve in Figure 13-2 represent the calculated overall copper recovery from each of the variability tests that were performed.

CHZ-003 Page 75

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Three data points, shown as green triangles in Figure 13-2 were ignored when calculating the copper recovery curve as they adversely change the interpretation of the head grade and copper recovery relationship. It was determined that these samples were material from the 0-65 metre depth range.

The data point (green triangle) with a copper recovery of 67% is thought to have exhibited a poor flotation response as the copper present is suspected to be native copper. The other two data points (green triangles) are suspected to have exhibited a poor flotation response due to being heavily oxidised as indicated by their low sulphur head grades (both less than 0.15 %sulphur).

The poor copper recovery of oxide samples has previously been highlighted from historical testwork reported by OPIMET.

The copper recovery as a function of depth is represented in Figure 13-3. It can be clearly seen from Figure 13-3 that the copper recovery is highly variable in the 0-65 m depth range. In comparison, very little variance occurs in the copper recovery below a depth of 65 metres.

ICP analysis of the concentrates produced in this work indicates that the copper concentrate may contain zinc that may incur penalty dependent upon the smelter to which it is sold. The concentrate is unlikely to contain any other penalty elements in excess of the penalty trigger levels.

FIGURE 13-1 METALLURGICAL RESPONSE CURVE- FINAL CONCENTRATE GRADE AGAINST COPPER HEAD GRADE

CHZ-003 Page 76

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 13-2 METALLURGICAL RESPONSE CURVE – OVERALL COPPER RECOVERY AGAINST COPPER HEAD GRADE

FIGURE 13-3 OVERALL COPPER RECOVERY AGAINST DEPTH

CHZ-003 Page 77

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

13.4 METALLURGICAL RESPONSE CURVES – GOLD

The metallurgical response curves for gold are shown in Figure 13-4 and Figure 13-5.

Figure 13-4 represents the estimated final gold in copper concentrate grade and gold head grade relationship, which has been derived based on the variability rougher flotation testwork and the two locked cycle tests that were performed. To estimate the gold grade in the final concentrate an upgrade ratio was used based on the gold cleaner concentrate to gold rougher concentrate grades.

Figure 13-5 represents the calculated overall gold recovery and gold head grade relationship, which has been derived based on the variability rougher flotation testwork and an assumed cleaning circuit recovery of 88.0% for the high copper-to-sulphur composite and 84.0% for the low copper-to-sulphur composite. The red data points on the curve in Figure 13-5 represent the calculated overall gold recovery from each of the variability tests that were performed.

The two outlier points are ignored in the relationship as this data was believed to have been generated by sampling error and if included would erroneously inflate the recovery response curve.

FIGURE 13-4 METALLURGICAL RESPONSE CURVE - GOLD IN CONCENTRATE GRADE VERSUS HEAD GRADE

CHZ-003 Page 78

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 13-5 METALLURGICAL RESPONSE CURVE - OVERALL GOLD RECOVERY VERSUS HEAD GRADE

13.5 METALLURGICAL RESPONSE CURVES – SILVER

The silver recovery response was developed for the revised Update of the Mineral Resource Estimate Preliminary Economic Assessment for the Taysan Project, October 2011. The relationship was developed from flotation testwork that identified a definite link between the silver to copper assay ratios in the feed and concentrate from each sequential processing step. The limited data for those relevant tests are plotted in Figure 13-6 where it will be noted that there is still a strong correlation between the silver and copper assay ratio relative to the same ratio in the final grade concentrate. It should be noted that as only three groups of data are indicated in this figure, a second order polynomial equation would have provided a better fit than the linear regression equation which is illustrated. However the linear equation was recommended given that the total suite of results illustrated similar linear relationships separately for the sequential processing stages.

The efficacy of this modified silver response model cannot be confirmed until such time as more flotation test results are to hand. However it may ensue that the assay ratio model may well yield a more consistent output that does the previously proposed model. Note however that the earlier model is still based on assay data, nominally relating the absolute silver assay in the concentrate to the associated feed assay. The silver to copper assay ratio model proposed herein will however accommodate changes to the concentrate grade according to the silver and copper ore assay input data. Very limited testwork with respect to silver has been performed since the model was developed. Test results in the current program are within acceptable alignment with the silver model.

CHZ-003 Page 79

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The Ag:Cu Relationship in Feed and Final Concentrate Products 6.5

6.0

5.5

5.0

4.5

4.0 y = 1.4077x - 3.1926 R² = 0.9054 3.5

Ag:Cu Assay Ag:Cu Assay the in Final Concentrate 3.0

2.5

2.0

1.5 3.5 4.0 4.5 5.0 5.5 6.0 6.5 Ag:Cu Assay in the Feed Ore

FIGURE 13-6 SILVER TO COPPER RELATIONSHIP IN FEED AND FINAL CONCENTRATE PRODUCTS

13.6 MAGNETITE SEPARATION TESTWORK

Only two magnetic separation tests were performed. The results for the magnetite testwork for both the low and high Cu:S composites are summarised in Table 13-5.

TABLE 13-5 MAGNETITE TESTWORK SUMMARY

Description High Cu:S Composite Low Cu:S Composite Rougher Stage Mass Recovery to Concentrate (%) 3.62 1.47 Rougher Stage Magnetics Recovery to Concentrate (%) 97.1 92.9 Regrind Energy (kWh/t) 10 -

Regrind P80 (µm) 39 - Cleaner Stage Mass Recovery to Concentrate (%) 68 - Cleaner Stage Iron Recovery to Final Concentrate (%) 96.5 - Final Cleaner Concentrate (Fe%) 68.37 -

Final Cleaner Concentrate (SiO2%) 2.25 -

Final Cleaner Concentrate (TiO2%) 0.63 - Overall Mass Recovery to Cleaner Concentrate (%) 2.46 -

CHZ-003 Page 80

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The metallurgical response for magnetite, produced from the magnetite separation testwork, is shown in the Figure 13-7 and Figure 13-8.

FIGURE 13-7 METALLURGICAL RESPONSE CURVE – FINAL CONCENTRATE GRADE AGAINST MAGNETIC HEAD GRADE

CHZ-003 Page 81

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 13-8 METALLURGICAL RESPONSE CURVE – OVERALL MAGNETIC RECOVERY AGAINST MAGNETIC HEAD GRADE

The tailings from the bulk flotation testwork underwent a rougher bulk magnetic separation with a wet drum magnet to produce a magnetite concentrate. The general conditions for the testwork are shown in Table 13-5. The bulk magnetic separation assays produced are shown in Table 13-6 and Table 13-7

The results indicate that the mass yield to concentrate was relatively small at 3.62% and 1.47% for the high and low copper to sulphur ratio composites respectively. The concentrate and tails produced from the rougher magnetic separation underwent Davis Tube analysis to determine the amount of magnetic material present in each stream.

For both composites less than 50% of the iron in the feed was recovered to the concentrate. This indicates that there is a large amount of iron present in non-magnetic species. This is supported by the low level of magnetic material, 0.1% determined by the Davis Tube testwork, in each of the tails streams.

CHZ-003 Page 82

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 13-6 BULK ROUGHER DRUM TESTWORK GENERAL CONDITIONS

Feed Density Time Flow Rate Ore Type Test No. Drum Strength (Gauss) (% Solids) (mins) (L/min) Low Copper to Sulphur Composite T73 27 20 1,100 2 High Copper to Sulphur Composite T77 27 18.5 1,100 2

TABLE 13-7 HIGH COPPER TO SULPHUR COMPOSITE ROUGHER DRUM TESTWORK RESULTS (TEST 77)

Weight Weight Magnetics Mags Rec. Cu Cu Rec. Fe Fe Rec. Au Au Rec. Sulphur Sulphur Rec. Description (g) (%) (%) (%) (%) (%) (%) (%) (ppm) (%) (%) (%) Concentrate 519.4 3.62 88.8 97.1 0.12 10.1 48.50 46.5 0.16 16.7 0.07 6.2 Tails 13,841.6 96.38 0.1 2.9 0.04 89.9 2.09 53.5 0.03 83.3 0.04 93.8

TABLE 13-8 LOW COPPER TO SULPHUR COMPOSITE ROUGHER DRUM TESTWORK RESULTS (TEST 73)

Weight Weight Magnetics Mags Rec. Cu Cu Rec. Fe Fe Rec. Au Au Rec. Sulphur Sulphur Rec. Description (g) (%) (%) (%) (%) (%) (%) (%) (ppm) (%) (%) (%) Concentrate 215.7 1.47 90.5 92.9 0.10 4.7 49.70 27.4 0.15 6.9 0.22 1.0 Tails 14,457.1 98.53 0.1 7.1 0.03 95.3 1.96 72.6 0.03 93.1 0.32 99.0

CHZ-003 Page 83

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Rougher bulk magnetic separation concentrate produced from Tests 73 and 77 was reground over several different time intervals and the regrind product analysed through a Davis Tube to simulate a cleaning magnetic separation stage. The magnetic material recovered from the Davis Tube underwent XRF analysis. The results indicate iron, as FeO, which is indicative of the amount of ferrous iron present in the material. Analysis was determined via titration. The results are shown from Table 13-8 to Table 13-11.

CHZ-003 Page 84

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 13-9 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – LOW COPPER-TO-SULPHUR COMPOSITE

Regrind Time Al2O3 As Ba CaO Cl Co Cr2O3 Cu Fe K2O Mgo Mn Test No. (seconds) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 0 4.88 0.001 0.016 0.97 0.009 0.002 0.143 0.088 51.230 0.98 0.89 0.139 10 1.78 0.002 0.004 0.35 0.016 0.002 0.154 0.085 64.630 0.38 0.34 0.132 T73 20 1.14 0.001 0.003 0.23 0.017 0.003 0.162 0.074 67.330 0.23 0.22 0.128 30 0.76 0.003 <0.001 0.14 0.008 0.003 0.162 0.061 69.150 0.11 0.14 0.126 60 0.73 0.002 0.001 0.13 0.009 0.003 0.17 0.053 69.320 0.09 0.15 0.125

TABLE 13-10 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – LOW COPPER-TO-SULPHUR COMPOSITE - CONTINUED

Na2O Ni P Pb S SiO2 Sn Sr TiO2 V Zn Zr FeO Test No. (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 0.766 0.009 0.054 0.005 0.187 17.75 0.002 0.01 0.78 0.133 0.04 0.007 24.4 0.231 0.01 0.026 0.005 0.166 5.39 <0.001 0.003 0.72 0.17 0.048 0.002 31.2 T73 0.128 0.012 0.017 0.007 0.154 3.03 0.001 0.003 0.64 0.175 0.052 <0.001 32.1 0.077 0.009 0.01 0.006 0.13 1.58 0.002 0.001 0.57 0.179 0.05 <0.001 33.4 0.058 0.009 0.008 0.006 0.123 1.45 0.002 <0.001 0.56 0.182 0.05 <0.001 33.7

CHZ-003 Page 85

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 13-11 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – HIGH COPPER-TO-SULPHUR COMPOSITE

Regrind Time Al2O3 As Ba CaO Cl Co Cr2O3 Cu Fe K2O Mgo Mn Test No. (seconds) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 0 5.13 0.001 0.02 0.68 0.007 0.004 0.062 0.109 49.850 1.42 0.71 0.13 10 1.44 0.002 0.004 0.18 0.007 0.004 0.064 0.102 66.000 0.42 0.2 0.13 T77 20 0.97 0.002 0.003 0.12 0.012 0.004 0.067 0.093 67.940 0.26 0.15 0.128 30 0.85 <0.001 0.003 0.11 0.012 0.006 0.063 0.089 68.500 0.21 0.15 0.13 60 0.57 0.002 0.039 0.08 0.027 0.004 0.067 0.069 69.560 0.09 0.12 0.122

TABLE 13-12 DAVIS TUBE MAGNETICS ASSAY ANALYSIS – HIGH COPPER-TO-SULPHUR COMPOSITE - CONTINUED

Na2O Ni P Pb S SiO2 Sn Sr TiO2 V Zn Zr FeO Test No. (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 0.995 0.021 0.039 0.003 0.099 19.65 <0.001 0.01 0.73 0.111 0.045 0.007 21.6 0.229 0.008 0.015 0.002 0.085 4.47 <0.001 <0.001 0.66 0.146 0.053 <0.001 28.7 T77 0.15 0.007 0.01 0.002 0.076 2.71 0.002 0.002 0.6 0.15 0.052 <0.001 29.4 0.127 0.004 0.009 0.006 0.074 2.19 0.003 0.003 0.6 0.152 0.057 0.002 29.8 0.075 0.005 0.005 0.019 0.096 1.14 <0.001 <0.001 0.52 0.154 0.058 <0.001 30.2

CHZ-003 Page 86

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The effect of regrind time on the iron and silica grades in the magnetite concentrate produced is shown in Figure 13-9. The results show an obvious and significant improvement by lowering the iron and silica grade as a result of inclusion of a regrind stage.

FIGURE 13-9 REGRIND TIME VS IRON AND SILICA GRADE

All remaining concentrate from the rougher bulk magnetic separation for the high copper-to-sulphur composite was reground at an energy of 10 kWh/t and run three times through the bulk magnetic drum separator to simulate a cleaning stage. The general testwork conditions and the summarised testwork results are shown in Table 13-13 and Table 13-14.

The final concentrate produced after three stages of cleaning was analysed by XRF and the results are shown in Table 13-15 and Table 13-16. No cleaning stage was carried out on the low copper to sulphur composite as there was insufficient sample.

TABLE 13-13 MAGNETITE SEPARATION CLEANER TESTWORK GENERAL CONDITIONS

Feed Time Drum Strength Flow Rate Ore type Test No. Density (mins) (Gauss) (L/min) (%Solids) High Copper to Sulphur T172 - 6, 4, 4 1,000 1.95 Composite

CHZ-003 Page 87

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 13-14 HIGH COPPER TO SULPHUR COMPOSITE MAGNETITE SEPARATION CLEANER TESTWORK RESULTS (TEST 172)

Weight Mass Recovery Iron Iron Recovery Description (g) (%) (%) (%) Magnetite Concentrate 153 67.7 70.00 96.1 Non Magnetics 1 52 23.2 5.35 2.5 Non Magnetics 2 17 7.5 6.69 1.0 Non Magnetics 3 4 1.6 12.37 0.4

TABLE 13-15 FINAL MAGNETITE CONCENTRATE ASSAY ANALYSIS (T172)

Regrind Test Al2O3 As Ba CaO Cl Co Cr2O3 Cu Fe K2O MgO Mn Energy No. (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (kWh/t) T172 10 0.87 <0.001 0.003 0.11 0.003 0.005 0.078 0.084 68.37 0.20 0.19 0.130

TABLE 13-16 FINAL MAGNETITE CONCENTRATE ASSAY ANALYSIS (T172) - CONTINUED

Test Na2O Ni P Pb S SiO2 Sn Sr TiO2 V Zn Zr FeO No. (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) T172 0.132 0.006 0.008 0.006 0.065 2.25 0.002 0.003 0.63 0.150 0.055 0.002 29.3

CHZ-003 Page 88

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

14 MINERAL RESOURCE ESTIMATES

The following section (section 14) is a summary of Section14 of the report taken from the CZH NI43- 101 Report entitled “January 2012 Update of the Mineral Resource Estimate, Taysan Project. Prepared by Mining Associates Pty Ltd for Crazy Horse Resources, Inc”. Author: Ian Taylor. (10th April 2012 NI43-101 Report).

The CZH drilling programme conducted during 2010-2011 at the Taysan Project has enhanced the knowledge of the significant copper deposit that exists within the Taysan Project. The CZH drill programme has focused on the central portion of the ore body, to develop confidence in a suitably large copper resource amenable to open pit mining.

Mining Associates (“MA”) revised the copper mineral resource estimate, using all historic and recent CZH drill data. The gold resource is based on all recent CZH drilling, Chase and Kumakata historic data. The silver resource is based on recent CZH drill data and Kumakata drill data, only recent CZH drilling has magnetite data.

The approach to the resource model consisted of analysis of all drill data, wireframing in section; confirmation and review in flitch slices; grouping the wireframes into sub-domains of similar orientation and grade ranges; tagging and statistical analysis of the drill intercepts by domain; variography; analysing associated metals within the copper domains; estimation using Ordinary Kriging of copper, gold, silver and magnetite into a block model; analysis and validation guided by geology and alteration, informing data, statistical measures and check reporting.

MA’s updated mineral resource estimate has defined a measured category resource of 156Mt at an average grade of 0.31% copper, 0.12g/t gold, 1.2g/t silver and 3.3% magnetite for 1,077Mlb of contained copper, 0.61 Moz contained gold, 5.80 Moz contained silver and 5.20 Mt contained magnetite. The estimate also defined an indicated category resource of 303 Mt at an average grade of 0.23% copper, 0.09g/t gold, 0.7g/t silver and 3.2% magnetite for 1,502 Mlb of contained copper, 0.85 Moz contained gold, 6.54 Moz contained silver and 9.69 Mt of contained magnetite. In addition, the estimate defined an inferred category resource of 509 Mt at an average grade of 0.18% copper, 0.08g/t gold, 0.5g/t silver and 2.7% magnetite for 2,065 Mlb of contained copper, 1.24 Moz contained gold, 7.81 Moz contained silver and 13.59 Mt contained magnetite. A cut-off grade of 0.1% copper was applied to all reported resource blocks. Table 14-1 below provides a summary of the resources.

TABLE 14-1 MINERAL RESOURCE ESTIMATE JANUARY 2012 Resource (0.1% M M lbs Au Ag Magnetite M oz M Oz Mt Cu % Copper Cut off) tonnes Cu g/t g/t % Au Ag Magnetite Measured 156 0.31 1,077 0.12 1.2 3.3 0.61 5.80 5.20 Indicated 303 0.23 1,502 0.09 0.7 3.2 0.85 6.54 9.69 Inferred 509 0.18 2,065 0.08 0.5 2.7 1.24 7.81 13.59

Within the defined copper resource are several associated accessory minerals. These minerals, gold, silver and magnetite were not routinely determined in the historic data. All elements are estimated using ordinary kriging.

CHZ-003 Page 89

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Notes to accompany the Taysan Inferred Resource Estimate: • The tenement holder is Asian Arc. CZH currently controls 100% of Asian Arc. • Resource estimate is based on historical drillholes and CZH holes to December 30th 2011 consisting of 193 historical holes (152 core and 41 percussion) and 93 CHR (core) holes totalling 80,429 metres (75,977 core metres and 4,452 percussion metres). The 1983 TCI holes were rejected outright (2 holes totalling 328 metres) • MA did not conduct an audit of the historic drilling or sample collection procedures. MA has reviewed the CZH procedures and visited site twice during the course of the CHR drill programmes. • There is no available QA/QC information (sample duplicates, blanks, drill core or certified reference materials) for the historical drilling data. Drilling completed by CZH undergoes internal QA/QC, including the submission of certified reference material, duplicates and blanks. The average grade for drilling completed by CZH supports the average grade for the historical drilling data within the mineralised copper domains. • All copper drilling data with the exception of two TCI holes was used in the estimation of the copper resource (1983 TY-007 and TY-008). • Only Chase, Kumakata and CZH gold assays were used for the estimation of the gold resource. • Only Kumakata and CHR silver assays were used for the estimate of the silver resource. Kumakata and CZH where the only drill programmes tested for silver. • CZH recorded magnetic susceptibility readings of pulverised two metre samples for holes CZT001 to CZT093. Magnetite regression was determined from 107 Davis Tube Test samples. • Composite lengths and high grade cuts based on spatial distribution and probability plots were applied as follows, - Copper assay data was composited to 8 metres down hole within geological domains; a copper grade cap was applied informing composites 99th percentile in high copper domains and 98.5th percentile in the lower grade domains. - Gold assays were composited to eight metres down hole within copper domains and were capped at the 99.5th percentile. - Silver assays were composited to eight metres down hole within copper domains and were capped at 99.5th percentile for the high grade copper domains and the 98.5th percentile for the low grade copper domains. 2 - Magnetite content correlates to the magnetic susceptibility of the pulps, (R =0.9733). Magnetite% = 0.1639 x MagSus reading + 0.8007 based on 107 Davis Tube Tests. The regression was applied to all magnetite susceptibility readings (8239 readings of one kg pulp bags representing 2 metre samples). Magnetite % results were composited to eight metres down hole and capped to 98.5th percentile. • Block model block sizes selection of XYZ 60 x 60 x 20m and 30 x 30 x 10m is based on ½ to 1 times the drill hole spacing. Sub-blocking in both models to 15 x15 x 5m for volumes and merging final model. Screened for overlying tuff and topography by sub-block. • Geological resource is constrained by sub-block with 18 wireframes in two grade domains based on lithology, structure, alteration, and a minimum sample grade of 0.1% Cu and 0.3% Cu, includes minor internal dilution. Gold and silver are constrained by the copper domains. Separate domains were created for magnetite based on grade (>2.8% magnetite).

CHZ-003 Page 90

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Drill intercepts within each domain were flagged in a database table and composited to 8 m downhole giving 6,529 informing 8 metre composites from 208 drill holes in total, 93 new drill holes (2010-2011 drill programme) are included in the count. • Routine bulk density measurements show some variation with an average bulk density of 2.6t/m3. The fresh material has a bulk density of 2.6 t/m3 applied; partially weathered material was assigned a bulk density of 2.5 t/m3. Oxide has an applied bulk density of 2.3 t/m3, and the overlying tuff a bulk density 1.3 t/m3. • Grade was interpolated into a constrained block model by domain using ordinary krige techniques. Kriging parameters are derived from a study of variography by domain. The block model was validated by statistical and visual comparison of data and estimated grades and by alternate estimation methods. • Copper resources have been classified as Measured, Indicated and Inferred. No QA/QC data from the historic holes is available. For recent drilling, MA has reviewed CZH’s sample protocols and found the sampling programme has been conducted in accordance with industry standards using appropriate quality assurance/quality control procedures. • No Benguet or Chase drill core is preserved, Kumakata and CZH drill core is preserved on site. All drill data was utilised in the copper estimate except for two TY holes (1983 drilling). • Resources have been classified as Measured, Indicated and Inferred. Resource classification is based on confidence in grade continuity and geological models of the primary commodity (Cu). The measured resource lies above -150mRL is in-fill drilled to approximately 60 x 60m, the majority of blocks must have a krige variance less than 0.4 and slope of regression greater than 0.8. The indicated resource lies above -300mRL and has been drilled on 120 x 60m drill sections with significant infill drilling on section to 30m centres, minor infill drilling on intermediate sections. The majority of blocks must have a krige variance less than 0.4. The inferred resource is drilled on 120 x 120 m pattern and the majority of blocks have a krige variance greater than 0.4. • Lower cut-off grade of 0.1% copper was applied to blocks in reporting the resource estimates.

The information in this portion of the technical report relating to mineral resource estimates are based on information compiled under the direction of Ian Taylor. Ian Taylor is a consultant geologist and Certified Professional (AusIMM (CPGeol)) holding a B.Sc (Hons) with specialist experience in resource evaluation in porphyry copper projects. Mr. Taylor is a Qualified Person ("QP") as defined in the "Canadian Institute of Mining, Metallurgy and Petroleum, CIM standards on Mineral Resources and Reserves' and NI 43-101.

CHZ-003 Page 91

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

15 MINERAL RESERVE ESTIMATES

15.1 INTRODUCTION

The Mineral Resource has been converted to a Mineral Reserve by the application of appropriate modifying factors and detailed mine planning. Optimised pit shells were defined at set long term economic parameters to guide the more detailed pit designs. This process is described in further in the following report sections.

15.2 MINERAL RESERVE ESTIMATE

The following long term commodity prices have been used to estimate the Mineral Reserves: • Copper: $3.0/lb • Gold: $1000/oz • Silver: $26/oz • Magnetite: $100/t

The marginal cut-off grade on a copper only basis is 0.14% Cu based on a processing cost of $7.11/t and long term copper price of $3.0/lb.

The Mineral Reserves estimate (see Table 15-1), however, is based on an elevated and variable cut-off grade strategy ranging from 0.28% CuEq2 to 0.18% CuEq1 during the life of the mine. A copper equivalent cut-off grade has been used to define the Mineral Reserves due to the significant revenues associated with the gold and magnetite. All material below the cut-off grade has been treated as waste rock for this project. Inferred Mineral Resources have also been treated as waste and have had no influence on the pit designs.

The waste to ore ratio for the stated Mineral Reserves is approximately 1:1 for the life of mine.

Due to the preliminary nature of the mining, processing, logistics and marketing studies, all Mineral Reserves have been classified as Probable.

2 CuEq = Cu % + 0.35 x Au (g/t) + 0.004 x Ag (g/t) + 0.016 x Mt%. The copper equivalence formula is based on the relative metal price, recovery and payability of each element. The LOM average recoveries and payabilities have been used to simplify the reporting on a copper equivalence basis. The metal prices, recoveries and payabilities used to derived the copper equivalence formula are shown in the table below: Element Metal Price Avg. LOM Recovery Avg. LOM Payability Cu $3.0/lb 91% 87% Au $1000/oz 70% 82% Ag $26/oz 56% 40% Magnetite $100/t con 95% 89%

CHZ-003 Page 92

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 15-1 TAYSAN MINERAL RESERVES ESTIMATE Tonnes Cu Au Ag Magnetite Category (Mt) % g/t g/t % Probable 353 0.27 0.11 0.9 3.4

15.2.1 Factors affecting the Mineral Reserve Estimate

IMC do not believe that are any significant impediments which would materially impact the Mineral Reserve estimate for Taysan. The project would benefit from further drilling immediately below the pit floor. More extensive metallurgical testwork is also recommended to improve the magnetite response model.

Mining and Geology IMC believe that suitable mining loss and dilution parameters have been taken into account to estimate the Mineral Reserves. The geological risk for the Mineral Reserves is considered to be low due to the significant amount of Measured Resources in the final pit shell.

Inferred Mineral Resources have been treated as waste rock.

Metallurgical An extensive metallurgical program has been completed covering the copper and gold mineralisation. Further magnetite testwork is planned to improve the magnetite response model.

Oxidised and partially oxidised material has been treated as waste rock due to low recoveries.

Infrastructure The project benefits from being a 2 hour drive south of Manila and 20km from an existing port owned by CZH. The project area is sparsely populated yet well serviced with an existing road network. It is planned to source electricity from the local grid through long term contracts.

Tenements and Permitting Whilst not all land required for the project development is under control of CZH or under a mining lease IMC understand that there are reasonable prospects that these will be granted as the project is developed. An FTAA application has been placed over the entire project area to cover the planned mine, plant and TSF sites.

15.3 MINE OPTIMISATION

15.3.1 Introduction

The pit optimisation process is essentially a mechanism for outlining pit shells that are economic at given financial parameters. The pit shells so developed honour criteria established for slope constraints. The pit shells created have been used to guide the pit stages and final pit designs used to estimate the Mineral Reserves. The following section describes the key economic criteria which has been used to convert the Mineral Resource into a Mineral Reserve.

CHZ-003 Page 93

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

15.3.2 Mine Optimisation Parameters

A summary of the key modifying factors that were applied to derive the potentially economic material in the pit optimisation is shown in Table 15-2 below.

A mine gate revenue, or net smelter return, was calculated to estimate the mining revenue from copper, gold, silver and magnetite sales whilst allowing for downstream costs between the mine and the point of sale.

TABLE 15-2 KEY PIT OPTIMISATION PARAMETERS Parameter Units Value Copper Price US$/lb 3.00 Gold Price US$/tr.Oz 1000 Silver Price US$/tr.Oz 26.0 Magnetite Price US$/t FOB 100 Mill throughput Mtpa 15 Processing cost incl. GA US$/t ore 7.11 And Sustaining Capex Average mining cost US$/total tonne 1.92 Mine Gate Revenue - Cu US$/lb 2.61 Mine Gate Revenue – Au US$/tr.Oz 839 Mine Gate Revenue – Ag US$/tr.Oz 11.4 Mine Gate Revenue - Magnetite US$/t FOB 88.8

15.3.3 Cut-off Grade The marginal cut-off grade is the grade that just pays for the ore related costs i.e. process opex and G&A after taking into account the downstream costs such as TC/RC and payability.

The mine gate revenue, or net smelter return, is used to estimate the revenue generated by copper and magnetite concentrate sales inclusive of deductions from the ‘mine gate’. The mine gate revenue is used to calculate the marginal cut-off grade for the project.

The marginal cut-off grade for the Taysan Project is 0.14% Cu on a copper only basis based on a $3.0/lb long term copper price and an ore processing cost of $7.11 per tonne.

At Taysan, copper accounts for approximately 75% of the total revenue. Gold credits and magnetite sales provide significant credits (10% and 15% of total revenue respectively) whilst silver credits remain a minor contributor to the project revenue (approximately 1% of total revenue).

The copper equivalence formula used in the mining studies is based on the relative recovery and payability of each element in each block in the resource model. Although the copper equivalence factors change on a block by block basis, the following formula (based on LOM average recoveries and payabilities) has been used to simplify the reporting on a copper equivalence basis:

CuEq = Cu % + 0.35 x Au (g/t) + 0.004 x Ag (g/t) + 0.016 x Magnetite%

CHZ-003 Page 94

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Where the Au, Ag and Magnetite equivalence factors are based on the relative recovery and payability compared to copper.

For example, the Au equivalence factor is determined by the following equation:

$/ = $/% 퐴푢 푟푒푐표푣푒푟푦 퐴푢 푃푎푦푎푏푖푙푖푡푦 퐴푢 푃푟푖푐푒 푔 퐴푢 푒푞푢푖푣푎푙푒푛푐푒 퐴푢 ℎ푒푎푑 푔푟푎푑푒 푥 � � 푥 � � 푥 � � 퐶푢 푅푒푐표푣푒푟푦 퐶푢 푃푎푦푎푏푖푙푖푡푦 퐶푢 푃푟푖푐푒 For an 0.10 g/t Au head grade

Au equivalence = 0.10 x (70% / 91%) x (82% / 87%) x (32.15 / 66.14) = 0.10 x 0.35 =0.035 % CuEq

The same logic applies to estimate the silver and magnetite equivalence factors.

The metal prices, recoveries and payabilities used to derive the copper equivalence formula are shown in Table 15-3 below:

TABLE 15-3 FACTORS USED TO ESTIMATE COPPER EQUIVALENCE Element Metal Price Avg. LOM Avg. LOM Payability Recovery Cu $3.0/lb 91% 87% Au $1000/oz 70% 82% Ag $26/oz 56% 40% Magnetite $100/t 95% 89%

15.3.4 Ore Loss and Dilution A mining loss of 2.5% was applied to the ore tonnes to estimate the ore tonnage in the mine production schedule to account for mining recovery, poorly assigned trucks, blast movement and geological loss. No additional dilution has been applied due to low marginal cut-off grade used and the low grade nature of the Taysan orebody. Dilution is not expected to be a significant issue at Taysan and in IMC’s opinion this has been effectively accounted for in the block model due to the large (60mx60mx20m and 30mx30mx10m) panel sizes and 8m sample composites used to estimate the block average grade. Some internal dilution has also been modelled due to the sectional domaining of the high and low grade ore domains which will include lower grade samples inside the domain. Furthermore, any dilution present in the ore will tend to be at grades that are similar to the ore grades due to gradational change from low grade to sub-marginal material.

15.3.5 Optimisation Summary

A number of optimisation scenarios were run to assess the impact of various copper price scenarios on the Taysan pit volume and value. The optimisation results at $2.5/lb, $3.0/lb and $3.5/lb copper are shown in Table 15-4.

CHZ-003 Page 95

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The impact of inferred resources was also assessed on the overall project size and value. Inferred resources at Taysan have a significant impact on the total project value and pit volume. For the purposes of the of the PFS mining studies, Inferred Resources have been treated as waste. Notwithstanding this, the conversion of Inferred Resources immediately below the Indicated Resources could significantly add to the pit value and mine life.

The Present Value (PV) shown in the following table and Figure 15-1 is a high level estimate of the pre- tax, pre-finance cash flow discounted at 10% annually and excludes capital, depreciation and value added tax (VAT). The present value of the Taysan project is in the order of $1.1B to $1.3B based on the pit optimisation results. The estimated project capital cost is $560M which leads to a net present value (NPV) estimate between $540M to $740M (pre-tax and pre-finance) for the Taysan Project.

TABLE 15-4 TAYSAN OPTIMISATION SUMMARY – PHYSICALS Cu Cut Est. Copper Pit Avg. Total Waste Ore Off Mine Cu Au Ag Magnetite Price Shell PV Tonnes Tonnes Tonnes Grade Life $/lb M$ % Years Mt Mt Mt % g/t g/t %

2.50 29 867 0.15 25.1 632 254 377 0.26 0.10 0.87 3.37 3.00 30 1,168 0.12 26.4 680 284 397 0.26 0.10 0.86 3.35 3.50 30 1,484 0.11 27.0 708 303 405 0.26 0.10 0.85 3.35 3.00 with 30 1,027 0.12 47.5 1,203 491 712 0.23 0.09 0.70 3.13 Inferred

CHZ-003 Page 96

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-1 OPTIMISATION SUMMARY – ORE, WASTE AND AVERAGE PV

CHZ-003 Page 97

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

15.3.6 Present Value and Cut-Off Grade Optimisation

Given the long mine life at Taysan (+26 years) and the low strip ratio, further investigations were carried out to improve the present value (PV) of the Taysan mine schedule by varying several parameters: • Final pit shell • Cut-off grade • Production Schedule

In high strip ratio orebodies, the final pit shell does not always provide the highest PV when scheduled using a practical pushback sequence. In some cases, a smaller final pit can lead to an improvement in project PV. This theory was tested at Taysan and it was found that the largest pit shell does still increase the PV (albeit by only approximately $10M out of $1.4B in total PV). The largest pit shell (Pit Shell 9) and 8 interim stages were chosen as the highest value pit development sequence for further investigations into cut-off grade optimisation.

The Whittle ‘Simultaneous Optimisation’ module was used to perform a concurrent optimisation of the following: • Production schedule • Cut-off grade • Low grade stockpiling.

For the purposes of the Taysan optimisation, it has been assumed that if material is stockpiled then is becomes waste (i.e. poor recovery due to oxidation). It follows that the Simultaneous Optimisation was mainly tasked with determining to optimal production schedule and cut-off grade strategy for chosen pit shell sequence.

The theory behind optimising the cut-off grade is that most projects benefit from processing an elevated head grade in the early years of the project to improve the cashflow, PV and IRR. This improvement in head grade delivered to the mill, however, comes at a cost; increased mining rates, higher strip ratios and a shorter mine life. The aim of the Simultaneous Optimisation is to assess whether the overall project value is improved by processing higher grades whilst taking the associated costs into account.

At Taysan, the project value can be increased by operating at an elevated and variable cut-off grade during the life of the project. The overall improvement in value is in the order of 5% in NPV – further improvements in NPV could be achieved if low grade material could be stockpiled and reclaimed several years later.

The optimal and proposed cut-off grade and production schedule is shown in Figure 15-2. The outcome of the cut-off grade optimisation is a variable cut-off grade which varies per year to maximise the project cashflow. For the purposes of practical scheduling and reporting Mineral Reserves, IMC have assigned each pit stage a singular cut-off grade.

The variable cut-off grade strategy applied to increase the PV of the Taysan PFS is as shown in Table 15-5 and by the black line in Figure 15-2.

CHZ-003 Page 98

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 15-5 VARIABLE CUT-OFF STRATEGY OF THE TAYSAN PFS Pit Stage CuEq (rec.) CuEq (in situ) Stage 1 0.26 0.28 Stage 2 0.26 0.28 Stage 3 0.26 0.28 Stage 4 0.24 0.27 Stage 5 0.20 0.23 Stage 6 0.20 0.23 Stage 7 0.18 0.21 Stage 8 0.16 0.18 Stage 9 0.16 0.18

FIGURE 15-2 VARIABLE CUT-OFF STRATEGY

15.3.7 Interim Pit Shells for Mine Production Scheduling A number of interim pit shells have been proposed to provide guidance for the pit designs and mining schedules. In total, 9 pit stages were chosen (Table 15-6). The purpose of the pit stages was to improve the project value by deferring waste and targeting higher grade and higher margin areas earlier in the mine production schedule.

CHZ-003 Page 99

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 15-6 OPTIMISATION RESULTS – BY PIT STAGE AND VARIABLE CUT-OFF GRADE Optimised COG Total Waste Ore Cu Au Ag Magnetite S Shell CuEq % InSitu Mt Mt Mt % g/t g/t % % 1 0.28 21.5 11.0 10.5 0.51 0.27 2.06 4.68 0.60 2 0.28 22.1 6.3 15.8 0.43 0.19 1.82 4.58 0.74 3 0.28 28.2 12.5 15.8 0.40 0.17 1.64 4.05 0.75 4 0.27 65.8 33.1 32.7 0.32 0.11 1.04 3.97 0.64 5 0.23 73.0 32.5 40.5 0.30 0.10 1.04 3.14 0.99 6 0.23 78.1 35.4 42.7 0.27 0.11 0.90 3.14 0.93 7 0.21 122.0 53.2 68.8 0.24 0.09 0.74 3.14 1.00 8 0.18 133.3 64.3 68.9 0.22 0.08 0.63 3.39 0.70 9 0.18 136.5 77.2 59.3 0.21 0.08 0.54 3.24 0.78 Total 680.4 325.5 354.9 0.27 0.11 0.89 3.43 0.83

The pit shells shown in Figure 15-3 and Figure 15-4 were chosen for detailed designs and scheduling. Cross-sections showing the pit shells and the resource classification, copper, gold, silver and magnetite grades are shown in Figure 15-5 to Figure 15-9. The cross-sections clearly show the higher grades of all four elements in the first 4 pit stages.

Pit shells 1, 2, 5, 10, 11, 13, 17, 19 and 30 were chosen based on their geometry and mining practicality. These 9 shells were then modified to allow for a minimum mining width of 75m between the shells.

CHZ-003 Page 100

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-3 OPTIMISED PIT SHELLS (LOCAL GRID)

FIGURE 15-4 OPTIMISED PIT SHELLS – OBLIQUE VIEW

CHZ-003 Page 101

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-5 19500N CROSS-SECTION: RESOURCE CLASSIFICATION

It should be noted that the pit shells 7, 8 and 9 have hit the limit of Indicated Resources as shown Figure 15-5. The Mineral Reserves are therefore currently limited by drilling due to the Inferred Resource classification for material below -300m RL.

FIGURE 15-6 19500N CROSS-SECTION: COPPER %

CHZ-003 Page 102

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-7 19500N CROSS-SECTION: GOLD G/T

FIGURE 15-8 19500N CROSS-SECTION: SILVER G/T

CHZ-003 Page 103

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 15-9 19500N CROSS-SECTION: MAGNETITE %

CHZ-003 Page 104

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16 MINING METHODS

16.1 INTRODUCTION

It is proposed that the primary mining fleet will consist of 15m3 and 12m3 excavators and a fleet of 140t capacity off-highway diesel trucks.

The following report sections described the proposed mining methods in more detail.

16.2 GEOTECHNICAL

The simplified geotechnical model (framework) for the pit assessment included the following rock types: • Tuff and Weathered rock overlying fresh rock comprising fractured diorite, with breccia and fault zones. • Lineaments dominantly strike North and Northwest

Surface processes are dominated by shallow but pervasive erosion of altered diorite below a tuff “cap” in the east of the project area and which forms the “plateau” in that area. No significant deep seated landslides are obvious or have been observed within the immediate project area.

16.2.1 Geotechnical Drilling A programme of four fully cored geotechnical boreholes was carried out during September and October, 2011, under the supervision of IMC and GHD. Two boreholes were completed in the pit area and two boreholes completed in the plant site footprint.

TABLE 16-1 DRILLHOLE COORDINATES

Easting (UTM Northing (UTM Completed Drillhole No. Location RL (m) WGS 84) WGS 84) Depth (mbgl) PFS-PZBH-001 Pit 307022 1522767 138.21 66.00 PFS-PZBH-003 Pit 306856 1522047 135.49 69.25 PFS-PLBH-003 Plant Site 306588 1520929 185.00 20.00 PFS-PLBH-004 Plant Site 306691 1520734 175.64 20.00

These holes were cored from ground level to nominated depths, to enable engineering geological logs to be compiled for the soil and rock profile, and to provide samples for geotechnical testing. Coring was achieved using a PQ core barrel, giving nominal 85mm diameter core.

CHZ-003 Page 105

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16.2.2 Open Pit

The pit was divided into 2 geotechnical domains comprising the: • West Corner with a series of faults interpreted to dip behind the pit wall • Remaining Part of the pit with no obvious large scale structure.

In the northwest end of the pit, northeast striking, south east dipping faults are interpreted to intersect or come very close to the pit shells. In this corner, pit wall stability will be influenced by the faults and the wall will need to be trimmed to cut through the fault into “intact” rock.

For the Remaining Part of the pit in Fresh Rock, ground conditions are considered likely to support for an overall slope in Fresh Rock of 50° with 10m wide benches to catch rockfall.

There are no significant geological structures driving the batter slope angle, which should be selected to match the preferred inter-bench height and slope.

For all parts of the pit in Tuff and Weathered rock, the recommended overall slope is 37°.

The proposed pit slope angles result in a factor of safety (FoS) for: • FoS ≥ 1.3 static conditions and • seismic conditions FoS = 1 for (0.4g acceleration).

The proposed pit slope guidelines for the open pit are summarised in Table 16-2.

TABLE 16-2 GEOTECHNICAL RECOMMENDATIONS FOR PIT SLOPE ANGLES Soil and Weathered Rock Fresh Rock Depth below surface To Base of Tuff From base of Tuff Bench Height Up to 10 m 20 m Bench Face Angle* 55° 75° Bench Width 8 m 10 m Overall Slope Angle 37° 45°

16.2.3 Waste Dumps

The Taysan project area is mostly covered by a thick layer of volcanic tuff (Taal Tuff). The topography across the site is subdued due to the tuff cover, however the unit is absent in the south and in the vicinity of Discovery Hill, where the topography steepens significantly. From core inspection, the Taal Tuff freshens at depth, with an abrupt transition to highly weathered HQD or Quartz Diorite (QD). These instances of highly weathered materials at depth represent the original topography prior to tuff deposition.

The Taal Tuff was observed to be variably indurated, with the highly weathered profile comprising sandy silt/clay to clayey sand, with some fine gravel. The classic component varied from sub-angular to sub-rounded. The fresh tuff was generally of low density and variable strength depending on the degree of welding. From limited core observation, the fresh tuff was generally competent and intact.

CHZ-003 Page 106

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The basement units comprised highly fractured HQD and QD. The weathered profile typically comprised low to medium plasticity sandy clays, which graded to high strength rock. This was not however reflected in the laboratory results, due to the highly fractured nature of the material. Limonite staining was evident on fracture surfaces for medium to slightly weathered materials, and the degree of alteration ranged from slightly to strongly argillic alteration, with less common propylitic alteration.

Shears and faults were common observations during logging core. These features were identified by highly brecciated zones, characterised by thick clayey infilling within a crushed rock mass.

Alluvial/fluvial sedimentary deposits were observed within the creek and stream channels and were generally deeply incised, which is a reflection of the high flow volumes during intense rainfall.

The generalised engineering geology model for the site is presented in Table 16-3. This basic model provides a preliminary understanding of foundation conditions across the site, which was based on the results of drillhole logging and sampling during recent field investigations.

TABLE 16-3 GENERALISED ENGINEERING GEOLOGY MODEL Geological Unit Material Description Depth From - To (mbgl) Weathered Tuff Sandy to silty, low to 0 - 16 medium plasticity, brown, fine – coarse grained sand, with some gravel, loose to medium dense Fresh Tuff Very low strength, low density, dark 16 - 30 brown to grey, with subrounded to subangular clasts Weathered Diorite High to intermediate plasticity clays, 30 - 45 more competent material highly fractured and brecciated, weakly cemented, orange brown, mottled with Fe staining, extremely low to very low strength, moderate to strong argillic alteration Fresh Diorite Moderate to High strength, light grey, >45 weak argillic alteration

16.2.3.1 Aquifers

Two aquifers were noted to be present within the pit area and are likely to be extensive across the site. These included: • A shallow unconfined aquifer within the Taal Tuff; and • A deeper fractured rock aquifer with the HQD.

CHZ-003 Page 107

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The shallow aquifer is currently used by the local population as a source of drinking and stock water. Anecdotal information from local groundwater users suggested that the standing water level in the tuff aquifer was approximately 12m below ground level.

16.2.3.2 Proposed Design Criteria

For the geotechnical conditions anticipated within WRD footprint, two steeper geometry options were also be examined in order to potentially reduce the WRD footprint area.

The basic proposed design criteria are presented in Table 16-4. An OSA closer to 180 is generally considered commensurate with standard WRD designs, particularly in high rainfall, high seismic environments; however an OSA of approximately 220 would also be examined.

TABLE 16-4 WRD DESIGN OPTIONS Bench Height (m) Berm Width (m) Batter Angle (0) Approx. Overall Height (m) Slope Angle (OSA) (0) 15 30 37 18 90 15 20 37 22 90

16.2.3.3 Drainage Control

Controlling drainage and water infiltration into the WRD would be an important mitigation measure against instability. Water management practices should be adopted on working benches to avoid water ponding and scouring, due to concentrated runoff from the WRD crest. This may involve bench profiling so that runoff is directed along the toe of each batter, and ultimately away from active working areas.

A system of drainage channels would also need to be designed to divert clean surface water around the WRD and discharge into surrounding watercourses.

In addition to this, a drainage system beneath the WRD would need to be designed to allow internal flows to be captured and treated prior to discharge

16.2.4 Groundwater

Groundwater is likely of comprise of the following: • Upper Aquifer with groundwater level some 30m below ground level, and perched at the interface with Fresh rock, and • Lower Aquifer with groundwater level below the Tuff boundary, and which aquifer is at least as deep as the open pit.

Groundwater control is likely to be necessary over the full depth of the pit to manage the stability of the wall, and for general seepage. Vertical wells are recommended.

CHZ-003 Page 108

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16.3 MINE DESIGN

16.3.1 Open Pit

Detailed pit stages were designed based on the results of the pit optimisation after the application of minimum mining widths and the inclusion of the variable cut-off grade strategy.

The tonnage of ore, waste and associated grades for each pit stage is shown in Table 16-5.

The nine pit stages are shown in plan view in Figure 15-3.

TABLE 16-5 TAYSAN PIT DESIGN TONNAGES COG Total Waste Ore Cu Au Ag Magnetite S Pit Stage CuEq % InSitu Mt Mt Mt % g/t g/t % % 1 0.28 20.6 11.0 9.6 0.50 0.27 2.07 4.69 0.56 2 0.28 21.3 7.4 13.9 0.42 0.19 1.78 4.49 0.72 3 0.28 26.8 10.8 16.0 0.40 0.17 1.61 4.21 0.73 4 0.27 62.0 30.7 31.3 0.33 0.12 1.15 4.01 0.67 5 0.23 83.3 36.6 46.7 0.29 0.09 1.00 3.19 0.97 6 0.23 75.7 35.3 40.4 0.27 0.11 0.89 3.15 0.93 7 0.21 102.0 46.8 55.1 0.23 0.09 0.74 2.95 1.11 8 0.18 77.7 39.8 37.8 0.19 0.07 0.57 3.48 0.46 9 0.18 231.2 129.0 102.2 0.23 0.09 0.64 3.34 0.81 Total 700.5 347.4 353.0 0.27 0.11 0.90 3.44 0.81

16.3.2 Waste Dumps

The LOM pit design and waste rock dump design for Taysan is shown in Figure 16-1.

The pit crest comprises of weathered tuff materials and the design of the dump has been set back 30m from optimised pit shell which included Inferred Resources rather than the Stage 9 pit design to accommodate future potential pit expansions.

The 30m buffer will allow control of rockfall, road access, slumping of the dumps due to earthquakes and control of surface runoff from the dump.

The dump has been split into a northern and southern dump to limit the impact of the dump on the existing drainage lines. Water diversion structures will need to be constructed during the mine development to reduce the surface water inflows into the pit. It is also proposed that the explosives magazines be placed on a platform on the northern side of the South dump.

CHZ-003 Page 109

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 16-1 TAYSAN WASTE ROCK DUMP LOCATION (24 YEAR FOOTPRINT)

CHZ-003 Page 110

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16.4 MINE PRODUCTION SCHEDULE

16.4.1 Introduction The material contained inside the pit designs at Taysan was used as the basis for the mine production schedule.

16.4.2 Material Movement The scheduled material total movement is shown in Figure 16-2. The pre-stripping of the subsequent stages is based on the requirement to have exposed enough ore before the completion of the previous stage to ensure a steady supply of ore to the mill whilst balancing total movement requirements.

FIGURE 16-2 MINE PRODUCTION SCHEDULE – TOTAL MOVEMENT BY MATERIAL TYPES

16.4.3 Ore Delivered to the Mill The ore processing schedule is very similar to the mining schedule as no low grade stockpile reclaiming has been planned at Taysan. The ore mined in the pre-production period (Year -1) will be processed in Year 1. The material processed and associated grades are shown in Table 16-6 and Table 16-7.

CHZ-003 Page 111

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 16-6 MINE PRODUCTION SCHEDULE – SUMMARY (YEAR 1 TO 12)

CHZ-003 Page 112

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 16-7 MINE PRODUCTION SCHEDULE – SUMMARY (YEAR 13 TO 24)

CHZ-003 Page 113

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16.5 MINING FLEET

16.5.1 Mining Fleet

The required mining equipment fleet for Taysan is shown in Table 16-8. The mining fleet is planned to consist of two 250t excavators and one 200t excavator for waste and ore mining. A fleet of Caterpillar 785 (or Komatsu HD1500) dump trucks with a nominal 140t capacity have been planned as the primary truck fleet.

The peak fleet size for Taysan will occur from year 15 to 18 as the schedule moves into higher strip ratio areas and the ore haulage distances increase. Three excavators and 31 trucks will be required to maintain feed to the plant and move the required waste quantities to the waste dump.

TABLE 16-8 TAYSAN PRIMARY MINE EQUIPMENT FLEET (NUMBER OF UNITS) Peak Equipment Type Year 1 5 10 (Year 15) Excavators 250t Excavator no. 1 2 2 2 200t Excavator no. 1 1 1 1 Trucks Cat 785 no. 10 20 20 31 Cat 773D Water Cart no. 2 2 2 3 Dozers Cat D9R no. 1 2 2 2 Cat D10T no. 1 2 2 2 Front End Loaders Cat 988 – ROM no. 1 2 2 2 Graders Cat 16M no. 2 2 3 3 Drills DML no. 1 2 2 3

16.5.2 Estimate of Operating Time

The mine at Taysan has been estimated to operate 362 days per year on a 24/7 basis. The operating roster was based on a three panel roster with 2 x 11 hr shifts per day similar to other mines in the Philippines.

The annual operating hours at Taysan are estimated to be 5,535 hours for the excavators and 5,445 hours for the truck fleet. Allowances have been made for maintenance, wet weather, standby and operating delays.

The whole of life availability for the primary fleet has been estimated to be 85% whilst the utilisation was estimated to be 80%.

CZH-003 Page 114

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

16.5.2.1 Excavator Productivity

Productivity of the loading and hauling equipment has been developed on the basis of empirical estimates together with haulage simulations to determine the truck productivity.

The peak estimated annual production requirement is 16Mbcm is expected to be maintained for approximately 8 years (Year 11 to 18). This mining rate can be achieved using two 250t (15m3 bucket) and one 200t (12m3 bucket) hydraulic excavators operating for 5,535 hours per year.

16.5.2.2 Truck Productivity

The production rate for the primary truck fleet has been estimated from simulations carried out for each pit stage and bench. The productivity of the haulage fleet varies with depth and material type due to changes in haul distance, gradient and material density.

Each pit stage had a unique haul route profile to the ROM pad and to the waste dump. The results from the truck simulations were used to determine the average loaded and empty travelling speeds per year for each of the material destinations.

16.5.2.3 Drill and Blast

The average estimated annual drill and blast expenditure is $5.8M. It has been assumed that none of the Tuff or Oxide material will require drilling and blasting whilst only 75% of the Fresh material will require drilling and blasting. These assumptions will need to be refined during the BFS following more detailed geotechnical testing and investigations.

16.5.2.4 Grade Control

Grade control costs have been estimated on the basis of a 30m x 30m drilling pattern with assays every two metres. The assay costs have been accounted for by CHR in the owner’s onsite laboratory cost. All grade control drilling will be completed with reverse circulation drill rigs. The average estimated annual grade control expenditure is $0.19M.

16.5.2.5 Manning Requirements

The manning requirements have been divided into various categories. The operating roster has been assumed to be a 2 x 11 hr shifts per day with 3 panels. The manning numbers are summarised in Table 16-9.

CZH-003 Page 115

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 16-9 MANNING REQUIREMENT – YEAR 1, 5, 10 AND PEAK

Peak Manning Requirement Year 1 5 10 (Year 15) Staff Expatriate Staff no. 13 13 13 13 National Staff no. 32 32 32 32 Subtotal – Staff 45 45 45 45 Operations Excavator Operator no. 6 8 8 11 Drill Operator no. 3 5 5 11 Mine Truck Operator no. 50 116 99 145 Loader Operator no. 7 7 7 7 Dozer Operator no. 7 14 14 14 Grader Operator no. 7 7 10 10 Water Truck Operator no. 7 7 7 10 Ancillary Plant Operator no. 17 29 38 38 Subtotal – Operations 103 193 187 245 Maintenance Tradesmen no. 15 26 27 36 Servicemen no. 2 3 3 4 Subtotal – Maintenance 17 30 30 41 Total no. 165 267 262 331

CZH-003 Page 116

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

17 RECOVERY METHODS

17.1 PROCESS OVERVIEW

The proposed Taysan Copper-Magnetite concentrator has been designed to treat 15 Mt/a based on a maximum copper head grade of 0.60% and a maximum magnetite head grade of 2.60%. The concentrator will utilise the following principal process areas for the recovery of the copper and magnetite concentrates: • Primary crushing (Gyratory Crushers) • Crushed ore stockpile and reclaim • SAG milling • Pebble crushing (cone crushers) • Ball mill grinding and classification • Copper rougher flotation and regrind • Two-stage copper cleaner flotation • Magnetite rougher magnetic separation • Magnetite regrind • Magnetite hydroseparation • Magnetite cleaner magnetic separation • Copper concentrate thickening, filtration, storage and load-out • Magnetite concentrate thickening, filtration, storage and load-out • Tailings thickening, disposal and decant water return • Process water storage and distribution • Raw water storage and distribution • Reagent make-up and distribution • High and low pressure air distribution

The Taysan flow sheet is assembled from unit processes used commonly throughout the minerals processing industry. A simplified version of the Taysan flow sheet is shown in Figure 17-1 with the overall Process Flow Diagram (PFD) of the Taysan copper concentrator shown in Figure 17-2.

CZH-003 Page 117

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 17-1 SIMPLIFIED TAYSAN FLOW SHEET

FIGURE 17-2 TAYSAN OVERALL PROCESS FLOW DIAGRAM

CZH-003 Page 118

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The processing circuit consists of a primary gyratory crusher discharging to a coarse ore stockpile of approximately 25,000 t live capacity. Grinding circuit is a single line SAG and ball milling with pebble crushing (SABC), consisting of a single SAG mill, two balls mills and two pebble crushers. The copper flotation circuit consist of a rougher, cleaner, cleaner-scavenger and re-cleaner circuit. The magnetite recovery circuit treats the copper flotation tails stream via rougher and cleaner magnetic separators. Concentrates are thickened via high rate thickeners prior to filtration in pressure filters. The tailing streams are combined and thickened in a thickener prior to discharge to the tailing storage facility.

The crushing and comminution flow sheets are considered conventional in design. The design has been based on both historical testwork and metallurgical testwork performed during the prefeasibility phase of the Taysan project. In addition, a benchmarking exercise was performed using data from other similar operations as a design check.

The copper flotation circuit design consists of rougher flotation, regrind and two stages of cleaning which is again based on both historical testwork and metallurgical testwork performed during the prefeasibility phase of the Taysan project.

Preliminary flotation tails settling testwork was performed to estimate the size of the flotation tails thickener. The preliminary data was benchmarked with other operations of a similar size.

The process design is inconsistent with the latest mine plan outputs as the mine plan has undergone revisions subsequent to freezing of process plant design. This inconsistency applies only to the magnetite cleaner, regrind and associated magnetite thickening and magnetite filtration sections of the plant. Review of the design specifications has indicated that the regrind mill should be able to accommodate the increased throughput with little change to the design. This is due to a relaxation on the product size distribution. The magnetite thickener size will need to be increased and the filter capacity increased. The filtration rates for the magnetite concentrate have not been tested however the increase in product size would likely result in an increased filtration rate so the capacity increase would not be expected to be dramatic. It is recommended that the throughput (and hence plant design) of the aforementioned magnetite sections of the plant be reconsidered in light of revised mine plans and further testwork conducted in subsequent phases of the project. It may reasonably be expected that increased throughput will be accompanied by increased capital and operating costs but it is not possible to quantify the magnitude of these changes at this stage. The change in the process design that may be required is considered to fall within the accuracy and growth allowance tolerances for a study of this level of accuracy.

CZH-003 Page 119

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

17.2 PROCESS AND EQUIPMENT SELECTION

17.2.1 Input

The plant is designed to process a nominal rate of 45,000 dry t/d of ore (15.0 Mt/a at 91.3% plant availability) from the Taysan ore body. The maximum design rate, incorporating a 20% design allowance, is 54,000 dry t/d. The processing plant operates 52 weeks per year, 7 days per week, 24 hours per day, at 91.3% availability. The expected Taysan Copper Project mine life is 24 years

The general processing and ore characteristics are summarised in a number of tables below (Table 17-1, Table 17-2, Table 17-3, Table 17-4, and Table 17-5). These tables reflect the main parameters used in the design of the process flow sheet. The general processing and ore characteristics are predominately derived from specific testwork, such as the comminution and the flotation testwork.

TABLE 17-1 OPERATING DAYS AND THROUGHPUT

Description Units Value Annual Throughput dry t/a 15,000,000 Number of Operating Days per Annum days 365 Hours per Day hrs 24

TABLE 17-2 ROM GRADE

Description Units Value Copper Feed Grade (Life-of-Mine Average) % w/w 0.28 Copper Feed Grade (Maximum for Design) % w/w 0.60 Magnetite Feed Grade (Life-of-Mine Average) % w/w 2.2 Magnetite Feed Grade (Maximum for Design) % w/w 2.6

TABLE 17-3 GENERAL ORE CHARACTERISTICS

Description Units Value Ore Specific Gravity (used for design) t/m³ 2.7 Ore Bulk Density (Design Mass Calculations) t/m³ 2.0

TABLE 17-4 COMMINUTION CHARACTERISTICS 80TH PERCENTILE

Description Units Value Bond Crushing Work Index kWh/t 11.1 Bond Rod Mill Work Index (1,180 µm) kWh/t 16.1 Bond Ball Mill Work Index (150 µm) kWh/t 14.3 Bond Abrasion Index - 0.19

CZH-003 Page 120

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 17-4 COMMINUTION CHARACTERISTICS 80TH PERCENTILE

Description Units Value SMC Drop Weight Index kWh/t 5.7 Axb - 45.4

TABLE 17-5 CONCENTRATE PRODUCTION

Description Units Value Concentrate Copper Grade – Design % w/w 28.0 Copper Recovery to Concentrate – Design % w/w 90.0 Copper Concentrate - Based on LOM Average Head Grade dry t/y 135,000 Contained Copper- Based on LOM Average Head Grade t/y 37,800 Copper Concentrate - Based on Max Head Grade dry t/y 290,000 Contained Copper - Based on Max Head Grade t/y 81,200 Magnetite Concentrate - Based on LOM Average Head Grade dry t/y 337,097 Magnetite Concentrate - Based on Max Head Grade dry t/y 398,388

17.2.2 ROM Crushing

The primary crushing operation design throughput rate of 2,537 dry t/h allows for the design throughput of approximately 61,000 dry t/d as required to meet the 15 Mt/a throughput rate. This is required to account for the lower availability, 67.5%, of the crusher components. The primary crusher consists of a single 60” x 89”, 600 kW (maximum power draw of 570 kW), gyratory crusher designed to generate a

P80 size of 125 mm.

17.2.3 Ore Storage and Reclaim

The crushed ore stockpile provides surge capacity between the primary crushing and the grinding sections of the plant. The stockpile has a live capacity of 25,000 t, approximately 13 hours of plant running time, with a total dozable capacity of 100,000 t. Three 2 m wide, 185 kW, variable speed reclaim feeders, with a maximum design capacity of 1,500 t/h each, reclaim ore from beneath the stockpile conveyor.

A small fan ventilated personnel escape tunnel is also provided. The required air, water, and fire suppression services will be run in the tunnel. Hoists are provided for maintenance of the apron feeders. A dust suppression system is provided at each reclaim discharge loading point.

17.2.4 SAG Mill and Pebble Crushing

The SAG mill is designed to reduce the reclaimed primary crushed ore to a size suitable for the ball mills. The 11.58 m diameter by 6.10 m EGL (38’ x 20’) SAG mill is powered by two variable-speed pinion 8 MW motors, with reduction gearing and inching drives. The design SAG mill power at the pinion (expected operating) is predicted at 15 MW and has been designed based on an overall 91.3% availability.

CZH-003 Page 121

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The SAG mill discharges onto two 3.66 m wide by 6.41 m, 75 kW, double deck screens with the oversize reporting to the two 600 kW cone pebble crushers producing a target P80 of 12 mm for ball mill feed.

17.2.5 Ball Milling and Classification

The nominal capacity of the twin ball mill grinding circuit is 1,875 dry t/h with the design based on the 80th percentile BWi ore parameters for ores expected throughout the life of mine. The ball mills are designed to reduce the particle size of the ore to a target grind size P80 of 106 µm, suitable for flotation.

Each of the two 7.3 m diameter, 10.4 m EGL (24’ x 40’) 10 kW, fixed-speed twin-pinion ball mills is expected to draw 8.6 MW. The mills use 65 mm diameter mild steel grinding. Each mill operates in closed circuit with a dedicated cyclone cluster.

17.2.6 Copper Flotation

The function of the copper flotation area is to selectively recover copper into a concentrate stream whilst optimising the grade and recovery. The flotation section is a conventional three stage rougher, cleaner/scavenger, recleaner circuit with regrind of rougher concentrate.

17.2.6.1 Copper Rougher Flotation and Regrind

The copper rougher section consists of seven 300 m3, 315 kW flotation cells, operating at a pH of 10.0. These produce a bulk copper concentrate that is collected in the copper rougher concentrate hopper.

To achieve a higher grade concentrate, the bulk rougher concentrate is ground to release any un- liberated copper sulphide minerals in a 3 MW IsaMill© with the product sent to the cleaner flotation section. Lime and secondary collector are added to the cleaner feed increasing the pH to 11.0 to assist in the depression of pyrite. Tailings from the rougher stage reports to the magnetite recovery section.

17.2.6.2 Copper Cleaner and Re-cleaner Flotation

The copper cleaner circuit consists of two stages of cleaning and one bank of cleaner scavenger flotation cells. The cleaner consists of four, 100 m3, flotation cells and the scavenger stage consists of two, 100 m3 cells. The copper re-cleaner circuit comprises of five, 20 m3, flotation cells.

17.2.7 Copper Concentrate Thickening / Filtration / Handling

The copper concentrate thickening, filtration and handling have been designed based on typical copper circuits with rougher concentrate regrind. The copper re-cleaner concentrate reports to an 18 m diameter conventional high rate thickener with the overflow recycled for use in the plant. Thickener underflow is removed at 60% w/w solids.

The copper concentrate is dewatered on a single 1,500 mm by 1,500 mm 68 chamber horizontal pressure filter, with a combined maximum filtration rate of 200 kg/m2.h. The filter operates with a total cycle time of approximately 12.8 minutes including core blow and is designed to produce a filter cake of 9% w/w moisture. The filtered copper concentrate product is stored in stockpiles inside the copper

CZH-003 Page 122

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 concentrate and load-out building. The building contains a stockpile with a live capacity of 5,500 tonnes, which is equivalent to eight days production.

17.2.8 Magnetite Recovery

The magnetite recovery circuit consists of rougher, regrind and cleaner sections. The rougher section consists of two parallel banks of eight, 1.2 m diameter, single roll magnetic separators. The tails stream from the magnetite rougher magnetic separator circuit is the final tails from the plant. The relatively high level of silica in rougher concentrate necessitates a regrind stage utilising a 3.0 MW IsaMill© with a © target grind size P80 of 31 µm. The IsaMill utilises 3 mm ceramic media.

The ground product is then passed through a hydroseparator, essentially a 18 m diameter thickener, for the removal of fine silica. The magnetite cleaner circuit consists of a single triple drum WLIMS operating at 1,200 gauss.

The magnetite concentrate thickening, filtration and handling have been designed based on typical magnetite circuits with regrind. The magnetite cleaner concentrate reports to an 18 m diameter high rate thickener. In place of flocculent, magnets are used to enhance settling. The 60% solids thickener underflow is dewatered on a 2,000 mm x 2,000 mm, 33 chamber horizontal pressure filter. The filter produces a filter cake of 9% moisture.

The filtered magnetite concentrate product is stored in stockpiles inside the magnetite concentrate and load-out building. The building contains a live stockpile with a capacity of 8,000 tonnes, for eight days production.

17.2.9 Tailings Disposal

The final tails thickening section is based on typical copper circuit designs utilising a 75 m diameter, high rate thickener operating with a 50% solids loading in the underflow. The thickened underflow is pumped to the TSF. Thickener overflow is recycled back into the process water. TSF decant water is recycled to the process plant.

17.3 PROCESS CONTROL

The implemented control philosophy for the Taysan Copper Project is a typical system employed in modern mineral processing operations. A PLC (programmable logic controller) /SCADA (supervisory control and data acquisition) system are provided to form the Process Control System (PCS).

Field instrumentation provides the inputs to the Process Control System (PCS), via the fibre optic data highway/network. The PCS control modules are located in the Motor Control Centres (MCC’s) and contain the proprietary hardware, power supplies and I/O modules for instrument monitoring and loop control.

The PCS performs the control functions by: • Collecting status information for drives, instrumentation and packaged equipment • Providing drive control and process interlocking • Providing PID (proportional-integral-derivative) control for process control loops.

CZH-003 Page 123

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Copper wiring and marshalling panels are minimised by the use of intelligent motor control centres and instrumentation communicating via Industrial Ethernet, Profibus PA or equivalent direct to the PLC.

The PCS communicates with third-party vendor packages over fibre optic cables.

Fibre optic networks and switching equipment are provided for the PLC, SCADA, CCTV, fire system and telephone and these are separate and independent. The fibre cable routing and network architecture are such that any one fibre cable failure point will not cause any data loss on the network.

17.4 PROCESSING PLANT LAYOUT

The general layout of the processing plant is shown in Figure 17-3. The layout of the mine and processing plant are shown Figure 17-4.

Note that there is a difference in the plant location for the infrastructure component of the Project and the final selected site. This difference affects all earlier revisions of infrastructure figures which include the processing plant. This direction was given by CZH to avoid delay and minimise costs to the project. The final plant site location is in close proximity to that used in the infrastructure costing. Discrepancies are to be resolved in future phases of the project. The impact of the plant site location changes is within the current level of project accuracy.

The Taysan processing plant has been laid out in accordance with established good engineering practice for traditional grinding and flotation plants. The plant site major objective is to make best use of the natural ground contours to minimise pumping requirements by using gravity flows. It is also essential to minimise the height of steel structures in this seismic region.

The regional topography is mildly undulating land alternating between low sloping hills and river valleys. The predominant ground composition is a weak tuff, but occasional hills comprise hard basalt rock. The area is subjected to the action of high rainfall and frequent significant earthquakes.

CZH-003 Page 124

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 17-3 TAYSAN PROCESS PLANT LAYOUT

FIGURE 17-4 TAYSAN MINE LAYOUT

CZH-003 Page 125

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The process plant layout has been optimised in relation to the terrain and the design is considerate of: • Predominately located on basalt rock (instead of ubiquitous tuff) to minimise foundation requirements • Benched pad levels for minimise conveyer lengths • Compact layout minimising pumping requirements • Located appropriately for minimal tailings pumping to nearby TSF • Suitable ground fall from the grinding area to concentrate loadout minimises pumping requirements and flotation tank support structure • Overland flow drainage works with existing ground profile to minimise bulk excavation • Naturally formed storm water pond location • Balanced cut and fill quantities where possible • ROM located just outside pit blast radius to minimise haul truck travel distance • ROM located making use of existing hill to minimise volume of made ground in ROM platform • Refurbish existing roads as process plant access roads • Opportunity to extend process plant layout to the East for expansion considerations.

17.5 PROCESSING PLANT POWER

The estimated process average operating power demand is 50.5 MW with 66.5 MW installed capacity. Power is to be supplied to the mine site from the Philippine national grid. Unit power cost rates of US$ 0.1317/kWh have been supplied by CZH.

The average operating power has been calculated based on the electrical load as generated from the major mechanical equipment list. With the exception of the mills, installed load in each case has been factored for motor efficiency and discounted by the product of availability (percentage of the year a drive is ready to run), utilisation (percentage operation during normal running) and power factor (the percentage of installed power used during normal operation). Mill motor power for the ball mills has been calculated based on the expected operating conditions for ore work indices with allowances for motor and gearbox losses. The power costs by area are summarised in Table 17-6. The SAG and Ball milling circuit consumes around 72% of the total power used by the process plant.

CZH-003 Page 126

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 17-6 POWER COSTS BY AREA SUMMARY

Installed Average Power Cost Cost Area Load Running Load Draw (US$/a) (US$/t) (kW) (kW) (kWh/a) ROM Crushing 1,156 829 6,632,570 873,509 0.06 Ore Storage and Reclaim 1,581 1,104 8,828,304 1,162,688 0.08 SAG and Ball Milling 40,862 33,507 268,056,032 35,302,979 2.34 Copper Flotation 8,741 6,905 55,242,488 7,275,436 0.49 Copper Concentrate Handling 867 404 3,230,242 425,423 0.03 Magnetite Recovery 4,603 3,452 27,615,000 3,636,896 0.24 Magnetite Concentrate Handling 802 374 2,988,777 393,622 0.03 Tailings Disposal 2,242 919 7,352,776 968,361 0.06 Reagents 439 243 1,943,463 255,954 0.02 Air Services 2,465 1,750 14,001,200 1,843,958 0.12 Water Services 1,767 954 7,633,872 1,005,381 0.07 Fuel Services 55 24 189,200 24,918 0.00 Total 65,580 50,465 403,713,924 53,169,125 3.54

CZH-003 Page 127

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18 PROJECT INFRASTRUCTURE

The Taysan Project Infrastructure studies have been carried out by GHD. Chapter 18 consists of extracts of the summaries from the various GHD reports with extra information taken from these reports as required. The individual reports will be highlighted in each sub-section.

18.1 ON SITE INFRASTRUCTURE AND SERVICES

The following section is taken from the report `On site Infrastructure and Services, Taysan Copper-Gold Prefeasibility Study (Revision 2), 23 April 2012, prepared by J Tiu.

The proposed mine site development for the Taysan Copper-Gold Project, requires support facilities to maintain continuous mining and processing operations. This Report presents the PFS requirements for the support facilities referred to as on site infrastructure and services in this report.

In summary, the on-site infrastructure covered by this report includes but not limited to the following: • Operations Village comprising the permanent accommodation village and the construction camp, layout and site wide utilities inclusive of: Internal roads and drainage Potable water supply Fire fighting water distribution Sewerage Security fencing Roads and area lighting Power Distribution Telecommunications. • Process plant support facilities inclusive of: Internal roads and drainage; Potable water supply Process water and fire fighting water distribution Sewerage Security fencing Roads and area lighting Power Distribution and Telecommunications. • Fuel Depot • Health and Safety Facilities, location only • Recreation Facilities, location only • Solid Waste Disposal • Laundry Facilities, location only.

18.1.1 Operations Village

The proposed Operations Village comprises the accommodation village and the construction camp. It will be located in such a way that it will be accessible to the mine operation work force. It is understood that the process plant location and layout is being rationalised to better suit the terrain and process hence the location of the operations village may change.

CZH-003 Page 128

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The Accommodation Village will serve as the housing facilities for approximately 320 staff to be occupied by the mine staff, project and mine management and administrator on a permanent basis. It is comprised of prefabricated vans divided into three major clusters, specifically the staff housing, the central facilities and the general managers’ quarters.

The Construction Camp will serve as the temporary housing facilities for the mine infrastructure workforce. It will be positioned adjacent to the Accommodation Village to enable sharing of the same services and infrastructure. It provides temporary housing, messing, laundries, etc for approximately 750 personnel. Generally construction camp housing units will be pre-fabricated container vans which will be transported to and installed on the site. It is assumed that some of the day staff will not be living on-site and will come from the nearby communities. It is expected that these temporary facilities will be removed at the end of the overall project construction.

18.1.2 Process Plant Infrastructure and Support Facilities

The master plan for the Process Plant infrastructure and support facilities is governed by the functional requirements of the mine and the process plant. For the purpose of this PFS submission, it is understood that the process plant layout and location are undergoing further refinements which will be accounted in the BFS phase of the project, thus the general requirements will be similar and the order of accuracy should still be within the range required for the PFS.

18.1.3 Roads and Earthworks

The access roads and interior road network within the operations village and the process plant area are to be designed in accordance with the DPWH design guidelines, AASHTO design standards and AMEC Civil and Structural Design Criteria. A comprehensive geotechnical investigation is required for the BFS Stage for all of the infrastructure sites to enable determination of design CBR’s for pavement design and slope stabilisation.

18.1.4 Site Wide Utilities

Water Distribution Network

Domestic water for the operations village will be supplied via a trunk main from the potable water treatment plant storage and will be distributed throughout the village via an underground pipe network. A separate system for the potable and fire fighting system will be used to cater for the domestic and fire fighting requirements of the operations village.

For the process plant, potable water will be supplied from a dedicated potable water tank located inside the plant site which will be fed from the central water treatment plant located outside the process plant boundary. A separate system will be provided for the fire fighting system sourced from the process plant raw water storage supplied by available fresh water sources. It is proposed that the raw water tank located inside the process plant will cater for the fire fighting requirements of the on-site infrastructure.

CZH-003 Page 129

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Sewerage System and Sewage Disposal

A sewerage system will be provided to cater for the wastewater discharge generated from the operations village and process plant support facilities. This will include the outflow from the buildings’ sanitary system and the grey water generated from domestic activities such as laundry, dishwashing, and bathing.

Sewage from the operations village will be handled by a central Sewage Treatment Plant, (STP) and treated sewage effluent (TSE) will be reused for irrigation and other non-potable purposes or disposed of to an approved waterway.

Sewage from the process plant facilities will be treated by septic tank and disposed of by suitable soakage pits. The possibility of pumping to the central STP should be investigated during the BFS.

Storm Drainage Network

The drainage system will be designed to cater for the surface water runoff generated from the proposed development. Disposal will generally be to existing waterways depending on the availability of a suitable outfall. Detention ponds will be provided as required as well as the possible use of overland flow paths and grass swales.

Power Supply

The Taysan copper mining complex will be powered through connection to the nearest 69 kV utility grid substation, as discussed in section 18.4 below. The mine site is provided with a 69 to 13.8 kV Substation located inside the Process Plant. Power is then reticulated in the mine site using a 13.8 kV overhead line, while inside the process plant through the use of 13.8 kV underground feeders. The reticulation services are as follows: • 69 kV Mines Substation and 13.8 kV Indoor Switchgear in the Process Plant • 3 x 2 MW, 13.8 kV, Standby Generator (N+1 Redundancy) for the Process Plant • 13.8 kV overhead distribution line from Mine Site Substation to Water Dam Pump stations • 13.8 kV overhead distribution line from Mine Site Substation to Tailing Decant Pump stations • 13.8 kV overhead distribution line from Mine Site Substation to Bore Hole pump stations • 13.8 kV overhead distribution line from Mine Site Substation to Operation Village • 13.8 kV overhead distribution line from Mine Site Substation to Construction Camp • 13.8 kV overhead distribution from Mine Site Substation to Admin Building • 13.8 kV overhead distribution line from Mine Site Substation to Magazine • 13.8 kV overhead distribution line from Mine Site Substation to Potable Water Treatment Plant • 13.8 kV underground distribution from Mine Site Substation to Process Plant Switchgear • 13.8 kV underground distribution from Mine Site Substation to 3 x 2 MW Standby Genset • 13.8 kV submarine cable to Barge pump station • Plant Area Lighting

Utilisation voltage is provided using pole mounted transformers for 450 kVA and below capacity and pad mounted transformers for 500 kVA and above capacity.

CZH-003 Page 130

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The mine site is provided with 69 and 13.8 kV substations for power delivery. These substations are to provide means of delivering power to the mine site from the utility/grid substation. In this study, the identified utility/grid substation is the Batangas NGCP Substation located in Mahabang Parang, Batangas.

The process plant is provided with a 3 x 2 MW standby diesel generator in containerized modular format, 2 units active, 1 unit redundancy. Each generator is configured to operate as either standby or prime power, and is rated 2 MW for standby operation.

Area lighting will be an outdoor flood light luminaire design for industrial or mining application. Area lighting is provided on the Process Plant and Operation Village.

Telecommunications

Communication requirements of the company will range from inter office telephone service within the site, outbound communication to Manila and abroad, email/fax services, office to field communication, and communication system for equipment operators and truck drivers that will transport the copper ore to the loading port.

A VoIP based system has been recommended for the communication system with Internet access from one of the telecom companies serving as the gateway. Communication servers and distribution hardware will then handle the different communication needs within and outside the mine site. Hard wiring between and within the site offices will be done where feasible, otherwise, wireless communication will be used. Communication between the site and sea port will be through the use of microwave antennas installed at the mine site and at the loading port. The mines site is provided with wi-fi system for wireless connectivity using Ethernet protocol, both for indoor and outdoor.

18.2 ACCESS ROADS

The following section is taken from the report “Access Roads and TSF Haul Roads, Schematic Design report, Taysan Copper-Gold Prefeasibility Study (Revision 2), 23 April 2012”, prepared by R Dela Cruz.

Taysan is a 2nd class municipality in the province of Batangas located and is bounded by the towns of Ibaan and Rosario in the north, Rosario in the east, City of Batangas in the west and Municipality of Lobo in the south.

The Project Site Locality Plan below Figure 18-1 indicates the regional road network around the CZH tenements and the Batangas Port area.

18.2.1 Existing Primary and Secondary Roads to Project Site

The Municipality of Taysan can be accessed via the existing municipal road from the Ibaan toll exit of the Southern Tagalog Arterial Road (STAR Tollway) in the Municipality of Ibaan.

There are two existing municipal roads from Ibaan town proper leading to the Municipality of Taysan where the project site is located.

CZH-003 Page 131

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The Ibaan-Taysan Road, leads southeast then intersects with Pag-asa-Bilogo Road then turning northeast to Taysan proper. Total distance from Ibaan to Taysan via this route is approximately 9.0 km.

The alternative access option is via the Rosario-Ibaan-Quezon Province National Road leading in an eastward direction to outer southern Luzon provinces. This road passes through Rosario town proper wherein connection is made to the Taysan-Rosario Road leading to the Municipality of Taysan. Total distance from Ibaan to Taysan via this route is approximately 7.40 km.

From Taysan town proper, there are two existing main roads to the mine site. These roads are: • Taysan-Dagatan Road • Pag-asa-Bilogo Road

A general layout of site access roads is indicated in Figure 18-1.

The 15 Mtpa Scopy Study, December 2011, determined that the preferred route to the site coming from Manila through the Ibaan toll exit is via Ibaan – Rosario – Taysan and to site along the Pag-asa – Bilogo Road which would require some upgrading. Further investigation of the Pag-asa – Bilogo Road has indicated it will be unsuitable as the main access to the mine as it passes through the Fortune Cement Corporation Development mining area. The access will now be along the existing Taysan- Dagatan Road, which will require some realignment around the mine pit.

CZH-003 Page 132

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 18-1 SITE ACCESS ROADS

CZH-003 Page 133

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18.2.2 Export Haul Route

The 15 Mtpa Scoping Study, December 2011, determined that the preferred route for export hauling would be from the site along the Gov. Antonio Carpio Road (West Bound) to Batangas and then south on the National Road of Barangay Tabangao to the proposed port at General Milling Corporation, as shown in Figure 18-1.

The route connects from the new process plant access road to the existing concreted Taysan-Dagatan Road continuing west to the national Gov. Antonio Carpio Road in Barangay Bilogo. From this junction, the route continues west to Batangas City to the intersection of the National Road in Barangay Pallocan. From this intersection, the route continues south to the port area in Barangay Tabangao where the proposed AAMRI port (formerly GMC Port) will be located. The total length of travel for this route is approximately 23.9 km from the proposed process plant to proposed port area.

18.2.3 Mine Area Roads

Mine area site access roads and TSF access roads, including access to the WSD and seepage dam, are shown in Figure 18-2.

The mine area roads required are generally as follows: • Construction haul roads to the TSF (TSF access roads) • Access roads to the WSD • Access roads to the Seepage Collection Dams • Single access tracks to the TSF tailings beaches • Interconnecting access roads between the Process Plant and Operations Village • Access road to the Water Treatment Plant.

The probable source of rock fill material for the TSF dams, as discussed in the Report on Tailings Management, will be waste rock from the mining operations. Haul roads will be required between the mine and the TSF dams.

There will be two stages of road construction for the TSF, the first stage, referred to as the Starter Stage, is required for the initial construction of the TSF and the Intermediate/Closure Stage, which is the final road arrangement for the TSF which will be completed in Year Five (see Figure 18-3). Note that the mining studies also include separate mine haul roads to the process plant ore stockpile and the waste dumps.

CZH-003 Page 134

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 18-2 MINE AREA SITE ROADS (STARTER STAGE)

CZH-003 Page 135

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 18-3 MINE AREA ROADS (ULTIMATE)

CZH-003 Page 136

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18.3 PORT

The following section is taken from the report “Port Facilities”, Taysan Copper-Gold Prefeasibility Study (Revision 2), 23 April 2012”, prepared by B Richards.

GHD has been engaged to undertake a preliminary feasibility study for the Port Facilities for a proposed copper gold mine at Taysan, in the southern part of Luzon, Philippines.

The purpose of the port will be to export mine product and import both mine plant during construction, and supplies during construction and the mine operation.

The export product to be handled is: • Copper concentrate – 162,000 wmt to 233,000 wmt (average of 175,000 wmt); • Magnetite – 422,000 wmt to 721,000 wmt (average of 522,000 wmt);

The annual export volumes will be confirmed during the Bankable Feasibility Study stage. The above tonnages of concentrate were taken from the 16 January 2012 NI43-101 report by Barton Metals Pty Ltd.

The imports will consist of 10’s-100’s of tonnes of mine supplies during operation and heavy individual items including components of mills, bulldozers, etc.

The proposed site of the port is located at Batangas. Crazy Horse Resources Inc has purchased the existing General Milling Port Facility which is located at the southern end of Batangas Bay. Whilst the infrastructure on the site is generally in a dilapidated condition, it does include an existing jetty facility (approach jetty, loading platform and associated dolphins) and onshore storage sheds along with other infrastructure typically found in a port facility. These have been assessed for suitability for their re- use/rehabilitation for the port and materials storage.

An option for new facilities has also been assessed for the port function.

In the absence of information on customer preferences in regards to vessel size, the use of 10,000 DWT vessels (self-propelled barges or small dry bulk carriers) have been assessed in this study. Given the relatively small volumes to be exported, vessels of around this size are considered appropriate for this task. At average tonnages, approximately 1.5 vessels per week will call at the facility.

The wharf and loading platform fitted with a conveyor and shiploader provide the method of loading. The ship will be moved along the berth to provide uniform loading in the holds. The use of conveyors and a shiploader (with a shuttle and luffing head, and trimming chute) will reduce the generation of dust. An average loading rate of 300 tph has been adopted which is relatively slow, but appropriate considering the volumes to be loaded. A typical vessel will be loaded in approximately 1.5 days.

The berth utilisation is considered to be low for a facility of this type.

CZH-003 Page 137

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

In regards to the jetty and loading platform, based on a condition inspection carried out by Regoron, the existing facility was found to be in poor to average condition – this reflects its lack of use over the last 10-15 years, lack of maintenance over this time and poor construction quality when it was originally constructed.

After completing a preliminary structural assessment and durability assessment of the structure as part of this study, it has been concluded that, with a major refurbishment and enhancement program, the existing facility could likely be used into the future for the export of product. The condition of the existing facility will need to be considered in more detail in later stages of the project, including a need to undertake a more detailed condition inspection, materials testing and assessment of the structures adequacy.

A new build option has also been developed for comparison purposes.

On shore, a materials handling system consisting of a truck receival dump station, stacking conveyors, reclaim conveyors and a jetty conveyor make up the proposed onshore system. Existing sheds are proposed to be used for the storage of the magnetite product, with a new shed to be constructed for the copper concentrate.

Product in the shed will be moved around by front end loaders.

The area of the General Milling Facility is considered to be large enough for the functional requirements of the port. The existing administrative building will be used for the same purpose for the Taysan port.

The key risks associated with the port facilities are the following: • Adequacy of the condition inspection and analysis of the existing jetty and loading platform – as discussed above, it is recommended that this is considered in further detail in the BFS. The outcome of this may change the conclusions reached below. • Interaction with the San Miguel Jetty – the San Miguel Jetty is located immediately adjacent to the General Milling Facility berth face, to the south. As such, any vessel that berths at the GMF will need to use the San Miguel Jetty. The number of vessels that use the San Miguel Jetty has not been confirmed as part of this study. If an agreement with cannot be worked out with San Miguel in regards to sharing access to both berths, then a new facility will need to be constructed.

Based on the GHD recommendations and direction from CZH, the port option selected was to develop the onshore infrastructure facilities and build a new approach jetty and loading platform on a new alignment so as to remove any interaction with the San Miguel Jetty. A service wharf is considered to not be required for the port facilities at the General Milling Facility. Capex and opex costs are based on this position. The conceptual layout is highlighted in Figure 18-4.

CZH-003 Page 138

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

FIGURE 18-4 CONCEPTUAL LAYOUT – MATERIALS HANDLING SYSTEM

18.4 POWER

The following section is taken from the report “Power Supply Study, Report for Taysan Taysan Copper- (15Mtpa) Prefeasibility Study, March 2012”, prepared by R Razo. GHD was engaged by CZH to provide a Prefeasibility Study (PFS) report for the supply of power to the proposed Taysan Porphyry Copper Gold Project (Project) Two options were initially considered for the supply of power to the mine site. These included power from a captive power station located at the mine or port, and power from a purpose built power station operated by an Independent Power Producer at the mine or port. These two options required significant capital expenditure so were discounted and the study shifted its focus to locally available power supply from the Luzon grid. This includes power from IPPs and local power distributors in the region. This study includes a review of options, estimated costs, and recommendations for further work in obtaining power which can be delivered economically, securely and reliably to the Project. The two options for power supply to Taysan include:

Option 1: BATELEC II to provide the permanent power supply of the mine facilities in consultation and involvement with NGCP to obtain grid power. For the port facilities, power to be provided by the current service provider Meralco which owns and operates the 69 kV distribution line in the area. Power for construction at the mine site could make use of existing electricity infrastructure in the mine area

CZH-003 Page 139

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Option2: Develop a bilateral contract with nearby IPP’s for the long term power procurement strategy near the area specifically for existing power generating plant or brown field power plant. There are a number of large power generation plants in South Luzon region which are producing electricity at a very competitive price for export to Metro Manila, the major load centre for the Luzon grid. A number of existing generators in the region have expressed interest to supply power to the mine through installation of additional units at the existing sites such as Calaca, Pagbilao and etc. The brown field expansions are likely to be more economic than the green field units. A power supply arrangement will need to be implemented at the end of the Prefeasibility Study or early in the Bankable Feasibility Study (BFS) phase. A back-up option should also be considered in the event that the preferred option (Option 1) does not materialise.

For the Project Prefeasibility study a power price of 5.50 PhP/kWh (0.128 US$/kWh) may be assumed for a block load of 54 MW (Excluding Port operation and infrastructure) at 90% load factor at the 230 kV Batangas metering point. The issue of costs associated with the transmission line from Batangas to the mine is subject to commercial agreement. As such, CZH will take responsibility to define any costs associated with this transmission line and reference should be made to the owners operating costs. CZH advise that they have taken legal advice and have assumed that the mine operator can construct and operate a 69kV transmission line from the Batangas metering point. The proposed layout of the transmission line is highlighted in Figure 18-5 below.

FIGURE 18-5 LAYOUT OF THE PROPOSED TRANSMISSION LINES

CZH-003 Page 140

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18.5 WATER BALANCE

The following summary is taken from the report “Water Balance” PFS Report for Taysan Copper-Gold Prefeasibility Study, Revision 0 January 2012”, prepared by C Mondonedo.

18.5.1 Climate and Topography

The Taysan Copper Project is located within a Type I climate area. Type I climates typically have two distinct seasons – a dry season from November to May when the Northeast Trade Winds are prevalent, and a wet season from June to October during the arrival of the Southwest Monsoon.

Climate patterns in the project area are strongly influenced by high mountain ranges located along the eastern coastline of Luzon. This area experiences heavy rainfall during the Southwest Monsoon period.

18.5.2 Typhoons

The typhoon season is generally considered to extend from July to November, although typhoons can occur any time from May to December. On average, three typhoons make landfall in the Taysan/Batangas area every two years.

18.5.3 Regional Rainfall

The Ambulong agro-meteorological station is considered representative of conditions at the project site. Average annual rainfall from 1979 to 2009 at the Ambulong rainfall station is 1,800 mm. 90% of this rainfall occurs in the 8 month period from May to December. The remaining 10% occurs in the 4 months from January to April.

18.5.4 Site Rainfall

There are no site-specific rainfall records available for Taysan. As part of current studies, rainfall recording equipment has been purchased and has been established at the site so that future site- specific rainfall records can be collected.

18.5.5 Evaporation

The Philippine Atmospheric, Geophysical, and Astronomical Services Administration (PAGASA) also maintains an evaporation pan at the Ambulong station and has daily pan evaporation measurements since 1954. For the current water balance investigations, open water evaporation has been estimated from this data using a pan coefficient of 0.8.

18.5.6 Watershed areas

The Taysan tenements cover an area of 114 km2. The site is located in moderately sloping terrain approximately 20 km east of the Batangas Bay coastline. The major river systems in the area are the Kalumpang River and Lobo River with catchment areas of approximately 415 km2 and 191 km2,

CZH-003 Page 141

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 respectively. Nearly 85% of the tenements lie within the Kalumpang River Basin. This river discharges to the northwest into the Batangas Bay. The remaining 15% is located in the Lobo River catchment.

18.5.7 Streamflow Data

There are a number of streamflow gauging stations located in the Southern Luzon Region (including Batangas, Cavite, and Quezon) which potentially could be used to assess potential surface water resources. The Maragondon River was selected as the most appropriate streamflow data set for the project.

Typically, the driest period with the lowest average monthly runoff is the three month period from February to April. During these months, average monthly runoff is less than 30 mm. These runoff depths are similar to, or higher than, the rainfall totals. This indicates a contribution from stored groundwater to stream flows during the dry season.

Streamflows are maintained through depletion of groundwater reserves during the October-April dry period. Groundwater reserves are then recharged during the wet season (May-September).

18.5.8 Groundwater Resources

The remaining tenement areas generally have better access to groundwater. The town of Sto. Niño, located within the tenements and other neighbouring towns, are supplied predominantly by groundwater extraction. Water supply for the area is supplied by several water districts. The population supplied by groundwater in Taysan is currently 33,000. Supplying the mine from groundwater sources is a viable option.

18.5.9 Water Balance Analysis

The water balance analysis has been conducted using the modelling software GoldSim.

The ore process plant water demand for the Taysan mine was based on the assumptions presented in Table 18-1.

TABLE 18-1 PROCESS WATER DEMAND

Parameter Value

Annual Ore Processed 15 Mtpa

Ore Density 2.7 t/m3

Settled Tailings Dry Density 1.5 t/m3

Percentage Solids in Tailings Slurry 60 %

Total Process Water Demand 31 ML/day

Maximum potential return from TSF 75 % of process demand

CZH-003 Page 142

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 18-1 PROCESS WATER DEMAND

Parameter Value

Minimum fresh water requirement 25 % of process demand

Percentage of fresh water requirement sourced from 50 % ground water

Table 18-2 summarises the mining operations data adopted for the water balance modelling:

TABLE 18-2 MINING OPERATION DATA

Parameter Value

Permanent workers 320 people

Temporary workers 750 people

Affected community population* Year 4 13,200 people Year 10 15,500 people *To be relocated or sourced from groundwater Ultimate 19,600 people

Domestic potable water demand (worker demand) 300 L/person/day

On-site power station water demand 2 ML/day

Dust suppression 0.5 ML/day

Fire fighting 1 ML/yr

Vehicle and general wash down 0.1 ML/day

18.5.10 Water Balance Storage Components

Table 18-3 summarises the main water storages of the project:

TABLE 18-3 WATER STORAGE

Storage ID Description Maximum Surface Area (km2) Catchment Volume (ML) Area (km2)

WSD WSD to provide a potable water 6 000 <0.5 10 supply to the system Receives runoff from the surrounding catchment

Pit Mining pit - Year 0 0.4 N/A 0 cms seepage Year 10 1.2 Ultimate 2.3

TSF 1A Tailings storage facility 555 000 11.3 12.0

CZH-003 Page 143

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 18-3 WATER STORAGE

Storage ID Description Maximum Surface Area (km2) Catchment Volume (ML) Area (km2) Receives runoff from the surrounding catchment and discharge from the processing plant

18.5.11 AWBM Model Development

An AWBM (Australian Water Balance Model) model was developed to estimate the relationship between rainfall and runoff. The general trend determined from the AWBM is consistent with the available streamflow data for the Maragondon River. Dry season flows (January to May) are underestimated, wherein river base flow may dominate. These results were recognized as acceptable at this stage.

18.5.12 GoldSim Water Balance Model Development

A water balance model of the mining process was developed using the GoldSim process simulation package. The results of the AWBM model were integrated into the GoldSim model to assess the runoff produced from each storage catchment.

The main scenario assessed in the water balance modelling specifies a distribution of 25% WSD water and 75% recycled water from the TSF (based on discussions with AMEC). This sharing divides the process plant water demand of 31.0 MLD into 7.8 MLD fresh water and 23.2 MLD recycled water. 50% of the fresh water will be provided from the bore field, leaving 3.9 MLD to be provided from the WSD.

18.5.13 Conclusions

From the water balance assessment undertaken, the following conclusions can be made: • The bore field is essential to the water supply of the process plant, as it provides 50% of its fresh water requirement • With a portion of the water requirement provided by groundwater, the WSD can adequately supply fresh water to the system • The volume of WSD must be set to 600 ML • TSF will overflow shortly after each lift is completed unless a constant low flow release is installed.

An assessment of the water quality was undertaken by developing a mass balance of the incoming and outgoing pollutant concentrations. As the tailings water quality is unknown at this stage, the life of mine dilution factor of outflow was determined. This factor gives the ratio of inflow to outflow concentration as tailings water egress from the TSF. The results of this assessment indicate that a dilution factor of approximately 1.42 is expected for the outflow concentration for the life of the mine (i.e., the inflow concentration is approximately 1.42 times larger than the outflow concentration).

CZH-003 Page 144

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

18.6 WATER SUPPLY

The following summary is taken from the report “Water Supply” PFS Report for Taysan Copper-Gold Prefeasibility Study, Revision 3 April 2012”, prepared by J Banasihan..

The Taysan Copper Project comprises the development of a copper/gold/magnetite operation involving 15 Mtpa ore processing rate operation. GHD have been engaged to undertake a prefeasibility level design of the water supply system for the Project.

The water supply strategy developed for the Taysan Copper Project Prefeasibility Study is presented in this Report.

The estimated water requirements for a 15 Mtpa ore processing rate is approximately 30,900 m3/day. It is assumed that 75% of the process water demands would be met through return of decant water from the TSF and the remaining 25% would be met from the available fresh water sources.

Water requirements have also been estimated for general industrial use including washdown and dust suppression requirements, domestic/potable supply for mine staff, and intermittent water supply (i.e. for fire fighting). These demands would also be met from the available fresh water sources.

Potential water supply resources are identified to satisfy the water requirement of the mine site. Both surface water and groundwater resources are considered viable for the Project.

The stream flow rates and catchment areas have been assessed for surface water resources. It is concluded that a Water Supply Dam (WSD) will be required in order to meet demand during dry periods. A potential (WSD located south west of the TSF has been proposed for the Project. The WSD lies within the upstream of Calumpit River which is a tributary of the Lobo River. An earthfill embankment is proposed for the WSD.

The Taysan Baseline Environmental Study conducted by GAIA South shows that the aquifer characteristics within the region of the mine site yield significant amounts of groundwater. Generally, groundwater constitutes a viable source of water for the Project Site.

A combined utilization of surface water and ground water is proposed for fresh water resources. It is estimated that 50% of fresh water requirements will come from surface water and 50% from bore fields.

Water supply pipeline alignments have been developed for fresh water pipeline, return water pipeline, and domestic water pipeline. Fresh water pipelines are used to convey fresh water from the WSD and from the bore fields to the plant site. Return water pipelines are used to convey recycled water from the decant pond of the TSF to the plant site. Domestic water supply pipelines are used for domestic/potable water distribution. The pipeline alignments generally follow the proposed service roads.

Pump stations are provided for water supply transfer from source to the plant site. Three types of pump stations are considered: land pump stations, bore pump stations and barge pump stations. Land pump

CZH-003 Page 145

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 stations are proposed where conventional pump stations are required. Bore pumps are used for groundwater extraction. Barge pump stations are proposed for decant water recycling as it can readily accommodate changes in the pond level of the TSF and is likely to be the most economical solution for the application.

The design criteria and Prefeasibility Stage design details for the water supply system components have been established and are presented in this report. Design of appurtenances such as valves will be confirmed upon the hydraulic simulations of the pipeline alignment in the succeeding stages of the Study.

A package water treatment plant with a capacity of approximately 320 m3/day has been proposed for domestic/potable water requirements. For the purpose of this Study, no treatment has been required for process water requirements.

18.7 TAILINGS STORAGE FACILITY

The following summary is taken from the report “Tailings Storage Facility” Prefeasibility Study Report for the 15 Mtpa Taysan Prefeasibility Study, Revision 1 March 2012”, prepared by T Blyth.

The Taysan project comprises the development of a copper/gold/magnetite operation involving a treatment rate of 15 Mtpa over a mine life of 24 years. The first 10 years are envisaged as a high grade starter pit, followed by the remaining life in lower grade but cheaply won ore.

In January 2011, GHD were engaged by CZH to undertake a Scoping Study based on a much larger, 25 year, 30 Mtpa throughput project. The study proposed a Tailings Storage Facility (TSF) for disposal of 500 Mm3 (750 Mt @ 1.5 t/m3) of tailings anticipated over the mine life. Results of this study are highlighted in the October 2011 NI43-101 report prepared by AMEC and MA. In October 2011, GHD revised the design of TSF Option 1 for a smaller 15 year, 15 Mtpa throughput project. This TSF was to provide storage for 150 Mm3 (225 Mt @ 1.5 t/m3) of tailings. Results of this study are highlighted in the December 2011 NI43-101 report prepared by Barton Metals Pty Ltd.

GHD have undertaken a Prefeasibility Study (PFS) design of TSF Option 1 for a 24 year 15 Mtpa project. To provide 240 Mm3 (360 Mt @ 1.5 t/m3) of tailings storage with allowance for operational and flood freeboard the TSF Option 1 embankments need to be raised to a maximum elevation of RL 200.6m.

Two starter embankments are required in narrow valleys in the headwaters of the Rosario River catchment. Each embankment would initially create an independent TSF storage. The two storages join to form a single storage in subsequent raises as the ridge separating them becomes submerged at around RL 160m. A much longer embankment must be constructed on the ridge to the north which forms the catchment divide prior to the TSF rising above about RL 170 m. The storage is largely bounded by natural surface to the east and south. At closure the embankments reach a maximum height of approximately 103 m. Figure 18-2 and Figure 18-3 display the starter embankments and the final embankments.

CZH-003 Page 146

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The embankment volume above the natural surface totals 17.6 Mm3. The relatively short haul from the pit (around 3.1 km on average) favours embankment construction from waste rock where suitable. The required embankment volume is substantially less than the total waste rock expected.

A storage capacity curve for TSF Option 1 is presented in Figure 18-6 below.

FIGURE 18-6 STORAGE CAPACITY CURVE FOR TSF OPTION 1

The embankment design is based on downstream batter slopes of 2.5(H):1(V) which have been adopted for all TSF embankments. Upstream batter slopes are 2(H):1(V). A nominal crest width of 20 m has been adopted to enable a 12.5 m wide single running lane for CAT777 (90t) mine truck with allowance for safety bunds on either side of the crest and a perimeter tailings line.

The embankment design incorporates zoning to maximise the use of waste rock from mining operations. Embankment zoning includes a low permeability core, a fine filter zone, a coarse filter zone, graded rockfill, coarse rockfill and rip rap.

Downstream construction methods have been adopted rather than upstream or centre-line construction due to the high seismicity of the region and concerns that tailings properties will not allow sufficient density to be achieved to limit the risk of liquefaction during a seismic event.

To minimize Capital Expenditure in Year 0, the tailings storage requirement for the Starter TSF allows for only a single year of projected tailings. A number of different TSF Starter configurations are possible. The PFS design is based on raising both TSF1-A and TSF1-B embankments in Year 0.

CZH-003 Page 147

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Alternatively construction could be staged and the TSF1-A embankment could be raised sufficiently to store a single year of tailings and TSF1-B could be raised subsequently.

The proposed raise schedule is provided in Table 18-4.

Table 18-4 RAISE SCHEDULE Start Finish Crest RL No. of Embankment Raise Raise Year Year Construction Volume (Mm3) Volume Width Seasons (Mm3) (m) Starter 0 0 158.2 1 0.7 0.7 n/a Lift 1 1 1 167.9 1 1.7 1.0 43.7 Lift 2 2 3 178.2 2 3.5 1.7 46.5 Lift 3 4 6 184.7 3 6.5 3.1 29.2 Lift 4 7 10 191.3 4 10.2 3.7 29.9 Lift 5 11 15 197.3 5 13.8 3.6 26.8 Lift 6 16 20 200.6 5 16.3 2.5 14.8

The proposed tailings management system comprises thickened tailings targeting a slurry density in excess of 60% solids (target 66%). The thickened tailings option has been chosen to give the best potential tailings density and thus reduce storage volume, whilst allowing pumping using conventional centrifugal pumps. No pilot plant tailings samples or column settlement tests are currently available. Based on GHD’s experience on similar projects it is anticipated that beach densities of 1.5 t/m3 could be reasonably assumed.

A PFS design has been developed for the tailings delivery system downstream of the tailings thickener. A tailings pump will drive tailings along a tailings delivery pipeline where they will be discharged via spigots to the TSF.

Potential adverse impacts of the project on water quality in the Lobo River and the receiving coastal waters of the Verde Island Passage have led to the additional constraint that decant and drainage water from the TSF - where possible, be released north into the Kalampang River catchment rather than South into the Rosario River, a tributary of the Lobo River. In the initial years of operation a series of inclined decant offtakes on the face of the embankment will be used to draw water from the decant pond for pumping to the Mill and excess water to return to the Rosario River. Once the decant pond becomes sufficiently elevated a decant tower can be provided to allow discharge north into the Kalampang catchment. In addition to decant releases, the TSF will be provided with a fixed level emergency spillway to pass floods in excess of the 100 year Average Recurrence Interval (ARI) flood.

Each embankment will feature seepage collection drains to collect silt runoff from the active works areas of the dam during construction, intercept seepage and convey drainage to a seepage collection pond where it can be recycled to the TSF.

CZH-003 Page 148

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Closure will be achieved by stabilisation of the tailings surface and re-vegetation, potentially into productive cropping such as rice growing. Final covering may require import of soil but it is also possible that the tailings themselves could be modified to form a suitable growing medium. The closure plan envisages a central clean water pond discharging to the pit, assumed to be flooded on closure to form a pit lake.

The footprint of TSF Option 1 lies partly outside of CZH’s existing tenement boundary and is therefore reliant on sterilisation and acquisition of this land. During the PFS, two alternative TSF configurations - TSF Options 1B and TSF Option 3 were also scoped. These alternate configurations were developed to be largely contained within the existing CZH tenement.

CZH-003 Page 149

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

19 MARKET STUDIES AND CONTRACTS

19.1 COPPER MARKET

Copper has been one of the most important materials in the development of civilisation and continues to play a vital role in society today. Copper's chemical, physical and aesthetic properties make it a material of choice in a wide range of domestic, industrial and high technology applications. Copper is ductile, corrosion resistant, malleable and an excellent conductor of heat and electricity. Alloyed with other metals, such as zinc (to form brass), aluminium or tin (to form bronzes), or nickel, for example, it can acquire new characteristics for use in highly specialised applications.

The largest use of copper is in the electrical industry where copper wire and cable account for about half of the world’s copper production. Other major markets are the motor vehicle and construction sectors. Copper is also an integral part of the expanding information technology sector and is used in the manufacture of computers, mobile phones, fax machines and televisions.

According to the International Copper Study Group (ICSG), world copper mine production in 2011 continued to underperform relative to capacity and remained at the same levels of 2010 (16 Mt). Operational failures, labour unrest and lower ore grades resulted in production levels not keeping pace with the growth of capacity. According to ICSG production and production capacity data, the average global mine capacity utilization rate fell to about 79% in 2011 and was at the lowest level in at least 20 years. Production in Chile, the largest world producer, declined by 3.2% and was 5.5% below that in 2007. Output from other major producers such as Peru, the United States, Australia and Indonesia, that combined represent around 25% of total world copper mine production, decreased by an aggregated 6%. Production in China, currently the second leading copper mine producer, increased by 12% in 2011.

ICSG reported world usage of refined copper grew by around 3% to 20 Mt in 2011, principally owing to increases in Chinese and Russian apparent usage of 7% and 60%, respectively. Growth in the United States and the European Union (EU) weakened as the year progressed, and in 2011, usage grew by a modest 0.1% in the United States and declined by 1.3% in the EU. Japanese usage, affected by the earthquake/tsunami, was down by 5% in 2011.

According to the preliminary ICSG data, the world apparent refined copper balance for the full-year 2011 indicates a production deficit of 358,000 tonnes, nearly equal to the deficit of 377,000 tonnes in 2010. ICSG projects global growth in copper demand for 2012 to exceed global growth in copper production, and a production deficit of about 250,000 tonnes of refined copper is projected for the full year.

19.2 GOLD MARKET

For thousands of years, gold has been valued as a global currency, a commodity, an investment and simply an object of beauty. Gold demand comes from three sources: jewelry, industry (including medical applications) and investment. The primary source of demand comes from jewelry, which accounted for 48% of the total demand in 2011, followed by investment demand which accounted for a further 40% and industry which accounted for the remaining 12%. While jewelry remains the largest

CZH-003 Page 150

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 component of demand, its share has decreased over the past few years in favor of investment demand, as a by-product of the global financial crisis. According to the World Gold Council (WGC), in 2011, gold demand was 4,067 tonnes worth an estimated US$205.5 billion. Although close to record levels, annual gold demand was only marginally ahead of 2010 (+0.4%) as burgeoning investment demand was counterbalanced by declines in the jewelry and technology sectors.

The annual supply of gold comes from a combination of newly mined gold, the mobilization of central bank reserves and the recycling of above ground stocks. Gold is mined in every continent with the exception of Antarctica (where mining is forbidden). China is currently the world’s largest producer of gold, mining 345 tonnes of gold in 2011, followed by Australia and the United States which produced 261 and 231 tonnes, respectively. The WGC reported that in 2011, mine production edged up 4% to reach an all-time high of 2,810 tonnes, as the rising price over the last decade has brought a strong pipeline of projects to fruition. Both formal and artisanal mining contributed to the growth in output, largely from Africa. Total gold supply in 2011 was 3,994 tonnes, a decline of 4% compared to 2010 (4,164 tonnes).

19.3 SILVER MARKET

Silver has been used for thousands of years as ornaments and utensils, for trade and as the basis for many monetary systems. Of all the metals, pure silver has the whitest colour, the highest optical reflectivity and the highest thermal and electrical conductivity. Also, silver halides are photosensitive. Owing to the above properties, silver has many industrial applications such as in mirrors, electrical and electronic products and photography, which is the largest single end use of silver.

According to a report prepared for The Silver Institute by GFMS Limited (GFMS), total silver supply rose by 15% to 1,056.8 million ounces in 2010. While all segments registered substantial growth, the increase was led by the return of producer hedging, followed by government sales and recycling. In 2010, mine production represented approximately 71% of silver supply followed by scrap supply which accounted for approximately 20%. Mexico eclipsed Peru as the world’s largest silver producing country for the first time in 2010. China, Australia and Chile rounded out the top five producing countries. Most silver is produced as a by-product of the mining of other metals. Only around 30% of silver output comes from so-called primary silver mines, where silver is the main source of revenue.

GFMS forecasts total silver supply for 2011 to be marginally higher than in 2010. Mine production is expected to rise by 31 million ounces in 2011 (+4%), driven by a strong project pipeline, higher precious metal prices and a healthy performance by the base metals sector.

In 2010, total fabrication rose by 13% to 878.8 million ounces, falling not far short of the record level set in 2000. The 21% rebound in industrial demand, which represents approximately 46% of silver demand, was the main force behind this increase. This was compounded by gains in jewelry and coin offtake, the latter registering a 28% rise. These increases countered the structural losses in silverware and photography.

Total fabrication demand is forecast by GFMS to rise by 4% in 2011. After the stellar rise in 2010, the growth in industrial offtake slowed in 2011 on the back of the earthquake/tsunami in Japan, the end of

CZH-003 Page 151

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 stock replenishment and slower economic growth. Despite higher prices, jewelry is projected to be up a little in 2011 due to ongoing market penetration in the youth demographic and substitution at the expense of gold. Both silverware and photographic demand are expected to maintain their long term trend of decline, which has been exacerbated by high prices.

19.4 MAGNETITE MARKET

Magnetite is a black highly magnetic mineral that resembles hematite in hardness and specific gravity but gives a black streak rather than a red one. It is equally widespread in nature, and the magnetic properties of rocks depend on a large extent on their content of magnetite. By using chunks of magnetite to magnetize iron filings, the Chinese were able to make primitive compasses as long ago as the seventh century AD. Actual magnetite typically has an iron content greater than 70%; however, the mineral is normally found in banded iron formations (BIF), which are repeated thin layers of iron oxides alternating with bands of iron-poor shale and chert. The result is that ore mined from magnetite deposits normally contains only 40 to 50% iron and therefore an additional process known as beneficiation is required to increase the iron content of the ore until it is suitable for a blast furnace.

By far the largest and growing market of magnetite is as an iron source for the iron and steel industry where is it used for sinter or for iron ore pellets which are then used for iron production from a blast furnace. Magnetite is also used as heavy media for the gravity sorting of coal and other minerals and in cement coatings on submerged gas pipes to keep them on the bottom of the sea or lake. Very fine magnetite has been used for water treatment to assist in the precipitation of stains and colour in water. Some high grade pellets are used for direct reduction and this is a growing market.

Iron ore is mined in about 50 countries, with the largest producers being Australia, Brazil, India and China. World production of iron ore increased from an estimated 1.815 billion tons in 2010 to 2.131 billion tons in 2011 and is expected to increase to 2.231 billion tons in 2012.

Iron ore demand is closely linked to the economic development of countries, such as China and India, and increased standards of living in these and other developing countries. Emerging markets comprise 75% of global iron ore demand and 90% of that is Chinese demand.

19.5 COPPER CONCENTRATE

The following sections 19.5 and 19.6 have been taken from the 10 Oct 2011 NI43-101 Report prepared by AMEC and MA.

The sale of copper concentrate is dependent upon the marketing strategy adopted. As there is no integrated smelting operation with the Taysan resource, the market will be to a custom smelter or smelters. This market accounts for about 50% of copper concentrate sales. The contract type can be long term frame between the mines and smelter or through an intermediary merchant or trader. Also sales can be accomplished on the spot market usually via merchants. Alternatively, price share contracts may be entertained where charges are levied as a percentage of the prevailing copper price.

Contract terms are normally fixed over the life of the contract and include: • Term of Contract

CZH-003 Page 152

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Brick or Block • Calendar or Mid-Year • Tonnage (tonnage options) • Holiday or No-Holiday • Reference Clauses (e.g. Major Settlements in Japan) • Delivery Terms (CIF or FOB; destinations) • Shipping Terms (SHINC/SATPMSHEX/SHEX) • Quotational Periods [QP] Price Reference period • Usually a single Month • Anchored to Month of Shipment or Arrival • Sometimes Options granted (usually to Buyer) • Some Buyers request back-pricing • Price Reference LME / London Bullion Market • Publication Reference Platt’s / Metal Bulletin • Penalty Elements/Schedules As / Hg / Co+Ni / Al2O3+MgO / Cl / F etc. • Payable Rates (all metals) % of metal content paid / mid deduction • Payment Terms Timing / Interest %.

Concentrate terms are typically negotiated on an annual basis and these normally represent smelter charges: • Treatment Charge $ / DMT • Refining Charge (Cu) ¢ / lb • Refining Charge (Au) $ / oz • Refining Charge (Ag) $ / oz

Historically concentrate terms have accounted for about ± 10% of copper price above/below 90¢/lb with caps and floors existing. Caps and floors have been eliminated in the current concentrate market.

The concentrate sales market is complex and an appropriate marketing strategy should be adopted. It is recommended that a formal copper concentrate market research study be undertaken in the next stage of the project and a marketing approach selected. This will ensure availability of technical information relating to concentrate quality can be integrated into the financial model based on accurate analysis of the concentrate.

19.6 MAGNETITE

Koenig Consulting provided a study to determine the marketability of magnetite concentrate produced from the tailings of the Taysan Copper Gold project in Batangas Province in the Philippines. The Koenig study assumed a stand-alone magnetite recovery facility.

To provide a basis for the magnetite study, the following has been undertaken: • Review of the current copper circuit test data in relation to magnetite recovery • Determination of the process and transport requirements for producing and shipping magnetite concentrate • Review of the uses and markets for magnetite

CZH-003 Page 153

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Review of the current and expected pricing for the concentrate • Review of the location of potential customers, (by country only) • Development of a conceptual financial analysis spread sheet to determine the value of producing and marketing magnetite concentrate.

Although the grades of magnetite in the tailings seem low at around 2% weight recovery, the project has value because of the low operating and capital costs. Current and predicted iron ore prices have also assisted in the project showing a significant return on investment. Considering the elevated concentrate TiO2 grade, the Davis Tube concentrates were evaluated from a perspective of suitability to produce a concentrate for the heavy media market.

19.7 CONTRACTS

There are no contracts entered into at this stage of the Prefeasibility Study with regards to potential mineral sales.

CZH have entered into an agreement to acquire a Port site at Batangas. An amount of PhP600M (US$10.5 M) is required to pay out the contract. An amount of PhP150M (US$3.5 M) has already been paid. The balance of the purchase price (PhP 450 Million (approximately US$10.5 M) is payable on or before October 27, 2012. The Company has the ability to defer this payment to April 27, 2013 on the payment of interest at the rate of 8% p.a. on the balance of the purchase price.

CZH-003 Page 154

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

The following summary is taken from the report “Acid and Metalliferous Drainage. Prefeasibility Study Report for the 15 Mtpa Taysan Prefeasibility Study, Revision 0 January 2012”, prepared by R Virtue..

20.1 ACID AND METALLIFEROUS DRAINAGE

GHD has been engaged by CZH to undertaken an assessment of the risks posed by Acid and Metalliferous Drainage (AMD) at the proposed Taysan Copper Project to guide the development of the project Prefeasibility Study.

Available metallurgical data were reviewed to provide a preliminary assessment of the risk of development of AMD and saline drainage from waste rock and tailings at the site. Comparison of sulphur, copper, calcium and magnesium concentrations indicate that although elevated sulphur was present in the host rock, much of the material had elevated calcium and magnesium, indicating potential for acid neutralisation. Copper to sulphur ratios indicated that chalcopyrite was the dominant source of sulphur in some areas. Overlying volcaniclastic rocks showed relatively low sulphur.

Eighty-one composite samples of waste rock were selected for analysis for Net Acid Generation (NAG) and Net Acid Producing Potential (NAPP) and the leachate from the oxidised samples analysed for a range of metals and major ions. The NAG and NAPP testing indicated the following AMD risk classifications: • Acid-Consuming Material (ACM) through Non-Acid-Forming (NAF), to Low Capacity for acid formation (PAF-LC) – Tuff (TUF), Metavolcanics (IMV), Plagioclase Diorite Porphyry (PDD) and Hornblende Quartz Diorite (HQD) (although some HQD samples are Uncertain/Contradictory (UC)). • Potentially Acid Forming (PAF): Quartz Diorite Porphyry (QDP) samples fall mostly within the PAF-LC classification (neutral NAGpH but weakly positive NAPP); • Mixed Classification NAF and PAF quadrants, with no distinct pattern – Quartz Diorite (QD) and Hornblende Quartz Diorite (HQD) ore.

Analysis of leachate from peroxide oxidised samples of different waste rock types indicate the following: • Tuff - Leachate concentrations less than the selected environmental trigger values, with the exception of manganese (although this was less than 10 times the trigger value). • Metavolcanics - Leachate concentrations within the guideline values except for molybdenum and chromium (assumed to be hexavalent); and • Remainder of lithologies - intermittently exceeded trigger values for copper, manganese, iron, and to a lesser extent lead, nickel and zinc.

Elevated sodium in the leachate indicated that it may present a risk of soil dispersion, depending on the clay mineralogy.

Samples of tailings were subjected to NAG and NAPP testing and water leaching. The water leachate, along with liquor from the trial tailings were subjected to metals and major ion analysis. The results

CZH-003 Page 155

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 indicate the tailings were unlikely to generate acid if exposed to the air and may hence be suitable for subaerial deposition and also presented a low risk of metallic leachate generation if not oxidised.

A suite of additional testing, including column leach testing, was recommended for future studies to confirm the waste rock and tailings leachate chemistry, taking into account reaction kinetics.

20.2 GENERAL ENVIRONMENTAL REQUIREMENTS

Report sections 20.2 and 20.3 were summarised from the 2012 Taysan PFS Report compiled by AMEC.

The Project management team will be responsible for the Environmental Assessment and, Environmental Management and Control during construction through positive local community relationships, ensuring the objectives and goals are dynamic and aligned with developed activities focussing on the continuous improvement.

20.3 ENVIRONMENTAL MANAGEMENT

The project will establish an Environmental Management Program, (EMP) contemplating objectives and goals associated with all environmental aspects and determining responsibility and terms for achieving proposed objectives.

The EMP will propose and ensure the adoption of clean, safe and economically feasible technologies allowing rational use of inputs, minimising environmental risks and emissions, inadequate release of liquid effluents and solid residues derived from activities to be executed and erosive processes and/or sliding/displacements deriving from activities that involve deforestation, earthworks, cuts/embankments or constant traffic of heavy equipment.

The EMP will ensure that the subcontracted firms, directly or indirectly bound to the works, will respect environmental preservation and protection practices established by environmental legislation and included in the mine’s Policies.

20.4 ENVIRONMENTAL BASELINE STUDY

This section of the report was prepared by GAIA South Incorporated (Gaia South) for CZH and is a summary of the Gaia South PFS report segment completed in May 2012.

The Environmental Baseline Report presents the current status of the existing surroundings and people prior to the proposed mining operations. The scope of the study covers the entire proposed facilities and its vicinities. Application of professional methodologies acceptable to environmental standards was employed in this study. Technically sound analyses and scientifically-based studies of the various biological, physical, social and health concepts were adopted to present the results of the assessment.

The key findings of the study are presented in Table 20-1.

CZH-003 Page 156

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS

Module Summary of Baseline Condition

THE LAND

Soils and Land-use • There are two (2) soil types inside the EPA area: Guadalupe Clay and Ibaan Clay Loam. • The soil samples gathered from the site has a pH range of 5.9-6.3. The Total Nitrogen and Organic matter are very low with 0.05% and 1.29%, respectively. Phosphorus is not detected, while Potassium is very high with 1.3cmol/L (Food and Agriculture Organisation – United Nations Development Program, adopted by the Bureau of Soils and Water Management of the Department of Agriculture). The natural fertility of the soil is very low although it has a very high cation exchange capacity. • Heavy metals in soil are all below the contamination level as based on international standards. • Based on the land-use assessment, twelve (12) land-use/vegetation units were identified within the EPA: Paddy rice, Sugarcane, Cassava, Open grassland, Kaingin, Mango, Coconut, Mixed Orchard with Coconut, Mango and Tamarind, Shrub land with Bamboo, secondary forest, Rock Quarry and Built-up area. • Majority of the existing vegetation units are suitable with the soil except for some areas where soil fertility is low. • About 65% of the EPA area (including the open pit area) is slightly susceptible to erosion, while 30% is moderately susceptible. Only 5% of the EPA’s extent is highly susceptible to erosion and is located in the southern portion of it.

Terrestrial Flora • One hundred and twenty eight (128) species of flora were identified during the assessment, belonging to 44 families. Of the 128 species, 68 species were recorded in the forest ecosystem and 31 species in grassland ecosystem. The remaining species not found in the forest and grassland ecosystems were observed in the agricultural, agroforestry and river ecosystems. • Generally, the forest ecosystem is relatively sparse in trees. Family Fabaceae is the most dominating family in this type of ecosystem. Most common species are akleng parang, alibangbang, antsoan dilau, kakauate and ipi-ipil. • In the grassland ecosystem, the most dominant species is carabao grass which is present at all sampling sites. • There are no unique or endangered vegetation species or community in the project site that may be affected by the project.

Terrestrial Fauna • A total of seventy (70) wildlife species were recorded in the EPA area and adjacent vicinity; consisting of three (3) species of amphibians, fifty-three (53) avian species, seven (7) mammals and seven (7) species of reptiles. Out of the 70 species 22.86% or 16 wildlife species are endemic to the Philippines.

CZH-003 Page 157

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS

Module Summary of Baseline Condition Commonly observed avians are orioles, bulbuls and sunbirds. • One (1) species – Philippine Sailfin Lizard is classified as Vulnerable (VU) classification according to the IUCN (2010). • Wildlife diversity ranges from low to very low indicating habitat disturbance and change in land use resulting in habitat conversion caused by a long history of agriculture and residential land use. • There are no unique or endangered animal species or community within the project site that might be affected by the project.

THE WATER

Hydrogeology • The EPA area straddles between two (2) watersheds: Kalumpang and Rosario watershed. The central and northern portion of the area is drained by the headwaters of Kalumpang River while the southern portion is drained by the Rosario River. Both rivers exhibit parallel-dendritic stream patterns and deeply cut through the generally soft volcanic and tuffaceous rocks they drain, forming steep river banks and deep, narrow river valleys. • An examination of the stream beds and banks of the tributaries of both rivers in the project area suggest that these tributaries are influent or losing streams. They flow through soft, permeable volcanic and tuffaceous rocks and contain relatively little water compared to the size of the catchments they are draining. • The Kalumpang and Rosario rivers discharge an average of 735.06 and 300.29 million cubic meters (MCM) annually. Within the EPA area about 44.7 MCM is drained by the Kalumpang River while the Rosario River drains 31.39 MCM in the southern portion. • Groundwater recharge is very poor especially during dry months when groundwater is converted to baseflow instead of percolating downwards. • A total of 12 wells were examined. Seven (7) of which belong to the Taysan Water District. All the wells examined were generally deep (Philippines national standards define deep wells as those deeper than 20m) and do not weaken or dry-up during summer. The majority of Taysan residents rely on groundwater as the sole source for all domestic, industrial and institutional water requirements. • Taysan has two (2) hydrogeologic units: Tuffaceous rocks that host local, disconnected aquifers and the metamorphosed/igneous rocks that contain little or no groundwater. Taysan Water District and Tilambo Multi-purpose Cooperative draw their water from the tuffaceous hydrogeologic unit. • The volume of groundwater and surface water that is available at the site is limited. Therefore, in order for the mining project to proceed, it needs to identify a sustainable source of fresh water to use in its mining operations. . It has been established during the Prefeasibility Study that the catchment of the

CZH-003 Page 158

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS

Module Summary of Baseline Condition tailings dam and proposed freshwater dam so the south west will provide sufficient fresh and recycled water for the project.

Water Quality • Parameters used to measure groundwater quality such as pH, copper, and zinc were generally neutral or within their respective limits prescribed by the Philippine National Standards for Drinking Water (PNSDW). Heavy metal concentrations atall groundwater stations were less than their respective analytical detection limits or much less than the PNSDW limits however, faecal and total coliform levels were many times the threshold for Class C waters which is zero. • Total coliforms and E. coli were present at all groundwater stations except Stations GW4 and GW5. All sampled groundwater stations were confirmed to be used either for drinking or cooking contrary to the PNSDW guidelines which prescribe that drinking waters should have nil levels of coliforms. • Freshwater quality and oxygen demand parameters such as pH, DO, BOD, oil and grease, total and fecal coliform, nitrates and phosphates, TSS and TDS were ascertained. The surface water stations had neutral to slightly basic pH values (7.0 to 8.4) but are still compliant with the DAO 90-34 criteria for Class C waters. Concentrations of BOD at WQ2, WQ3, WQ4 and WQ7 exceeded the DAO 90-34 Class C standard. At stations WQ1, WQ2, WQ3, WQ4 and WQ8 Phosphates exceeded the limit of 0.40 mg/L for Class C waters. Oil and grease in all stations are within their respective limits prescribed in the DAO 90-34 Class C standards. DO concentrations at all stations are compliant with the DAO 90-34 Class B criteria except for WQ2 and WQ3, which had a DO reading of 3.0 mg/L. Total and fecal coliform were present in all stations and exceeded the criteria specified in the DAO 90-34 Class C guidelines of 5,000 MPN/100 mL. This is mainly due to unwarranted disposal of sewerage from piggeries. • Arsenic, cadmium, lead, mercury and hexavalent chromium were less than their respective detection limits in all the surface water samples. The concentration is still within the 0.05 mg/L limit specified by the DAO 90-34 for Class C waters. • Water quality is generally Class C (not suitable for drinking or bathing in. Considered only suitable for fisheries, boating and industrial uses), however many sites exceed the Class C coliform threshold.

Freshwater Biology • The benthic community in the rivers shows very limited composition. 05-FW1 has four (4) taxa, the highest among the nine (9) sampling sites. All other stations have three (3) taxa except LFW2 with only two (2). • Phytoplankton found at the stations within the EPA reflect a range of ecological health at different sites.

CZH-003 Page 159

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS

Module Summary of Baseline Condition

• Stations 05-FW1 and 05-FW3 are dominated by the diatoms Cymbella and Surirella denoting clean water.. On the other hand, stations 05-FW2 and 05- FW4 are dominated by Euglenoids which are indicators of organic pollution. • The zooplankton community at sampling sites within the exploration permit is also variable. Station 05-FW1 is dominated by Odonata (dragonfly) larvae. On the other hand, station 05-FW2 is dominated by Ostracods, a group of microcrustaceans, and bivalves. • Overall, dominance indexes computed from each sampling point indicate equitable representation of zooplankton species in the water column except in a ‘bloom’ condition at station 05-FW4.

Marine Biology • At station MW1 three (3) major phytoplankton species dominate with an aggregated species count of 27. MW2 has a total of 27 phytoplankton species, 20 of which are diatoms while MW3 has total of 23 taxa of phytoplankton. The diatoms are the most specious group in all the three (3) sampling areas. • The zooplankton community of the selected sampling points has rich diversity. MW1 and MW2 both have 14 species each while MW3 has 15 species. • The benthic profile of the three sampling stations varies. MW1 is mainly composed of coralline and turf algae (40.4%) followed by reef building corals (21.04%) dominated by Acropora sp. MW2 a mixed stand of Cymodocea and Syringodium with 70:30 proportion in terms of biomass while MW3 has a monospecific stand of Halodule.Fish biomass at MW1 recorded 115 individuals of 19 fish species dominated by the damselfishes while MW2 yielded only 24 individuals of 3 fish species. Only Acanthurus achiles (surgeonfish) from MW1 and Scolopsis bilineatus (marine catfish) from MW2 are considered target fish species. • Analysis of fishes from Taysan and Batangas City Market showed that heavy metal concentration exceeded the daily allowable intake. Toxicity symptoms may be suppressed if consumption is less than the frequency specified by the standard.

Physical Oceanography • The nearest tidal station is located in Batangas Port, Batangas City. • The tidal pattern at the Lobo Area shows a semi-diurnal type characterized by two high waters and two low waters in a lunar day. • Seabed depth ranges from a low of 0.8 meters near the shoreline to a high of 250 meters seaward, the latter being observed near or at the 1.0 kilometer- mark. • Current velocities range from 0.08 meters per second (mps) to 0.14 meters per second (mps) during flood and from 0.03 meters per second (mps) to 0.05 meters per second (mps) during ebb tide. During flood tide, the observed current was generally directed to the south direction or towards the sea. The

CZH-003 Page 160

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 20-1 SUMMARY OF THE BASELINE ENVIRONMENTAL CONDITIONS

Module Summary of Baseline Condition observed current during ebb tide is generally directed in the easterly direction in the direction towards the shoreline. • Based on the result of the oceanographic survey, water currents (both surface and subsurface) will have insignificant effects during the operational phase of the mining project.

THE AIR

Air Quality • The air quality sampling conducted at eight (8) sampling stations within the

EPA area shows that the ambient Total Suspended Particulate (TSP), SOx and

NOx concentrations were all within the DENR National Ambient Air Quality Guideline Value (NAAQGV) for criteria pollutants as specified in the Philippine Clean Air Act of 1999. • The noise survey showed that all sites, including residential areas, peaked at heavy and light indusrtrial standards due to the operation of tricycles, Jeepneys and commercial trucks.

THE PEOPLE

Socio-economics • Taysan Municipality is a 2nd class municipality with a total revenue collection of 76.4 Million Pesos in Fiscal Year 2009. • As of 2007, Taysan has a total population of 33,454 with a total of 5,823 households and an average of 4.84 persons per household. • The population density of Taysan is 3.6 persons per hectare. • Taysan’s population shows high birth rate characteristics with youth comprising 43.6%. The working population of the municipality is 58.49% while the both young and old dependents comprises 41.51% • As of School Year 2007-2008, 9,514 persons aged 5 to 24 are attending school. Based on the CBMS, about 4% do not attend school because of financial limitations. • All the barangays in Taysan have day-care centers.

Public Health • The Municipality of Taysan has one (1) Rural Health Unit and eighteen (18) Barangay Health Stations. There is only one (1) doctor, three (3) nurses, one (1) dentist, one (1) nutritionist and one (1) laboratory technician based in the RHU • In 2009, the three leading cause of morbidity/disease is Acute Respiratory Infection (ARI), Infected Wounds and Diarrheal Diseases while the top three leading causes of mortality is Congestive Heart Failure, Hypertensive Vascular Disease and Myocardial Infarction.

Upon project construction and operation, positive and negative effects may be expected. These factors will significantly or insignificantly affect the condition of the environment and people who live within and

CZH-003 Page 161

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 around the identified impact zones. However, these impacts may be mitigated or enhanced according to the management strategies that will be employed by the Proponent. Significant findings on the environment and social situation based on the baseline study are summarised as follows: • Non-existence of local resolutions, ordinances or administrative orders declaring the immediate mine site area for conservation. • Wildlife species observed were mostly “least concern” in terms of conservation status. Majority of the plants are either agricultural crops or less important tree species that grow within a secondary growth forest. However, some trees of Molave (Vitex parviflora) were documented. This species is considered “vulnerable” by the International Union for Conservation of Nature and Natural Resources (IUCN, 2010). • High susceptibility of the Ibaan Clay loam on the lower half of the area to landsliding is observed. Diverting the flow of tributaries near the proposed TSF may lower the risk of flooding. • The estimated surface water yield from the Pit and Piña sub-catchments, which amount to 9.14 and 16.22 MCM per year, constitute the maximum reduction in discharge that may occur from the Kalumpang and Rosario Rivers, respectively. Considering the total output of the Kalumpang and Rosario rivers, these represent 1.2% and 5.4% of the total yield of the Kalumpang and Rosario rivers, respectively. • The Rosario and Piñahan Rivers run from Taysan via Bucao entering the ocean in the Municipality of Lobo which faces Verde Island and the Verde Island Passage. • The analysed ambient air quality in the area was assessed to be within the National Standards. However, noise levels at all sample sites exceed national standards due to the passage of tricycles, jeepneys and commercial trucks. • The Taysan local government and its people have been supported by various industries operating in the area. The presence of school facilities, barangay health centers, well-built barangay halls, business establishments, residential subdivisions, recreational facilities, covered courts, multi-purpose hall, and water/ irrigation facilities among others reflect that resources in the area are available. • At present, the community which will be directly affected by the development comprises approximately 3,000 titled or claimed lots embracing around 199 households. Issues on relocation/resettlement are currently being managed by a well run community development team and this will continue until when the relocation is enacted during construction.. • No records of security problems were noted during the assessment and based on community documentation. • An Information, Education, and Communication (IEC) Program in the community focusing on environmental management and monitoring, technical and safety features of the operation, and community development has been in operation since August 2010 and will continue through feasibility, construction and mine management. • Need to formulate the company’s Mission-Vision-Goal Statement to serve as guiding tool in its operation and concern to environment and people; and • Need to devise a Social Development and Management Plan (SDMP) focusing on infrastructure development, social services, livelihood assistance, relocation and resettlement, and community organizing (CO). This work has begun and will be completed during the bankable feasibility stage.

CZH-003 Page 162

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

21 CAPITAL AND OPERATING COSTS

21.1 CAPITAL COST MINING

21.1.1 Introduction

IMC have prepared a detailed mining cost model from first principles for the Taysan Copper project. Inputs for the mining cost model have been gathered from various sources including: • Local mining contractors (Galeo) • Client – fuel, labour and administration costs • In-country Caterpillar and Komatsu dealers (Monark and Maxima) • Atlas-Copco Philippines • IMC’s in-house operating cost database

21.1.2 Mine Capital Cost

In this cost estimate, plant capital costs have been assessed according to a purchase and replacement schedule based on unit capital costs and life. As the mining cost is being modelled as an owner/miner operation, the purchase and replacement capital is included in the capital estimate. As a contractor operation, the capital equipment would have been incorporated as a contract mining rate in addition to the contractor’s profit margin.

All costs are in 2012 US dollars (US$) unless otherwise indicated.

TABLE 21-1 EXCHANGE RATE BASIS OF ESTIMATE Currency Rate per US$ PHP 43.0 JPY 90.0 AUD 0.95

21.1.3 Pre-production Cost

Pre-production costs include capitalised operating costs expended prior to and including year -1.

Equipment will be mobilised and site facilities will be established 6 to 12 months prior to the operation of the mill. The mine site facilities will include: • Offices, crib huts, ablutions; • Workshop, stores containers; • Fuel storage, fast fuel station, wash down pads, safety bunds, oil collection sumps; • Explosive magazines; • Utility connections.

During pre-production, land clearing, topsoil removal and storage will be focused on the Stage 1 pit initial waste dump and ROM stockpile areas. It is estimated that 65Ha will need to be cleared and grubbed in the pre-production year. Approximately 160kBCM of topsoil will also need to be stripped and stockpiled before the start of pre-production mining activities.

CZH-003 Page 163

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The estimated costs incurred during the pre-production period are summarised in Table 21-2.

TABLE 21-2 PRE-PRODUCTION COST ESTIMATE (EXCLUDING MINING FLEET PURCHASE)

Item Units Cost Tooling $ x 1000 300.0 First Fill of Diesel $ x 1000 400.0 Admin and Overheads $ x 1000 2,500.1 Grade Control $ x 1000 15.7 Technical Services $ x 1000 200.0 Haul/Access Road Development $ x 1000 2,593.8 Land clearing and grubbing $ x 1000 325.0 Topsoil removal $ x 1000 487.5 Waste/ore pre-strip $ x 1000 12,387.3 Mobile Plant Mobilisation $ x 1000 889.7 Maintenance Spares $ x 1000 1,112.1

Total Pre-Production Cost 21,211.1

A unit rate of $5000 per hectare has been used for clearing and grubbing. A unit rate of $3.0 per bcm has been used for topsoil removal and stockpiling. An estimated topsoil thickness of 250 mm has been assumed.

The mine infrastructure and services listed below have been excluded from this pre-production capital cost estimate as it has been accounted for by GHD in their PFS cost estimates.

IMC have specifically excluded the following items from the capital cost estimate – the capital cost for these items are included by others in the PFS: • ROM pad construction and crusher approach • Laboratory • Camp + camp running costs • Crib, office and ablution facilities • Mine workshop, heavy and light vehicles • Stores building, laydown pad • Heavy and light vehicle wash down pad • Waste oil treatment facilities • Bulk explosives and detonator magazine • Fuel storage facilities • Water supply and reticulation • Electricity supply and reticulation • Sediment dams

CZH-003 Page 164

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The capital purchase and replacement cost schedule shown in Figure 21-1 and Figure 21-2 respectively and Table 21-3 summarises the cost of capital that mine operations will be responsible for. The prices for the Caterpillar and Komatsu equipment are based on quotes received from equipment suppliers in June 2011. The Caterpillar prices were revised in February 2012.

FIGURE 21-1 CAPITAL COST BREAKDOWN BY EQUIPMENT TYPE

FIGURE 21-2 PURCHASE AND REPLACEMENT COST ESTIMATE – YEAR 1 TO 24 Note: Year -1 Mine equipment expenditure is estimated to be $44.5M.

CZH-003 Page 165

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-3 TAYSAN PURCHASE AND REPLACEMENT CAPITAL SCHEDULE (K$)

CZH-003 Page 166

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

21.2 PROCESS PLANT CAPITAL COST ESTIMATE

Table 21-4 provides a summary of the process plant capital cost estimate for the Taysan Copper Project.

TABLE 21-4 PROCESS PLANT CAPITAL COST SUMMARY

Description Cost US$ Million

Total Cost Estimate (Directs) 215.6 Indirect Cost Estimate (EPCM) 38.8 Process Plant Capital Cost Estimate 254.4

The cost estimate comprises equipment supply, fabrication, installation, and construction costs for the permanent and temporary works. Equipment costs are based on budget pricing sourced from international suppliers with the appropriate currency conversions applied. Fabrication, installation, and construction costs are based on budget pricing obtained from local contractors. The rates provided by the contractors include allowance for inherent risks, including productivity impacts due to the location of the site.

A design growth and accuracy provision has been provided in Estimate for quantity growth to account for the increase in quantity in the planned scope of work from this design phase to the final constructed product. This allowance is based on consultant experience and is consistent with accepted industry practice.

The Engineering and Procurement cost estimate has been determined by applying a percentage of 18%. This figure is based on previous project history appropriate to this level of study. The accuracy level of PFS capex is to be included at +- 25% and contingency elements are applied.

The Project Contingency is based on a factored approach from industry Norms for a project of this nature. The process plant represents 52% of the Capital Cost Estimate has a contingency factor of 9.8% to the USD254.4M.

Table 21-5 provides a summary of the process plant mechanical equipment and total installed capital (TIC) cost estimate for the Taysan Copper Project.

TABLE 21-5 PROCESS PLANT MECHANICAL EQUIPMENT CAPITAL COST ESTIMATE

WBS Description Mechanical Equipment TIC Area Cost US$ Million Cost US$ Million

2000 Process Plant General 0.0 68.3

2100 Primary Crushing 7.6 12.0

2200 Stockpile Feed Conveyor 4.1 10.2

2300 Grinding 54.1 63.5

2400 Copper Flotation 18.4 21.1

CZH-003 Page 167

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-5 PROCESS PLANT MECHANICAL EQUIPMENT CAPITAL COST ESTIMATE

WBS Description Mechanical Equipment TIC Area Cost US$ Million Cost US$ Million

2500 Copper Thickening and Filtration 2.2 6.2

2600 Magnetite Recovery 5.7 9.5

2700 Magnetite Thickening and Filtration 2.5 6.5

2800 Tails Thickening and Disposal 2.6 5.8

2900 Reagent and Services 7.2 11.6

3000 Storage Ponds and Control Systems 0.9 Total 104.4 215.6

The following costs have been excluded from the Process Plant Capital Base Cost Estimate: • All costs incurred prior to the start of detailed EP services, such as study work, testwork and exploration infrastructure including road works etc. • All Owner’s Costs • Accommodation camp supply and establishment • Technical assistance during “ramp-up” (post commission) • Escalation • Taxes such as VAT and withholding tax and levies • Closure and rehabilitation costs applicable to the Process plant and Infrastructure • Security systems • Perimeter lighting • Geotechnical investigations • Any allowance for environmental or social constraints • Working or sustaining capital • External/independent audits • Capital contributions to any Statutory authorities • Licence and/or royalty fees • Environmental/permitting development or statutory approvals • Works insurance, public liability, or goods in transit insurances • Pre-project costs ( exploration, feasibility studies, permitting and financing activities ) • Finance charges/costs • Capital recovery at the end of the project • Withholding tax • Legal fees

21.3 INFRASTRUCTRE CAPITAL COSTS

21.3.1 On Site Infrastructure and Services

The estimated capital expenditure are summarised below in Table 21-6.

CZH-003 Page 168

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-6 INITIAL CAPITAL EXPENDITURE – ON-SITE INFRASTRUCTURE SITE WORKS

Item No Work Description Amount (US Dollar)

1.0 General Requirements 201 751

2.0 Operations Village 1 960 803

3.0 Process Plant 1 361 755

4.0 Administration Facilities 592 159

5.0 Electrical Infrastructure 16 814 000

6.0 Telecommunications 1 006 000

7.0 Fuel Depot 300 298

8.0 Engineering Procurement and Construction Management 1 667 757

9.0 Design Growth Allowance 1 111 838

Total Estimated Cost USD 25 016 361

21.3.2 Access Roads and TSF Haul Roads

Following is the capital cost estimate (TABLE 21-7) for the mine area roads and the access service roads.

The Intermediate / Closure Stage roads shown at item 7 of the estimates are road extensions required as the TSF fills and the dams are increased in height. It is assumed that these roads extensions would be completed in Year 5 of operation.

TABLE 21-7 SUMMARY OF ROAD CAPITAL COST ESTIMATES

Item No. Work Description Amount (USD)

YEAR 0

1 General Requirements 234 099

2 Starter Stage 4 239 492

2.1 TSF Access Roads 3 244 311

2.2 Water Facilities Roads 995 181

3 Service / Regional Roads 442 491

3.1 Mine Service Roads 50 117

3.2 Mine Access Roads 392 373

4 Engineering Procurement and Construction Management 368 706

5 Design Growth Allowance 245 804

TOTAL YEAR 0 5 530 592

CZH-003 Page 169

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-7 SUMMARY OF ROAD CAPITAL COST ESTIMATES

Item No. Work Description Amount (USD)

YEAR 5

6 General Requirements 236 723

7 Intermediate / Closure Stage TSF Roads 4 734 466

8 Engineering Procurement and Construction Management 372 839

9 Design Growth Allowance 248 559

TOTAL YEAR 5 5 592 588

Total Estimated Cost 11 123 180

21.3.3 Port Facilities

Based on the above, the capital cost estimate for the proposed scope of work is:

TABLE 21-8 ESTIMATED COSTS CAPEX – OVERALL DEVELOPMENT

Description Cost (USD)

New Wharf $ 3 301 000

Onshore Facilities $11 662 000

Engineering Procurement and Construction Management 1 123 000

Design Growth Allowance 748 000

TOTAL $16 834 000

21.3.4 Power

The proposed transmission line that will be constructed along the 18.62 kilometre NGCP 69 kV lines with the indicative capital cost of the 69 kV transmission line for the power plant location to the mine being Php 3.5 Million per kilometre, which is a total of US$ 1.52 million plus EPCM costs of US$113,000 and Design Growth Allowance of US$75,000. Expenses relative to Right Of Way (ROW) will be shouldered by the customer and is estimated by CZH to be US$0.53M.

21.3.5 Water Supply

The capital costs for the water supply system have been prepared and are summarised as follows:

CZH-003 Page 170

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-9 WATER SUPPLY CAPITAL COSTS

Amount (US Item No. Work Description Dollar)

1 General Requirements 542 070

2 Water Supply Dam 3 683 993

3 Delivery Pipelines 3 171 251

4 Pump Stations 2 613 953

5 Appurtenances 73 588

7 Domestic Water Supply and Distribution 1 297 674

Engineering Procurement and Construction 8 853 690 Management

9 Design Growth Allowance 569 127

Total Estimated Cost 12 805 347

21.3.6 Tailings Storage Facility

The Capital Cost of the TSF is considered in two parts. Initial Capital Expenditure is the up-front costs for the TSF starter embankments, TSF water management and tailings distribution system in Year 0 which is estimated to be $14.618 M USD.

The second part is the Sustaining Capital Expenditure over the life of the mine (Year 1 to 24) and closure provisions (Year 25) is estimated at $97.5 M USD. A detailed yearly breakdown is provided in TABLE 21-10 below. TABLE 21-10 SUSTAINING CAP-EX ESTIMATE Year Raise 2011 USD 1 Lift 1 11,590,501 2 Lift 2 7,957,807 3 7,957,807 4 Lift 3 5,137,724 5 5,137,724 6 5,137,724 7 Lift 4 4,648,951 8 4,648,951 9 4,648,951 10 4,648,951 11 Lift 5 3,445,830 12 3,445,830 13 3,445,830

CZH-003 Page 171

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

14 3,445,830 15 3,445,830 16 Lift 6 3,150,175 17 3,150,175 18 3,150,175 19 3,150,175 20 3,150,175 21 - 22 - 23 - 24 Closure 3,037,653 Total 97,532,781

The TSF estimate is based on many assumptions associated with distances embankment material has to be carted, unit rates for construction availability of construction materials, ancillary items and geotechnical conditions.

21.3.7 Basis of Estimates

The Taysan Base Assumptions provided by CZH were also adopted and use as the basis for capital cost estimates for Taysan Copper Project.

The following assumptions have been applied in developing the capital cost estimate: • Exchange Rate of 1 USD = 43 PHP; • Project fuel cost of 1.00 USD/L; • Power costs of 0.1317 USD/kWh (except for the Batangas Wharf where a rate of 0.1158 USD/kWh was used); • General requirements include: • mobilisation/demobilisation and temporary facilities 4%; • Health and safety 0.75%; • Permitting 0.25%; • Estimates are for fixed and built items, no mobile equipment or consumables are included; • All road material quantities are purely based on the assumption that vertical alignment will follow existing alignment as much as possible and the connecting elevations from the regional access roads; • Earthworks (cut & fill) quantities are computer generated volumes based on LiDAR survey of existing terrain versus the design model subgrade levels; • Utility services such as stormwater, water distribution and sewerage system are based on the initial masterplan layout of the village and the process plant. This will require further evaluation during the BFS utilising the final site location layout; • For drainage works, net unit cost includes supply and installation of reinforced concrete pipe culvert complete with inlet and outlet structures requirements inclusive of excavation, backfilling and compaction and other work items deemed necessary to complete cross drainage construction;

CZH-003 Page 172

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• For protection works, net unit cost includes supply and installation of gabion basket Terramesh type slope protection (PVC Coated) retaining wall inclusive of excavation, backfilling and compaction to an acceptable degree, boulders filling, geotextile fabric and other item necessary to complete installation.

21.3.8 Infrastructure Indirect Costs

• Engineering, design and construction management at 7.5% of the construction cost; • Design Growth Allowance of 5% of the construction cost. This is to account for design growth that typically occurs between prefeasibility level and project implementation.

21.3.9 Exclusion from Infrastructure Capital Costs Estimates

The following costs are excluded from the capital estimate: • All Owner’s Costs; • Contingency; • Performance Bond and any other Guarantees; • Insurances; • Taxes such as GST and withholding tax, VAT and levies; • Escalation; • Provision for exchange rate fluctuations; • Land acquisition; • Owner options; • All costs incurred prior to the start of detailed EPCM services; • Commissioning; • Location or relocation of any potential existing buried services; • Additional test work/geotechnical investigations, if required; • Additional site or aerial surveys, if required; • Allowance for possible industrial relations disputes; • Allowance for market conditions leading to increased rates for or shortages of materials, labour or equipment; • Allowance for abnormal weather impact or delays (i.e. flooding during construction); • Allowance for unforeseen environmental or social constraints.

21.3.10 Project Contingency

A risk and opportunity assessment has been carried out and is provided in the Project Risk register. No contingency has been incorporated in the estimates by GHD. A contingency has been developed by CZH and is estimated at 10% for the purposes of this study. The contingency for infrastructure capex should be developed following a Risk and Opportunity Workshop in future design phases.

21.4 OWNERS CAPITAL COSTS AND OTHER CAPITAL COSTS

Table 21-11 highlights a total of USD47.5M for the Owners Capital Expenditure Costs and displays a breakdown of these costs. The Item description in the Table 21-11 highlights the description of these costs.

CZH-003 Page 173

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-11 ESTIMATES FOR THE OWNERS CAPITAL COSTS

Item Total (US$) Year -1 (US$) Year 0 (US$)

Batangas Port Acquisition Cost (section 19.7) 10,500,000 10,500,000 0 Land Acquisition/Compensation at Mine 11,557,000 1,000,000 10,557,000 Land Acquisition -ROW , Batangas to Mine Transmission Line 528,000 528,000 - Owners Commissioning, Spares, Stores 7,327,000 - 7,327,000 Owners G&A Capital Costs 16,597,000 3,715,000 12,882,000 Exploration Sterilisation Costs (to cover areas not held by CZH). 1,000,000 1,000,000 -

TOTAL (US$) 47,509,000 16,215,000 31,294,000

A contingency allowance is based on the weighted average of the various segments that made up Owners costs which includes all items in Table 21-11 above. The various items varied between 0 to 20% and the weighted average contingency is 9%. This 9% figure has been used in the financial model.

21.5 OWNER’S SUSTAINING CAPITAL COST ESTIMATES

The Sustaining Capital expenditure summary is presented in Table 21-12 below.

TABLE 21-12 SUSTAINING CAPITAL EXPENDITURE OVER THE 24 YEAR MINE LIFE

Sustaining Capital Expenditure Item Total (US$)

Land Acquisition/Compensation at Mine 6,000,000

G&A Mobile Equipment Replacement (Years 1-24) 5,850,000

Process Plant and Port Mobile Equipment Replacement (Years 1-24) 7,200,000

General Sustaining Capex (Years 1-24) 11,500,000

TOTAL 30,550,000

21.6 SUMMARY CAPITAL COSTS

Table 21-13 provides the capital cost estimate for the Taysan Prefeasibility Study as well as defining the source of the capital cost estimate. The overall accuracy of the Prefeasibility capital cost estimate is ± 25% and contingency elements are applied.

TABLE 21-13 CAPITAL COST SUMMARY

WBS Item Capital Cost USD Millions Source

Initial Capital Costs

1000 Preproduction Mining Costs 4.5 IMC

1000 Mining Prestrip 15.8 IMC

CZH-003 Page 174

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-13 CAPITAL COST SUMMARY

WBS Item Capital Cost USD Millions Source

1000 Mining Equipment 44.5 IMC

2000 Process Plant 215.6 AMEC

Buildings

3000 Workshop and Offices 5.5 JCL

4000 Permanent Camp 1.8 JCL

9000 Construction Camp 1.5 JCL

3000 Laboratory Fit out and General Requirements 0.4 JCL

On Site Infrastructure and Services

4000 General Requirements 0.5 GHD

4000 Operations Village 2.1 GHD

4000 Process Plant 1.4 GHD

4000 Electrical Infrastructure 17.7 GHD

4000 Telecommunications 1.1 GHD

3000 Fuel Depot 0.3 GHD

4000 Explosive Magazine 0.2 GHD

7000 Water Supply 12.0 GHD

3000 TSF Year 0 Local Borrow Option 2 13.7 GHD

4000 TSF Access Road Option 2 5.2 GHD

7000 Port Facility 15.7 GHD

4000 Transmission line and Right of Way 1.6 GHD

Mobile Equipment 3.2 IMC/AMEC/GHD

Owners Costs and Working Capital Year -1 16.2 CZH

Owners Costs and Working Capital Year 0 31.3 CZH

Sub-Total 412.7

Process Plant EPCM (18%) 38.8 AMEC

Infrastructure EPCM (7.5%) 5.1 GHD

Contingency (9.9%) 45.3

Sub-Total 89.2

Total 501.9

CZH-003 Page 175

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Table 21-14 provides a summary of the life of mine sustaining capital costs.

TABLE 21-14 SUSTAINING CAPITAL COST ESTIMATE

WBS Item Capital Cost USD Millions Source

Sustaining Capital

1000 Mining Fleet Additional Capacity 63.6 IMC

1000 Mining Fleet Replacement 138.4 IMC

1000 Haul Road Construction 8.2 IMC

3000 TSF 103.1 GHD

Mobile Equipment 13.1 CZH/AMEC

Land Acquisition 6.0 CZH

General Other 11.5

Sustaining Capital Total 343.9

The following risks are excluded from the Total Capital Cost Estimate: • Escalation • Funding Costs • Foreign Exchange • Taxes, levies, and import duties • Legal and regulatory • Sovereign, political and social risk • Insurance. Additional exclusions are defined in each of the above sections of the report.

21.7 MINING OPERATING COST ESTIMATE

The mine operating cost has been estimated from first principles using IMC’s operating cost modelling database along with inputs from local contractors and equipment suppliers. The cost model has been built up from first principles and is based on required equipment hours and manning levels to deliver the quantities in the mine production schedule. TABLE 21-15 displays these costs.

Details of the required mining fleet and manning levels have been discussed in Section 16 of this report.

The average mine operating cost for Taysan is estimated to be $1.78 per total tonne as shown in. A diesel fuel price of $1.0/l was used in the estimate based on a supply quotation from a large international fuel supplier.

The Taysan project mine operating cost benefits from the following: • Relatively low labour rates • 50m cap of low density ‘free dig’ Tuff overlying the ore

CZH-003 Page 176

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Low LOM strip ratio (1:1) • Short haul distance to the plant site and waste rock dumps

A sensitivity analysis on the mine operating cost estimate was undertaken to assess the key input parameters that most affected the operating cost. The mine operating cost at Taysan is most sensitive to changes in equipment operating cost, fuel price and truck productivity.

TABLE 21-15 UNIT OPERATING COST ESTIMATE – YEAR 1 TO 24 ($/TOTAL TONNE) Year 1 5 10 15 20 24 LOM

Ore Mining

Grade Control $/dt 0.01 0.01 0.01 0.00 0.01 0.01 0.01 Drill and Blast $/dt 0.11 0.11 0.14 0.10 0.28 0.29 0.14 Excavate, Load & Haul $/dt 0.56 0.77 0.86 0.43 1.64 1.72 0.71 Stockpile Management $/dt 0.01 0.01 0.01 0.01 0.01 0.01 0.01 Sub-Total Ore Mining $/dt 0.69 0.90 1.02 0.54 1.94 2.04 0.86 Waste Mining

Excavate, Load & Haul $/dt 0.54 0.60 0.62 0.79 0.23 0.22 0.65 Drill and Blast $/dt 0.10 0.10 0.10 0.19 0.04 0.03 0.13 Sub-Total Waste Mining $/dt 0.64 0.71 0.71 0.98 0.26 0.25 0.78 Overheads/General Costs

Admin and Technical Services $/dt 0.20 0.14 0.16 0.09 0.23 0.29 0.13 Pit Preparation/Rehabilitation $/dt 0.00 0.00 0.01 0.00 0.01 0.01 0.00 Sub-Total Overheads/General Costs $/dt 0.20 0.14 0.16 0.09 0.23 0.30 0.14 Contractor Margin $/dt ------Total Mining Unit Costs $/dt 1.53 1.74 1.89 1.61 2.44 2.59 1.78

21.8 PROCESS PLANT OPERATING COST ESTIMATE

The process plant operating cost estimate, was calculated based on material quantities, unit costs supplied from existing operations or derived from various external sources, and testwork data available at the time of writing including: • Experience from similar projects • Quotations for supply of goods and services.

The process plant operating cost estimate was developed with input from vendors for the general plant and is a build-up based on the following major items: • Fuel and Miscellaneous • Process plant labour (including Port operations) • Maintenance materials • Reagents • Power • Crushing and grinding consumables.

Unit operating costs were developed to reflect the full design throughput operating conditions at 91.3% availability. The overall accuracy of the Process Plant operating cost estimate is ± 25% and contingency elements are applied. The process plant operating costs are summarised in Table 21-16.

CZH-003 Page 177

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-16 PROCESS PLANT OPERATING COST ESTIMATE

LOM Average Annual LOM Average Area Cost US$/t Milled 1,000 US$

Power 53,169 3.54

Labour 3,024 0.20

Reagents 4,741 0.32

Crushing and Grinding Consumables 21,205 1.41

Maintenance Materials 4,796 0.32

Laboratory 150 0.01

Mobile Equipment and Miscellaneous 990 0.07

Total 88,077 5.87

The average LOM annual Process Plant Operating cost breakdown is presented in Table 21-17 below.

TABLE 21-17 PROCESS PLANT OPERATING COST BREAKDOWN

Annual US$/Ton Unit Cost Annual Cost % of Cost Item Units Consumption Ore USD USD Total tonnes Milled UTILITIES Power kWh 0.13 4,430,760 53,169,124 3.54 60.37% Water m3 UTILITIES TOTAL 4,430,760 53,169,124 3.54 60.37% LABOUR Process and Metallurgy 2,060,886 0.14 2.34% Process Engineering Services 964,064 0.06 1.09% LABOUR TOTAL 3,024,950 0.20 3.43% REAGENTS Lime t 0.17 7,500 1,275,000 0.09 1.45% Collector - PAX t 1.60 225 360,000 0.02 0.41% Collector - A238 t 3.85 150 577,500 0.04 0.66% Frother - OreprepX-133 t 3.35 300 1,005,000 0.07 1.14% Flocculant - Cu Concentrate t 3.36 3 11,743 0.00 0.01% Flocculant - Tails t 3.36 450 1,512,000 0.10 1.72% REAGENTS TOTAL 4,741,243 0.32 5.38% CONSUMABLES Crushers Set 90,000 472,449 0.03 0.54% SAG Mill Liners Set 1,146,662 2,452,464 0.16 2.78%

CZH-003 Page 178

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-17 PROCESS PLANT OPERATING COST BREAKDOWN

Annual US$/Ton Unit Cost Annual Cost % of Cost Item Units Consumption Ore USD USD Total tonnes Milled Ball Mill Liners Set 800,000 1,280,000 0.09 1.45%

Regrind Mill Liners (Cu & Fe3O4) Set 825,000 878,274 0.06 1.00% Pumping & Classification Set 363,000 726,000 0.05 0.82% Reline Contractors Set 612,200 1,224,400 0.08 1.39% SAG Mill Media 125 mm t 1.23 3,900 4,797,000 0.32 5.45% Ball Mill Media 80 mm t 1.23 6,000 7,380,000 0.49 8.38% Regrind Mill 2mm t 8.63 113 1,981,274 0.13 2.25% Lime Mill Media 50 mm t 0.93 15 13,950 0.00 0.02% CONSUMABLES TOTAL 21,205,810 1.41 24.08% MAINTENANCE Crushing and Grinding 3,361,186 0.22 3.82% Copper Flotation and Regrind 592,190 0.04 0.67% Magnetite Recovery 267,191 0.02 0.30% Concentrate Dewatering 317,004 0.02 0.36% Tails Thickening and Disposal 144,162 0.01 0.16% Raw and Portable Water 43,487 0.00 0.05% Reagents & Utilities 70,933 0.00 0.08% MAINTENANCE TOTAL 4,796,154 0.22 5.45% LABORATORY TOTAL 150,000 0.01 0.17% MOBILE VEHICLES AND MISCELLANEOUS 990,000 0.07 1.12%

TOTAL 88,077,281 5.87

The operating cost estimate has been developed from a number of sources. Cost determinations have been based on fixed and variable components relating to ore throughput and ore characteristics. The sources of data are detailed in Table 21-18.

TABLE 21-18 PLANT OPERATING COST SOURCE DATA

Cost Centre Source of Cost Data Power Consumption from mechanical equipment list load estimate and power cost rates as advised by CZH. Labour Manning schedules based upon CZH model. Philippine and expatriate rates as developed by CZH. Reagents Consumptions from testwork and unit prices from supplier quotes. Consumables Liner consumptions calculated from testwork Bond Abrasion Index results. Other consumables obtained from similar operations. Unit cost obtained from various supplier quotes. Maintenance Materials Predicted from unit costs for similar scale operations.

CZH-003 Page 179

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-18 PLANT OPERATING COST SOURCE DATA

Cost Centre Source of Cost Data Laboratory Predicted from unit costs for similar scale operations. Mobile Vehicles Vehicle schedules based upon CZH model. Rates as supplied by CZH.

21.9 INFRASTRUCTURE OPERATING COST ESTIMATE

The infrastructure operating cost estimate, include the costs to operate the TSF, water storage dam and water management systems, was developed by GHD and based on the Taysan Base Assumptions provided by CZH.

The infrastructure operating cost estimate was developed by GHD and is a build-up based on the following major areas: • On-site and process plant supporting infrastructure • Tailings storage facility • Water storage facility and water management systems • Access roads The key operating cost for the access roads and haul roads is the regular and unforecast maintenance of roads due to adverse weather and routine operation of vehicles on these roads • Port The operating costs developed by GHD for the Port were applied to the actual tonnages of concentrates estimated in the latest schedule of quantities for the PFS • Electrical infrastructure • Other items.

Unit operating costs were developed to reflect the full design throughput operating conditions at 91.3% availability. A summary of infrastructure operating costs is presented in Table 21-19.

TABLE 21-19 INFRASTRUCTURE OPERATING COST ESTIMATE

LOM Average Annual LOM Average Area Cost 1,000 US$ US$/t Milled

Road Maintenance 598.0 0.04

Tailings Storage Facility 1,172.2 0.08

Port Operations Costs 1,072.0 0.07

Infrastructure (village, telecommunications, fuel depot) 539.3 0.04

Transmission Line Maintenance (Batangas/Mine 69kV) 175.0 0.01

Water pumping, decant water, maintenance 775. 0 0.05

Total 4,331.5 0.29

CZH-003 Page 180

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

21.9.1 Infrastructure Operating Cost Estimate Basis

The Taysan Base Assumptions provided by CDC are used as the basis for operating and maintenance estimates.

The following assumptions have been applied in developing the operating cost estimate: • Exchange Rate of 1 USD = 43 PHP; • Project fuel cost of 1.00 USD/L; • Power costs of USD 0.1317/kWh (except for the Batangas Wharf where a rate of 0.1158 USD/kWh was used); • Power costs are based on the US$0.128/ kWh plus the cost of transmission line losses as provided by GHD. The overall cost is based on the CZH assumption that the mine owner will be able to own and operate a 69kV transmission line. • Consumables for diesel generators include filters, oil and diesel fuel base on a 4-hour operation per month; • Electrical consumption for road and area lighting are not included; • Operating costs for telecommunications have been assumed to 5% of capital cost; • Maintenance cost for the fuel depot has been assumed to be 10% of the capital cost.

21.9.2 Exclusions from the Operating Cost Estimate Summary

The following costs are specifically excluded from the operating estimate: • Mobile Plant capital cost (costed by others) for roads only; • Laboratory tests; • Contingency; • Depreciation and accounting effects; • Replacement capital • Performance Bond and any other Guarantees; • Insurances; • Taxes such as GST and withholding tax, VAT and levies; • Royalties and duties; • Statutory charges, licences and approvals; • Escalation; • Provision for exchange rate fluctuations; • Allowance for market conditions leading to increased rates for or shortages of materials, labour or equipment.

21.10 GENERAL AND ADMINISTRATION OPERATING COST ESTIMATE

The Taysan Project General and Administration (G & A) operating costs in any given year are presented in this section. The estimates provided are based on a 15 Mt per annum processing facility and were compiled to reflect current pricing scales. Any and all goods and services that could be sourced locally were and the estimates reflect a Filipino operating environment.

CZH-003 Page 181

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The estimate for General and Administration operating costs can be broken down into the following items as provided in Table 21-20 below. Note that these operating costs are fixed costs. The unit operating rates are based on a 15 Mtpa throughput rate only. The figures have been rounded to the nearest US$’000.

TABLE 21-20 SUMMARY OF GENERAL AND ADMINISTRATION COSTS – TAYSAN COPPER PROJECT

Yearly Estimate Unit Rates Type Item 1,000 US$ (US$/t ore processed)

Salaries/Wages/On Costs 3,497 0.23 Fixed Cost

Offices/ Equipment 764 0.05 Fixed Cost

Insurances / Financial / Commercial 1,160 0.08 Fixed Cost

Community Affairs Costs/ Grants/ Projects 1,400 0.09 Fixed Cost

Mine Tenement Holding Costs 181 0.01 Fixed Cost

Security 45 0 Fixed Cost

Environment /OH&S 445 0.03 Fixed Cost

Administration Mobile Equipment 804 0.05 Fixed Cost

Total 8,296 $0.55 Fixed Cost

21.11 METAL PAYMENT TERMS, PRECIOUS METAL CREDITS AND TREATMENT AND REFINING CHARGES

21.11.1 Copper Payment Terms and Treatment and Refining Charges

The copper concentrate is subject to Treatment and Refining charges (TC/RC). These charges have been based on quoted public information by UBS Investment Research (8th Dec 2011) and are set at US$50/dmt concentrate and US$0.05/lb payable copper. The concentrate is also subject to a 1% concentrate grade deduction which gives rise to an overall 95.9% payability factor for the life of mine.

Gold and silver each have deductions with gold having a minimum 1 g/t grade reduction on the contained gold grade in the concentrate and silver has a 30g/t deduction off the silver grade in the concentrate (Wilson, P.C. 1993). This results in payability factors of 85.6% and 33.2% respectively. Gold and silver also have refining charges of US$6.00/tr oz and US$0.45/tr oz respectively.

CZH-003 Page 182

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

TABLE 21-21 COPPER CONCENTRATE TC/RCS AND METAL PAYABILITY FACTORS

Copper Concentrate and Metal Terms Amount Comment AMEC have approved the use of Moisture in concentrate - Copper concentrates (%) 9 9% moisture. Design basis 10%. Cu in concentrate (%) 24 Variable based on head grade

Copper Payment (% contained metal) 1.0 1 % deduction on the con grade

Copper Payable Metal (% contained metal) 95.9 From Financial model

Gold in concentrate (g/t) 7.2 From Financial model Gold Payment (% contained metal) - based on a 1 g/t deduction on the concentrate 1.00 minimum deduction (g/t) grade Gold Payable Metal (% contained metal) 85.6 From Financial model

Silver in concentrate (average) (g/t) 48 From Financial model Silver Payment (% contained metal) - based on a 30.00 30 g/t deduction on the con grade. minimum deduction (g/t) Silver Payable Metal (% contained metal) 33.2 From Financial model

Copper Treatment and Refining Charges

Copper treatment charge (US$/dmt concentrate) 50 UBS Research, Dec. 2011

Copper refining charge US$/lb payable Cu 0.05 UBS Research, Dec. 2011 Copper - price participation (10% of Cu price above) Exclude price participation. Abandoned 0 US$/lb payable Cu from 2007. Gold refining charge US$/tr.oz payable Au 6.00 in addition to the 1g/t deduction

Silver refining charge US$/tr.oz payable Ag 0.45 in addition to the 30g/t deduction

21.11.2 Magnetite Payment Terms

The magnetite concentrate is assumed to have payments based on Free on Board payments.

21.12 TRUCKING AND SHIPPING CONCENTRATE COSTS

The mine will produce on average 146,000 dry metric tonne (“dmt”) tonnes per annum (161,000 wet metric tonne (“wmt”)) of copper concentrate with a high of 209,000 dmt per annum and a low of 107,000 dmt per annum. The mine will produce on average 480,000 dry metric tonne (“dmt”) tonnes per annum (527,000 wmt) of magnetite concentrate with a high of 601,000 dmt per annum and a low of 378,000 dmt per annum.

The trucking of magnetite and copper concentrates is based on an estimate of costs provided by Aboitiz and a rate of US$0.25/tonne/km is a suitable rate to apply and the US$5.98/wmt (wet metric tonne) concentrate for trucking is based on this unit rate.

The US$17/wmt shipping cost for copper concentrates is a quotation from Aboitiz and assumes that copper concentrates will be shipped to ports in China or Japan.

CZH-003 Page 183

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

There are no shipping costs with magnetite payments based on a Free On Board basis at the Batangas Port.

Marketing costs for copper and magnetite have been included in the General and Administration operating cost charges where salaries for a marketing department are included.

21.13 ROYALTY

A 1.5% royalty is payable to Taysan Copper Corporation (TCC).

21.14 SUMMARY OF OPERATING COSTS

This report summarises the operating cost estimates for the Taysan Project. The operating cost estimates associated with the various facilities have been developed by the following organisations: • Mining – IMC • Process Plant – AMEC. • Tailing Storage Facility and Water Infrastructure – GHD • General and Administration – CZH

The operating cost estimates were developed based on materials cost and unit rates, supplier quotations from various external sources as well as historical rates from similar projects.

The Taysan Project Operating Cost estimate is summarised in Table 21-22.

TABLE 21-22 OPERATING COST ESTIMATE SUMMARY

Area LOM Average Annual Cost 1000 US$ LOM Average US$/t Ore Milled

Mining 52 200 3.48

Process plant 88 077 5.87

Infrastructure 4 332 0.29

General and administration 8 296 0.55

Total 152 905 10.19

The operating cost estimate for the Taysan Project has a level of accuracy of ±25% and is expressed in US dollars.

All relevant Tailings Storage Facility (TSF) operating costs are included in the Process Plant and Associated Infrastructure area, except the costs for future TSF lifts, which are included in the sustaining capital estimate above.

On a LOM Project basis, the average unit operating cost for the Taysan Project is estimated to be US$10.19 per tonne of ore milled.

CZH-003 Page 184

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

22 ECONOMIC ANALYSIS

22.1 VALUATION METHODOLOGY

The valuation technique used is a discounted cash flow (“DCF”) financial model based on the resource estimate as contained in the NI43-101 report dated 10 April 2012 and entitled “January 2012 Update of the Mineral Resource Estimate for the Taysan Project” prepared by Mining Associates Pty. Ltd.

The DCF analysis is based on a 10% discount rate and pre-tax and post-tax leveraged project cash flows.

22.2 KEY ASSUMPTIONS

All capital costs and operating costs have been identified in the previous sections.

The key assumptions used by Crazy Horse Resources in the financial model are as follows: • The Project shall operate under the fiscal regime of a Financial or Technical Assistance Agreement (FTAA) as set out in the Administrative Order No. 2007-12 of the Department of Environment and Natural Resources (DENR) in the Philippines (it should be noted that a FTAA has been applied for in respect of the Taysan Project; however, it has not yet been granted); • The Project shall register with the Board of Investments (BOI) and avail of incentives under Executive Order No. 226 including an income tax holiday for a period of four (4) years from the commencement of commercial production and shall apply for and be granted by the Bureau of Internal Revenue (BIR) VAT-zero-rating on all its local purchases of goods and services starting in the third year of operation; • Recovery of 95% of value-added taxes (VAT) paid at a rate of 12% on certain capital costs and operating costs occurs two years after the year incurred in the form of cash refunds; • Excise tax payable to the government of Philippines of 2% of net smelter returns; and • Royalty payable to TCC of 1.5% of net smelter returns post payment of the excise tax.

In addition, the financial model assumes that 65% of initial capital costs are financed with debt and the balance with equity. The debt is assumed to have an interest cost of 10% per annum and 1% upfront financing fees. A one-year grace period is assumed and thereafter principal repayment has been determined so that the debt service coverage ratio is at least 1.6x in any given year, which repays the debt in approximately three years after the grace period in the Base Case.

22.3 COPPER PRICE

As at 25 April 2012, the London Metals Exchange (LME) cash copper price was US$8,285/tonne, or US$3.76/lb Cu. The project valuation has assumed a copper price of US$3.00/lb Cu (or US$6,614/t Cu).

22.4 PROJECT UPSIDE POTENTIAL

The Project upside potential is discussed in section 25. No value is placed on the upside potential of exploration. However, future studies will consider this item in work programmes.

CZH-003 Page 185

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

22.5 RESULTS OF VALUATION

This PFS indicates that the Taysan Project has a Net Present Value (“NPV”) at a 10% discount rate of US$512 million for the Base Case of US$3/lb Cu, US$1,000/oz Au, US$26/oz Ag and US$100/tonne of Magnetite. The internal rate of return (“IRR”) is 30.4% for this Base Case.

The Taysan Project remains sensitive to copper prices as shown in Table 22-1.

TABLE 22-1 RESULTS OF VALUATION OF TAYSAN PROJECT Item April, 2012 Copper Price $/lb $2.50 $3.00 $4.00 Gold Price $/oz $850 $1,000 $1,400 Silver Price $/oz $24 $26 $28 Magnetite Price $/tonne $80 $100 $110 Discount Rate % 10% 10% 10% Project Pre-tax NPV $M $245 $695 $1,506 Project Pre-tax IRR % 20.1% 33.5% 53.3% Project Post-tax NPV $M $185 $512 $978 Project Post-tax IRR % 18.6% 30.4% 44.2% Project Post-finance* NPV $M $175 $503 $969 Project Post-finance* IRR % 26.6% 49.2% 77.6%

** Calculated on net cash flow after taking into account debt financing at a debt-to-equity ratio of 65:35.

These numbers reflect a fiscal regime under a Financial or Technical Assistance Agreement (FTAA). These numbers have not assumed that the processing plant will receive a Philippines Economic Zone Authority (PEZA) certification as was assumed in the base case in October 2011.

The planned payable production of copper, gold, silver and magnetite (net of deductions) over the twenty- four year mine life is as shown in Table 22-2.

TABLE 22-2 LIFE OF MINE PRODUCTION

Cu Equivalent Cu Equivalent Production Avg/Year LOM Total LOM (Mlbs) (tonnes) Copper (Mlbs) 76 1,822 1,822 826,356 Gold ('000 oz) 30 720 240 108,798 Silver ('000 oz) 93 2,242 19 8,815 Magnetite ('000 t) 476 11,416 381 172,612 Total Copper Equivalent 2,462 1,116,581

The total average cash operating cost per pound of copper equivalent is US$1.54/lb over the life of the project and averages US$1.05/lb during the first five years of operations. The total operating cost

CZH-003 Page 186

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

(including transportation, treatment and refining charges) per pound of copper equivalent is US$1.68/lb over the life of the project and averages US$1.18/lb during the first five years of operations.

22.6 SENSITIVITY ANALYSIS

A sensitivity analysis was undertaken on the post-tax cash flows of the Taysan-an Project. Figure 22-2 and Figure 22-1 show that the post-tax NPV (at 10%) and IRR of the Taysan Project are sensitive to changes in revenue, and less so to operating and capital costs.

Taysan Project: Post-Tax NPV (10%) Sensitivity

$700

$600

$500

$400 tax NPV at 10% (US$M) -

Post $300 -10% -5% 0% +5% +10%

Percentage Change

Revenue Opex Capex

FIGURE 22-1 SENSITIVITY ANALYSIS ON THE POST-TAX OF THE PROJECT

CZH-003 Page 187

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Taysan Project: Post-Tax IRR Sensitivity

40%

36%

32%

28%

24% (%) Return of Rate Internal 20% -10% -5% 0% +5% +10%

Percentage Change

Revenue Opex Capex

FIGURE 22-2 SENSITIVITY ANALYSIS ON THE POST-TAX IRR OF THE PROJECT

CZH-003 Page 188

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

23 ADJACENT PROPERTIES Please refer to, “A Technical Review of Exploration and Resource Estimates of the Taysan Project in Batangas Province, Philippines for Taysan Copper Corporation and Crazy Horse Resources Inc., June 2010”, Section 14. This section details the copper-gold porphyry deposits located in the regional vicinity of the Taysan Copper-Gold Deposit. In terms of this PFS the adjacent properties have an impact in terms of areas required to cover the TSF and water dams and this has been highlighted in the tenement section of this report. An exploration allowance of US$1 million has been estimated to carry out sterilisation drilling in these areas. Land acquisition costs have also been included to cover these areas not controlled by CZH.

CZH-003 Page 189

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

24 OTHER RELEVANT DATA AND INFORMATION

The following section has been summarized from the PFS Report compiled by AMEC (May 2012).

24.1 PROJECT IMPLEMENTATION SCHEDULE

A project implementation schedule has been developed showing the path forward from the PFS through to handover to operations. A nine month Feasibility Study period has been allowed for in consultation with CZH, followed by approximately two years EPCM execution of the project.

The project schedule shows the total project duration of approximately 39 months (including detail design, procurement, construction and commissioning). The project implementation schedule Key milestones are summarised: • Award Consultancy Services Feasibility Study – Month 1 • Complete Feasibility Study Report – Month 9 • Award Detailed Design Contract – Month 14 • Site Concrete Commence – Month 26 • Finish Detailed Design – Month 31 • Commissioning Starts – Month 36 • Practical Completion – Month 39.

24.2 PROJECT OPERATIONAL PLAN

The Operations Plan reflects the broad principles on which the plant will operate. These relate to mining, maintenance, supply strategies, transport of concentrates, manning requirements and employment philosophy.

Site operations are generally run by the Owner’s staff. Mining will be done by an Owner operated mining fleet and the plant operated and maintained by the Owner. Although the plant would have fully equipped maintenance workshops, where possible, maintenance will be performed off-site by suitable contractor’s e.g. motor re-winds. The maintenance strategy reflects capital cost reduction measures adopted in the PFS; specifically these are based around a compact processing plant utilising commonality of spares approach and the use of mobile cranes in place of gantry cranes for maintenance throughout the concentrator.

In general it is considered that better efficiencies are obtained by outsourcing services wherever possible. In particular this will apply to supply contracts for bulk commodities such as lime. Transport of concentrates will be contracted to a freight company that would supply and operate a trucking fleet. Storage and ship loading of copper and magnetite concentrates will be performed by the owner.

Manning levels are determined by the functional requirements of the operation. Additional positions for site labour will be filled to satisfy Filipino labour laws and local agreements with the community. The manning structure is made up of management and administration staff, technical staff, operators, trades and general labour. The labour numbers will be adjusted to satisfy local requirements, but it is estimated that total numbers employed on the site will approach 900.

CZH-003 Page 190

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

The employment philosophy is based on preferential hire of local people to fill general labour and operating positions. Where possible skilled labour will be employed from local villages and surrounding townships. Preference will be given to Filipino Nationals to fill managerial and technical positions although it is anticipated that some of these may have to be filled by expatriate staff initially.

Training is considered to be a key activity before plant start up with the need to prepare the local workforce in areas of plant operation, maintenance, operating procedures and workplace health and safety. Where possible contract services will be used to develop training materials and deliver training.

Community relations and land management are considered to be highly significant to the operation of the site. Crazy Horse Resources Incorporated has provided input to this area of the PFS and has had an active development plan in place since commencement of the project. Community relations are taken into account in the employment strategy, which aims to utilise and train local people wherever practical and to minimise negative impacts from bringing people outside the local area.

24.3 HEALTH SAFETY ENVIRONMENT AND COMMUNITY

The Project goal is to ensure Safety performance is paramount in the project. The Project is committed to achieving the highest attainable standards in managing both the occupational and natural environments. The management system will place high priority on workforce consultation and involvement, hazard identification and control, community consultation and the safeguarding of the environment to eliminate work place incidents.

Plans and procedures will be progressively developed to ensure the impact of the execution of the Taysan Project on the Community is as low as reasonably possible. Community risk mitigation strategies will be developed from the Taysan Project’s risk management process.

CZH-003 Page 191

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

25 INTERPRETATION AND CONCLUSIONS

The following section has been summarized from the PFS Report compiled by AMEC (May 2012).

25.1 RISKS AND UNCERTAINTIES

The most significant risks to delivering the project to the budget and achieving the stated viability are summarised as follows; • Budget Over-Run – The primary contributors to budget over-run are poor management resulting in scope creep and schedule prolongation. Any over-run will ultimately affect the overall project viability. • Power Supply – The power supply tariffs to the site requires further negotiation between CZH and the supplier to agree a suitable rate for supply. • Power Price – The actual price of electricity paid by CZH during operations will be subject to market conditions, hence future competition for power may result in the price of electricity being higher that the current assumption within the PFS. • Implementation Timing – During the Bankable phase a study should be undertake to ascertain other potential projects in the area which could impact on the implementation from a resource and supply perspective. • Escalation – Should commodity prices increase and market competition intensify then it is likely that the project will be exposed to positive escalation. • Political – The upcoming elections could coincide with the execution of the project, this has potential to affect both the project delivery and the project outcome through social conflict and civil unrest. • Pit Geotechnical – Inappropriate geotechnical parameters may incur additional operational costs if the pit slope stability adopted proves to be poorer than anticipated. • CZH as Developer/Operator – The implementation strategy requires CZH undertake the overall project management role for the execution phase of the project, for constructing earthworks using its construction fleet, and the owner-operator role for the operations phase of the project. Significant project and construction management capabilities will be required by the Owner for this and particularly to ensure the timely completion of the bulk earthworks. This approach risks causing delay to the project schedule and prolongation claims from other contractors with liability falling on CZH. Cost increases arising from the need to employ additional staff to provide project management are a further risk. • Failure to Acquire Land Early -To avoid delays to the construction schedule the purchase of community lands and the relocation action plan must be implemented at the beginning of the engineering and construction stage.. If these activities are delayed then there is a high likelihood that the construction schedule will not be met. • Metal Price – Factors beyond the control of CZH may affect the marketability of any substances discovered. Mineral prices have fluctuated widely, particularly in recent years. The marketability of minerals is also affected by numerous other factors beyond the control of CZH, including government regulations relating to price, royalties, allowable production and importing and exporting of minerals, the effect of which cannot accurately be predicted. • Development Delays – Risks related to development, construction and mining operations could delay development of properties, delay production, increase production costs or result in liability to the project owner. .

CZH-003 Page 192

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• Schedule Delays - There are significant risks that the commencement and completion of construction of a mine on the Taysan Project could be delayed due to circumstances beyond the Corporation’s control. Such risks include delays in acquiring all of the necessary surface rights, delays in obtaining environmental and construction authorizations and permits, delays in finalizing all necessary detailed engineering and a definitive construction contract, as well as unforeseen difficulties encountered during the construction process. • Production Hazards – The business of mining is subject to a variety of risks. These include cave- ins and other accidents, flooding, environmental hazards, the discharge of toxic chemicals and other hazards. Such occurrences may delay production, increase production costs or result in liability. The mine owner may become subject to liability for hazards which it cannot insure against or which it may elect not to insure against because of premium costs or other reasons. In particular, the mine owner is subject to the risks of environmental liability or earthquake damage. • Environmental – Legislative Risk - The current or future operations of CZH, including development activities and commencement of production on its properties, require permits from various foreign, federal, state and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. • Foreign County Risks – Political conditions in the Philippines may adversely impact CZH’s financial condition and results of operation. Mineral exploration and mining activities in Philippines may be affected in varying degrees by political conditions and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond CZH’s control and may adversely affect its financial condition and results of operation. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. • Land Agreements – Surface access rights to the Taysan Copper Project may be impaired. The acquisition of surface access rights is a detailed and time-consuming process. Such rights may be subject to prior unregistered agreements or interests or to other claims or interests that may be material and adverse to CZH. Enforcing CZH’s rights to such surface access may be costly and time-consuming. CZH may be unable to enforce its agreements, to secure the renewal of its surface leases, or to purchase the properties from the local communities, and may therefore be unable to carry out planned mining activities despite having acquired the necessary minerals rights. The land administration system in the surrounding communities is consistent with the community system of land possession, under which communities have the right to decide upon their territories. These decisions must be made and undertaken by consensus, through a General Assembly of the community. There can be no assurance that decisions of the General Assemblies will be favourable to CZH. • Relocation of Families – Some families will be required to relocate. As a result of the project development, CZH is currently preparing a Resettlement Action Plan (RAP).

CZH-003 Page 193

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

25.2 UPSIDE POTENTIAL

25.2.1 Tenement Exploration Potential

Taysan, as a typical porphyry copper-gold project, is hosted by several intrusive bodies with a high grade core. Geological mapping and ground geophysics (magnetics and induced polarisation surveys) indicate that exploration potential exists in the Company’s land holdings to discover new deposits.

The copper mineralisation is controlled by fault zones dipping between 30 and 60 degrees that crosscut the intrusive bodies with potential to expand resources at depth along this structural zone.

25.2.2 Mineral Resource and Mineral Reserve Potential

The large Measured and Indicated Mineral Resource provides the basis for 24 year Stage 1 of the project. The Stage 2 expansion can potentially double the throughput rate or extend the mine life to up to 40 years. The existing 24 year project can be optimized by drilling out the Inferred Mineral Resources that are located in and around the margins of the ultimate 24 year pit shell and the longer term expansion will require a drill out of the Inferred Mineral Resources and mineralised zones at depth.

25.2.3 Upside Potential Associated with Inferred Mineral Resources in the Current 24 Year Pit

Some of the resources in the overall pit are in the Inferred category. A minimal drilling program may convert this material to Indicated Mineral Resources, and thus be included in the project Mineral Reserves. With the potential conversion of waste to Mineral Reserves there would be a decrease in the overall strip ratio, thereby potentially lowering capital and operating costs.

25.2.4 Inferred Mineral Resources at Depth

Inferred Mineral Resources are present at depth with east dipping mineralised zones that continue at depth below the Inferred Mineral Resources. The bulk of the 509 Mt Inferred Mineral Resource is contained in the mineralised zones at depth. There is potential to drill these zones and the surrounding mineralised zones out to Indicated Mineral Resource status and also convert these to Mineral Reserves. This potential can be realised by improving copper prices as well as expanding production through to possibly twice the throughput, thereby lowering unit operating rates. Lower mining unit rates can be assessed by considering a larger, more cost effective mining fleet.

25.2.5 Opportunity for Concentrate Recovery Improvements

There is potential for further optimisation of the process plant primary grind size to increase recovery as well as use of flash flotation to increase recovery. Recovery of this shallow ore currently classified as waste material either by utilising oxide specific collectors or other means of recovery, for example heap leaching has the potential to improve the overall project metal yield.

25.2.6 Upside Potential for Downstream Processing of Magnetite Concentrate

The magnetite concentrate produced is of a quality which potentially allows the product to be upgraded to either a finer grained product to meet specialist markets or for pelletizing to increase the product

CZH-003 Page 194

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 marketability and value. Potential to claim taxation benefits through downstream processing activities also has the potential for improved commercial realisation.

CZH-003 Page 195

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

26 RECOMMENDATIONS

The following section has been summarized from the PFS Report compiled by AMEC (May 2012).

26.1 RESOURCE

Further exploration should be carried out on the exploration tenements and exploration tenement application areas once they are granted.

A drilling programme should be considered during future studies to upgrade all Inferred Mineral Resources within and around the ultimate 24 year pit shell, including the potential area below -300 m RL where the final pit shell can potentially be mined down to another 50 m plus depth.

Future studies should assess the Mineral Resource potential at depth.

26.2 GEOTECHNICAL STUDIES

• Detailed assessment of groundwater and the dewatering strategy is required. In-pit dewatering may also prove viable with assessment. • Structural evaluation should continue as the understanding of the project develops. This interpretation can probably be most readily achieved through geological interpretation against additional specific geotechnical information. • Close geological mapping and survey monitoring will be required during excavation to confirm structural controlled stability, and the deformation characteristics of the overall rockmass. • Engineering evaluation of stability using kinematic and FEM methods should be implemented early in the pit life, and all models should be calibrated against the geological mapping and survey monitoring for deformation.

26.3 MINING

During the Taysan PFS, a number of observations have been made by IMC that should be revisited, reviewed or investigated further: 1. Further drilling should focus on the Inferred Resources immediately below the PFS pit floor (i.e. between the -300 mRL and the -450 mRL. There are also Inferred Resources inside the Stage 9 pit design which should be drilled further. 2. A review of the magnetite market should be conducted to better assess the FOB value of the magnetite concentrate. 3. A significant amount (approx. 20 Mt at 0.32% Cu) of mineralised oxide material has been treated as waste in the PFS due to poor flotation recoveries. A stockpiling strategy and eventual leaching option could be considered in future studies. 4. There are currently ‘gaps’ in the CZH tenement holdings which impacts the plant and TSF sites. These ‘gaps’ are covered by the current FTAA application and a plan is in place to gain control of these areas – this item is critical to the development of the Taysan project and should be prioritised. 5. More geotechnical information relating to road construction on Tuff is required to more accurately estimate the road alignment and construction costs.

CZH-003 Page 196

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

6. Drill and Blast assumptions should be reviewed with an aim to better estimate the proportions of fresh material requiring drilling and blasting. 7. A long term waste dumping and AMD strategy needs to be integrated with the mining study. If neutralisation and encapsulation is required then this needs to form part of the waste dump construction and cost estimation schedule. 8. Little information was available during the PFS covering groundwater and other inflows into the Taysan pit during the life of the project. A more thorough understanding of the pit inflow quantities will need to be developed during the BFS.

26.4 PROCESS PLANT

Recommended further metallurgical testwork to be completed on the Taysan resource includes: • Magnetite variability testwork. • Further investigation of flash flotation. • Unconfined Compressive Strength and Crusher Work Index testwork. • Copper concentrate settling and filtration testwork. • Magnetite concentrate settling and filtration testwork. • Tails high rate settling testwork.

Recovery of this shallow ore currently classified as waste material should be evaluated.

Further studies should consider: • Detailed excavation benching to provide gravity falls in process circuit and reduce / eliminate raking flotation substructure. • Reducing general bulk excavation at stockpile by locating only its vault below excavated ground level. • Minimising the overall height of structures and their supported masses to reduce incurred seismic loadings through detailed design of equipment and supporting structures. • Costing retained earth walls instead of cantilever concrete retaining walls at ROM pad and tailings thickener underflow pumps. • Careful detailed design of stockpile vault and thickener underflow access tunnel to minimise height and extent of concrete tunnel and wing walls.

26.5 INFRASTRUCTURE

While the level of detail provided in this PFS Report is appropriate for a schematic design, the following will need to be conducted in the BFS phase of the project. • Topographic Survey and Coordination with Governing Agency. • Detailed hydraulic Design Calculations of the utility networks such as storm water, sewerage, and water distribution system will be carried out in the BFS phase of the project. • Detailed specifications for the STP and treated effluent disposal from the STP are to be developed in consultation with package plant suppliers and STP designers. • The location for the workshop, fuel depot, core storage and hazardous material storage needs to be confirmed in the BFS phase of the project. • All road Design Criteria should be reviewed to decrease capital costs. • A comprehensive geotechnical investigation is required on the final road alignments.

CZH-003 Page 197

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

• A ground strip topographic survey of existing roads proposed for upgrade and proposed new roads should be conducted. • Road construction bench marks will also need to be established for construction. • A detailed road alignment survey should be conducted to finalise the designs with the proposed roads pegged in the field which will also allow confirmation of drainage requirements. • For the TSF design, once process pilot plant trials are undertaken the following laboratory tests on representative tailings samples are proposed: − Column Settling Tests − Particle Size Distribution (Hydrometer) − Rheology (Yield Stress, Coefficient of Rigidity) − Atterberg Limits − Average tailings Particle Specific Gravity. • On receipt of laboratory test results, a tailings discharge model should be developed in a software package such as RiftTD to optimise the TSF configuration. • Progressing to the next phase of works would require both additional data collection and updating of the water balance assessment. • Continuous water balance assessment revision as more detailed data becomes available. • Installation and monitoring of both stream gauges and on site weather stations is recommended. • The following actions and information will be required during the BFS phase of the project for the water supply design: - Confirmation for the suitability of WSD site and review of the dam alignment - Geotechnical investigation o Minimum of three bore holes at each site o Outcrop mapping to confirm foundation conditions and depth of overburden - Stability assessment to confirm dam section - Confirm foundation treatment - Identify local source of borrow material (aggregate, sand etc.) and undertake trial pits and laboratory testing to confirm availability and suitability - Desktop reservoir-rim landslide assessment.

26.6 OTHER ITEMS

It is recommended that studies are undertaken to consider the upgrading of the magnetite concentrate to specific value adding products, including evaluation of any potential taxation benefits as a consequence of downstream processing activities.

A detailed marketing study into magnetite is recommended to be conducted during the Feasibility Study stage.

A detailed land acquisition and compensation programme needs to be developed and completed during the next stage of the project.

CZH-003 Page 198

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

27 REFERENCES

Acharya, H. K. (1980). Seismic and Tsunamic risk in the Philippines. Proc. 7th World Conf. On Earthquake Engineering. AMEC Australia Pty Ltd., 2012. Taysan Copper Project PrefeasibilityStudy. Document No. 65012-00000- 23-002-001. May 2012. Prepared by G Binks. Banasihan, J. 2012. Water Supply. PFS Report for Taysan Copper-Gold Prefeasibility Study, Revision 3. Dated April 2012. GHD. Barrier, E., P. Huchon and M. Aurelio (1991). Philippine Fault: A key for Philippine Kinematics. Geology 19: 32-35. Barton, A. 2011. Revised Preliminary Economic Assessment for a 15 Million tonne per annum Mine, Taysan Copper Gold Project. NI43-101 Report prepared by Barton Metals Pty Ltd and dated 16/12/2011.

Barton, A. 2012. Revised Preliminary Economic Assessment for a 15 Million tonne per annum Mine with Higher Magnetite Recoveries. NI43-101 Report dated 28 February 2012 and prepared by Barton Metals Pty Ltd. Binks, G. and Taylor, I. 2011. Update of the Mineral Resource Estimate and Preliminary Economic Assessment for the Taysan Project, Batangas Province, Philippines, prepared by Mining Associates Pty. Ltd. and AMEC Minproc Ltd. and dated 10th October, 2011 (NI43-101 Report).. Binks, G. and Taylor, I. 2011. Mineral Resource Estimate and Preliminary Economic Assessment, Taysan Project, Batangas Province, Philippines, for Crazy Horse Resources, Inc., dated 11 March 2011 and authored by Mining Associates Pty Ltd, (11 March 2011 NI43-101 Report). Bird, P., (2003), An updated digital model of plate boundaries, Geochem. Geophys. Geosyst., 4(3), 1-52. Blyth, T. 2012. Tailings Storage Facility. Prefeasibility Study Report for the 15 Mtpa Taysan Prefeasibility Study, Revision 1, March 2012. GHD. Chiou, Brian S.-J. and Robert R. Youngs (2008). NGA Model for Average Horizontal Component of Peak Ground Motion and Response Spectra. PEER Report 2008/09, Pacific Engineering Research Center College of Engineering University of California, Berkeley. Cook, D.R., Heithersay, P.S., Wolfe, R., and Calderson, A.L., 1998. Australian and Western Pacific Porphyry Cu-Au Deposits, AGSO Journal of Geology & Geophysics, 17 (4), pp.97-104. Cox, D.M., April 2010, Mineral Resource Estimate Upgrade on the Kay Tanda Project, Luzon, Philippines, NI43-101 Technical Report for Mindoro Resources Limited. Cox, D.P., 1986a, Descriptive model of porphyry Cu, in Cox, D.P. and Singer, D.A., eds., Mineral deposit models: U.S. Geological Survey Bulletin 1693, p. 76. Department of Environment and Natural Resources of the Philippines, http://www.denr.gov.ph/ Dela Cruz, R. 2012. Access Roads and TSF Haul Roads, Schematic Design Report, Taysan Copper-Gold Prefeasibility Study (Revision 2), 23 April 2012. GHD. De los Santos, 1995 The Geology, Hydrothermal Alteration and Mineralisation of the Taysan Porphyry Copper Deposit (Batangas, Philippines) MSc. thesis University of Tsukuba Japan.

CZH-003 Page 199

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Ekstrom, G., and A.M., Dziewonski, (1988), Evidence of bias in estimations of earthquake size, Nature, 332, 319-323. Erceg, M., Papio, M., 30 June 1995, The Taysan Porphyry Copper and Gold Deposit, Philippines, Project Review 1995; Chase Minerals (Philippines) Corporation. Fukushima, Y. and T. Tanaka (1990). A new attenuation relationship for peak horizontal acceleration of strong earthquake ground motion in Japan. Bull Seis. Soc. Am. 80(4): 757–776. Gaia South, Inc. 2011. Environmental Baseline Report prepared for CZH. For the proposed Taysan Copper Project. Environmental Consultants. Manila. March 2011. Garwin, S., Hall, R., and Watanabe, Y., 2005, Tectonic Setting, Geology, and Gold and Copper Mineralization in Cenozoic Magmatic Arcs of Southeast Asia and the West Pacific, Economic Geology, 100th Anniversary Volume, pp.891-930. GHD, 2011, 15Mtpa Case Infrastructure and TSF. Taysan Copper Scoping Study for Crazy Horse Resources Inc. Document No. 60314-00000-000-000. 10 November, 2011. Gregor, N. J., W. J. Silva, I. G. Wong and R. R. Youngs (2002). Ground-Motion Attenuation Relationships for Cascadia Subduction Zone Megathrust Earthquakes Based on a Stochastic Finite-Fault Model. Bull. Seism. Soc. Am. 92: 1923-1932. Hanks, T. C. and Kanamori, H. (1979). A moment magnitude scale, Journal of Geophysical Research 84(B5), 2348–2350. Idriss, I. M. (2008). Empirical Model for Estimating the Average Horizontal Values of Pseudo-Absolute Spectral Accelerations Generated by Crustal Earthquakes. Vol. 1, http://peer.berkeley.edu/products/rep_nga_models.html. International Copper Study Group. Copper Market Forecast 2012-2013. Press Release. Date Issued: 30th April 2012. http://www.icsg.org/ Intertek 2010; Schedule of Services & Charges. www.intertek.com/minerals/sample-preparation Kitamoto, Dr. A., 2010, National Institute of Informatics, Japan, http://agora.ex.nii.ac.jp/~kitamoto/ Klapwijk, P. 2011. The Silver Market in 2011. The Silver Institute, New York, 16th November, 2011 GFMS. http://www.silverinstitute.org Knittel, U., M. J. Defant and I. Raczek (1988). Recent enrichment in the source region of arc magmas from Luzon Island, Philippines: Sr and Nd isotopic evidence. Geology 16: 73-76. Koenig, R. 2011. Magnetite recovery Concept Study. Taysan Copper-Gold Porphyry Project. January 2011. Koo, R., T. Mote, R. V. Manlapig and C. Zamora (2009). Probabilistic Seismic Hazard Assessment for Central Manila in Philippines. 2009 AEES Conference. Liang, J. 2012. Seismic Hazard Assessment. Peak Ground Acceleration Estimation. Prepared by J Liang for Crazy Horse Resources, Inc. for the Taysan Prefeasibility Study, GHD. Dated 30/5/2011. Leach, T. M., 1999, PACRIM, Evolution of Selected Porphyry Copper-Gold Systems in the Southwest Pacific Region and its Relevance to Exploration

CZH-003 Page 200

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Lerchs H. & Grossmann I.F., 1965 Optimum Design Of Open Pit Mines, Joint C.O.R.S. and O.R.S.A. Conference, Montreal, May 27-29, 1964, in Transactions 1965, C.I.M., pp.17-24. Mines and Geology Bureau of the Philippines, http://www.mgb.gov.ph/ Mondonedo, C. 2012. Water Balance. PFS Report for Taysan Copper-Gold Prefeasibility Study, Revision 0 Dated January 2012. GHD. Nagamune, T. (1972), Magnitudes estimated from body waves for great earthquakes,(in Japanese), Quart. J. Seism. 47, 1-8. Rangin, C., X. Le Pichon, S. Mazzotti, M. Pubellier, N. Chamot-Rooke, M. Aurelio, A. Walpersdorf, and R. Quebral, (1999), Plate convergence measured by GPS across the Sundaland/Philippine Sea plate deformed boundary: The Philippines and eastern Indonesia. Geophys. J. Int., 139, 296 –316. Razo, R. 2012. Power Supply Study, Report for Taysan Copper-(15Mtpa) Prefeasibility Study, March 2012. GHD. Richards, B. 2012. Port Facilities, Taysan Copper-Gold Prefeasibility Study (Revision 2), 23 April 2012. GHD. Rimando, R.E., Knuepfer, P.L.K., (2006). Neotectonics of the Marilina Valley fault system (MVFS) and tectonic framework of structures in northern and central Luzon, Philippines. Tectonophysics 415, 17–38. Sadigh, K., Chang, C.Y, Egan, J.A., Makdisi, F. and Youngs, R.R. (1997). Attenuation Relationships for Shallow Crustal Earthquakes Based on California Strong Motion Data. Seismological Research Letters, Volume 68,Number 1, January/February 1997. Sajona, F. G., R. Maury, H. Bellon, J. Cotten, M. Defant and M. Pubellier (1993). Initiation of subduction and the generation of slab melts in western and eastern Mindanao, the Philippines Geology 21: 1007-1010. Singer, D. A., Mosier, D.L., Cox, D.P., 1998, Descriptive Model of Porphyry Cu, Model 17, pubs.usgs.gov/bul/b1693/Md17.pdf Sinclair, W.D., 2007, Porphyry deposits, in Goodfellow, W.D., ed., Mineral Deposits of Canada: A Synthesis of Major Deposit-Types, District Metallogeny, the Evolution of Geological Provinces, and Exploration Methods: Geological Association of Canada, Mineral Deposits Division, Special Publication No. 5, p. 223-243. Sowerby, R., 2010, A Technical Review of Exploration and Resources Estimates of the Taysan Project, Batangas Province, Philippines. 04 June 2010. NI43-101 Report, Geosynthesis Pty Ltd. Su, S. S. (1988). Seismic Hazard Analysis for the Philippines. Natural Hazards 1: 27-44. Taylor, I. 2012. January 2012 Update of the Mineral Resource Estimate. Taysan Project, Batangas Province, Philippines, NI43-101 Report prepared by Mining Associates Pty Ltd. Document No: MA 1172-2- 2, Effective date 16 March 2012. Thenhaus, P. C., S. L. Hanson, S. T. Algermissen, B. C. Bartolome, M. L. P. Bautista, B. J. Punongbayan, A. R. Rasdas, T. E. Nillos and R. S. Punongbayan (1994). Estimates of the regional ground-motion hazard in the Philippines. Proc. National Conf. on Natural Disaster Mitigation, Quezon City, PHIVOLCS. Tiu, J. 2012. On site Infrastructure and Services, Taysan Copper-Gold Prefeasibility Study (Revision 2), Dated 23 April 2012. GHD.

CZH-003 Page 201

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

Torregosa, R. F., M. Sugito and N. Nojima (2001). Strong Motion Simulation for the Philippines Based on Seismic Hazard Assessment. Journal of Natural Disaster Science 23(1): 35-51. Virtue, R. 2012. Acid and Metalliferous Drainage. Prefeasibility Study Report for the 15 Mtpa Taysan Prefeasibility Study, Revision 0 January 2012. GHD. Willis, B. (1944). Philippine earthquake and structure. Bull. Seis. Soc. Am. 34(2): 69-81. Wilson, P,C. 1993. Copper. Revenue calculations and marketing. (with assistance from C. Chanroux) Pp337-339. Chapter 16. AusIMM. Cost Estimation Handbook for the Australian Mining Industry. Monograph 20. Wolf, J. A., Manuzon, M. S., A. F. Divis, A. F., 1978, The Taysan porphyry copper deposit, southern Luzon Island, Philippines (in Porphyry copper deposits of the southwestern Pacific islands and Australia), Economic Geology and the Bulletin of the Society of Economic Geologists (August 1978), 73(5):608-617 Wong, I., T. Dawson and M. Dober (2008). Evaluating the Seismic Hazards in Metro Manila, Philippines. 14th World Conference on Earthquake Engineering. Wong, K.Y., December 1995, Preliminary Metallurgical Testing of Taysan Composite Samples for Chase Minerals (Philippines) Corporation, Optimet Report 95034. World Gold Council Report, 2012. Press release. 2011, 2012. http://www.gold.org/ Yamaguchi, A, Katsuya, T, and Hajima, Y, 2011. Copper Smelting Margin Update. UBS Investment Research by UBS Securities Japan Limited. 8 December, 2011.

CZH-003 Page 202

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

28 GLOSSARY OF TECHNICAL TERMS This glossary has been referenced from the 10 October 2010 NI43-101 Report compiled by G Binks and Ian Taylor and comprises a general list of common technical terms that are typically used by geologists and engineers. Additional technical terms have also been added for this report. The list has been edited to conform in general to actual usage in the body of this report. However, the inclusion of a technical term in this glossary does not necessarily mean that it appears in the body of this report, and no imputation should be drawn. Investors should refer to more comprehensive dictionaries of geology in printed form or available in the internet for a complete glossary.

“200 mesh” the number of openings (200) in one linear inch of screen mesh (200 mesh approximately equals 75 microns)

Acid Consuming Material with a net acid producing potential (NAPP) of less than -100 kgH2SO4/t, which is likely to Material (ACM) have the capacity to neutralize excess acid produced by other potentially acid forming (PAF) material. Acid or Metalliferous Also called Acid Rock Drainage (ARD), refers to the outflow of acidic water from a mine. Acid or (or Mine) Drainage metalliferous drainage occurs naturally within most environments as part of the rock weathering (AMD) process. However, this is exacerbated by large-scale earth disturbances characteristic of mining and other large construction activities, usually within rocks containing an abundance of sulphide minerals. Low pH drainage derived from materials with an insufficient capacity to neutralize the acidic products to sulphide and elemental sulphur oxidation and the dissolution products of acidic minerals and amorphous minerals. AMD is also produced when neutralization potential is no longer capable of maintaining neutral pH conditions in a measurable volume of drainage. Analytic Signal The analytic signal method, known also as the total gradient method, is a method for interpretation of magnetic/gravity data. The data is transformed to produce a particular type of calculated gravity or magnetic anomaly enhancement map used for defining in a map sense the edges (boundaries) of geologically anomalous density or magnetization distributions “Au” chemical symbol for gold “block model” A block model is a computer based representation of a deposit in which geological zones are defined and filled with blocks which are assigned estimated values of grade and other attributes. The purpose of the block model (BM) is to associate grades with the volume model. The blocks in the BM are basically cubes with the size defined according to certain parameters. “bulk density” The dry in-situ tonnage factor used to convert volumes to tonnage. Bulk density testwork is carried out on site and is relatively comprehensive, although samples of the more friable and broken portions of the mineralised zones are often unable to be measured with any degree of confidence, therefore caution is used when using the data. Bulk density measurements are carried out on selected representative samples of whole drill core wherever possible. The samples are dried and bulk density measured using the classical wax-coating and water immersion method. “cut off grade” The lowest grade value that is included in a resource statement. Must comply with JORC requirement “reasonable prospects for eventual economic extraction” the lowest grade, or quality, of mineralised material that qualifies as economically mineable and available in a given deposit. May be defined on the basis of economic evaluation, or on physical or chemical attributes that define an acceptable product specification. “diamond drilling, Rotary drilling technique using diamond set or impregnated bits, to cut a solid, continuous core diamond core” sample of the rock. The core sample is retrieved to the surface, in a core barrel, by a wireline. “down-hole survey” Drillhole deviation as surveyed down-hole by using a conventional single-shot camera and readings taken at regular depth intervals, usually every 50 metres. “drill-hole database” The drilling, surveying, geological and analyses database is produced by qualified personnel and is compiled, validated and maintained in digital and hardcopy formats. “g/t” grams per tonne, equivalent to parts per million “g/t Au” grams of gold per tonne

CZH-003 Page 203

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

“gold assay” Gold analysis should be carried out by an independent accredited laboratory by classical ‘Screen Fire Assay’ technique that involves sieving a 900-1,000 gram sample to 200 mesh (~75microns). The entire oversize and duplicate undersize fractions are fire assayed and the weighted average gold grade calculated. This is one of the most appropriate methods for determining gold content if there is a ‘coarse gold’ component to the mineralization. “grade cap, also called The maximum value assigned to individual informing sample composites to reduce bias in the top cut” resource estimate. They are capped to prevent over estimation of the total resource as they exert an undue statistical weight. Capped samples may represent “outliers” or a small high-grade portion that is volumetrically too small to be separately domained. “inverse distance It asserts that samples closer to the point of estimation are more likely to be similar to the sample estimation” at the estimation point than samples further away. Samples closer to the point of estimation are collected and weighted according to the inverse of their separation from the point of estimation, so samples closer to the point of estimation receive a higher weight than samples further away. The inverse distance weights can also be raised to a power, generally 2 (also called inverse distance squared). The higher the power, the more weight is assigned to the closer value. A power of 2 was used in the estimate used for comparison with the OK estimates. “JORC” The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2004 (the “JORC Code” or “the Code”). The Code sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The definitions in the JORC Code are either identical to, or not materially different from, those similar codes, guidelines and standards published and adopted by the relevant professional bodies in Australia, Canada, South Africa, USA, UK, Ireland and many countries in Europe. “JORC or NI43-101 That part of a Mineral Resource for which tonnage, grade and mineral content can be estimated Inferred Resource” with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability. “JORC or NI43-101 That part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, Indicated Resource” grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed. “JORC or NI43-101 That part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, Measured Resource” grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity. “kriging The methodology for quantitatively assessing the suitability of a kriging neighbourhood involves neighbourhood some simple tests. It has been argued that KNA is a mandatory step in setting up any kriging analysis, or KNA” estimate. Kriging is commonly described as a “minimum variance estimator” but this is only true when the block size and neighbourhood are properly defined. The objective of KNA is to determine the combination of search neighbourhood and block size that will result in conditional unbiasedness. “lb” Avoirdupois pound (= 453.59237 grams). Mlb = million avoirdupois pounds “micron (µ)” Unit of length (= one thousandth of a millimetre or one millionth of a metre). “Mineral Resource” A concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories when reporting under JORC or NI43-101. “Mo” Chemical symbol for molybdenum “nearest neighbour Nearest Neighbour assigns values to blocks in the model by assigning the values from the nearest

CZH-003 Page 204

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012 estimation” “Inferred” sample point to the block attribute of interest. That part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability. Net Acid Generation The NAG test provides a direct assessment of the potential for a material to produce acid after a (NAG) period of exposure and weathering and is used to refine the results of the theoretical ABA predictions. This method involves the addition of hydrogen peroxide to a prepared sample of mine waste to oxidise contained reactive sulphides. This is followed by measurement of the pH of the reaction solution and titration of any net acidity produced by the acid generation and neutralisation reactions occurring in the sample. Units are in kg H2SO4 per tonne of ore. Net Acid Producing A theoretical calculation value commonly used to indicate if a material has potential to generate Potential (NAPP) ARD. It represents the balance between a material’s maximum potential acidity (MPA) and its acid neutralizing capacity (ANC). The NAPP is also expressed in units of kg H2SO4 per tonne ore and is calculated as follows: NAPP = MPA – ANC “ordinary Kriging Kriging is an inverse distance weighting technique where weights are selected via the variogram estimation, or “OK” according to the samples distance and direction from the point of estimation. The weights are not only derived from the distance between samples and the block to be estimated, but also the distance between the samples themselves. This tends to give much lower weights to individual samples in an area where the samples are clustered. OK is known as the “best linear unbiased estimator. The kriging estimates are controlled by the variogram parameters. The variogram model parameters are interpreted from the data while the search parameters are optimised during kriging neighbourhood analysis. “oz” Troy ounce (= 31.103477 grams). Moz = million troy ounces Potentially Acid A sample is usually defined as PAF when it has a positive NAPP and the NAG pH < 4.5. A sample Forming (PAF) classified as PAF has a significant sulphur content, the acid generating potential of which exceeds the inherent acid neutralising capacity of the material. “QA/QC” Quality Assurance/Quality Control. The procedures for sample collection, analysis and storage. Drill samples are despatched to ‘certified’ independent analytical laboratories for analyses. Blanks, Duplicates and Certified Reference Material samples are included with each batch of drill samples as part of the Company’s QA/QC programme. Mining Associates, as part of database management, monitors the results on a batch-by-batch basis. “RC drilling” Reverse Circulation drilling. A method of rotary drilling in which the sample is returned to the surface, using compressed air, inside the inner-tube of the drill-rod. A face-sampling hammer is used to penetrate the rock and provide crushed and pulverised sample to the surface without contamination. “survey” Comprehensive surveying of drillhole positions, topography, and other cadastral features. Locations are usually stored in both local drill grid and UTM coordinates. “t” Tonne (= 1 million grams) “variogram” The Variogram (or more accurately the Semi-variogram) is a method of displaying and modelling the difference in grade between two samples separated by a distance h, called the “lag” distance. It provides the mathematical model of variation with distance upon which the Krige estimation method is based. “wireframe” This is created by using triangulation to produce an isometric projection of, for example, a rock type, mineralization envelope or an underground stope. Volumes can be determined directly of each solid.

CZH-003 Page 205

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

CERTIFICATES OF QUALIFIED PERSONS CERTIFICATE Alistair Barton

I, Alistair Heatley Barton, FAusIMM, CP Geo., do hereby certify that: 1. I am Principal Geologist and Director at: Barton Metals Pty Ltd 40 Balmerino Drive, Carina, Queensland, 4152, AUSTRALIA. 2. I graduated with an Associate Diploma and Fellowship Diploma in Geology from the Royal Melbourne Institute of Technology in 1973 and 1974 respectively. 3. I am a Fellow of the Australasian Institute of Mining and Metallurgy (FAusIMM) and I am an accredited Chartered Professional (Geology). 4. I have worked as a geologist for a total of 37 years since graduation in the gold, base metals, coal and industrial minerals industries including exploration, project development, mining operations, contract mining and engineering services, consulting, capital fund raising and public company management. Commodity experience includes copper, lead, zinc, gold, silver, tin, tungsten, molybdenum, tantalite, nickel, uranium, indium, heavy mineral sands, coal, iron ore, blue metal quarry products, some clays, silicon, silica sand, pyrite (for sulphur), semi-precious gem stones (aquamarine, topaz), limestone and dolomite. I have operated throughout Australia and also have overseas experience in Canada, China, Mongolia, Mozambique, Mexico, Fiji, the Philippines, Solomon Islands and New Zealand. Of relevance to this Project is my experience of more than 10 years in managing scoping studies, Prefeasibility studies and feasibility studies. 5. I have read the Policy and this report is prepared in compliance with its provisions. I have read the definition of Qualified Person set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a Qualified Person for the purposes of NI 43-101. 6. For the purposes of the Technical Report entitled: “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project and dated 12 June 2012” of which I am a part author, I am a Qualified Person as defined in national Instrument 43-101 (“the Policy”) and a Competent Person as defined under the JORC Code (2004) 7. I am responsible for the preparation of the sections 1 to 12 (inc. except section 7.5), 14, 18 to 20 (inc.), 21.3 to 21.6 (inc.), 21.9 to 21.14 (inc.) and 22 to 28 (inc.)of the Technical Report to Crazy Horse Resources, Inc. entitled “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project ” and dated 12 June 2012, relating to the Project areas. 8. I have read National Instrument 43-101 and Form 43-101 F1, and the Technical Report has been prepared in compliance with that instrument and form. 9. I have had an involvement in the Project areas since April 2011. The nature of this involvement includes technical reports write ups, management of the scoping study, management of the Prefeasibility Study and full technical and commercial reviews of the project. I visited the Project area and the Batangas Port for a total of one day in April 2011. 10. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading. 11. I am independent of the issuer applying all of the tests in Section 1.5 of NI 43-101. 12. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report. 13. I have not had prior involvement with the property that is the subject of the Technical Report.

CZH-003 Page 207

CRAZY HORSE

Taysan Copper Gold Project - Prefeasibility Study for a 15Mtpa Mine RESOURCES INCORPORATED June 2012

14. I have no direct or indirect interest in the property that is the subject of this report. 15. I do not hold, directly or indirectly, any shares in CZH or other companies with interests in the Taysan Project 16. I do not hold any direct interest in any mineral tenements in the Philippines. 17. I will receive only normal consulting fees for the preparation of this report.

Dated: 12 June, 2012.

Signature of Qualified Person Alistair Heatley Barton

CZH-003

Page 208

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

CERTIFICATES OF QUALIFIED PERSONS CERTIFICATE Cameron Wylie

I, Cameron Andrew Wylie, MAusIMM, CP Mine Geotech., MIPENZ, CPEng(NZ), do hereby certify that: 1. I am Principal Geotechnical Engineer and Director at: Resource Development Consultants Ltd 15 Havelock Road Havelock North New Zealand 4130

2. I graduated with a Bachelor of Science (BSc) and Master in Science (MSc, First Class Hons.) in Geology from the University of Auckland in 1987 and 1989 respectively. 3. I am a member of the Australasian Institute of Mining and Metallurgy (MAusIMM) and I am an accredited Chartered Professional (Mine Geotechnics). I am also a Member of the Institute of Professional Engineers (NZ) and a Chartered Professional Engineer in New Zealand. 4. I have worked as a geotechnical specialist for 23 years since graduation in 1989. My relevant experience includes project work in the Philippines since 1994 including specifically porphyry deposits in similar tectonic environments and materials, and on open cut and underground mining projects since 1989. I have particular experience in hazard and geotechnical management in mines and as it relates to seismic activity through my work in the Philippines, Indonesia and New Zealand, all seismically active countries. I have additional extensive experience in geotechnics in volcaniclastic materials and terrains, and in tropical conditions. I have worked in countries including the Philippines, Australia, Indonesia, Malaysia, Chile, Mozambique and Armenia and on mining and heavy civil engineering projects throughout my career. 5. I have read the Policy and this report is prepared in compliance with its provisions. I have read the definition of Qualified Person set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a Qualified Person for the purposes of NI 43-101. 6. For the purposes of the Technical Report entitled: “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project and dated 12 June 2012” of which I am an author, I am a Qualified Person as defined in national Instrument 43-101 (“the Policy”) and a Competent Person as defined under the JORC Code (2004). 7. I am responsible for the preparation of the Geotechnical and Seismic Assessment aspects of the Technical Report (Sections 7.5 and section 16.2) to Crazy Horse Resources, Inc. entitled “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project and dated 12 June 2012”, relating to the Project areas. 8. I have read National Instrument 43-101 and Form 43-101 F1, and the Technical Report has been prepared in compliance with that instrument and form. 9. I have had an involvement in the Project since late 2010 including preparation of geotechnical aspects of the scoping study (geotechnical report “Taysan Copper Project Geotechnical Study” published 24 February 2011), and on the Prefeasibility study since March 2011. The nature of this involvement includes the management of geotechnical aspects of the study, interaction with other relevant technical team members as it relates to geotechnical aspects and responsibility for the analyses and reporting of all geotechnical aspects of the study. I have visited the Project area at least 4 times throughout the study and am thoroughly familiar with the project area.

CZH-003 Page 209

CRAZY HORSE

Taysan Copper Gold Project - Prefeasibility Study for a 15Mtpa Mine RESOURCES INCORPORATED June 2012

10. I am not aware of any material fact or material change with respect to the geotechnical and seismic assessment subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading. 11. I am independent of the issuer applying all of the tests in Section 1.5 of NI 43-101. 12. I consent to the filing of the Technical Report with any stock exchanqe and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report. 13. I have previously not had prior involvement with the property that is the subject of the Technical Report. 14. I have no direct or indirect interest in the property that is the subject of this report. 15. I do not hold, directly or indirectly, any shares in CZH or other companies with interests in the Taysan Project 16. I do not hold any direct interest in any mineral tenements in the Philippines. 17. I will receive only normal consulting fees for the preparation of this report.

Dated: 12 June, 2012.

Signature of Qualified Person Cameron Andrew Wylie

CZH-003 Page 210

Taysan Copper Gold Project – Prefeasibility Study for a 15Mtpa Mine June 2012

CERTIFICATES OF QUALIFIED PERSONS CERTIFICATE Grahame Binks

I, Grahame Edward Binks, B.Eng. (Hons Met), M.Eng.Sci, MAusIMM (CP), RPEQ do hereby certify that: 1. I am Senior Study Manager at; AMEC Australia Pty. Ltd. Level 14 144 Edward Street, Brisbane Qld 4001, Australia 2. I graduated with a Batchelor of Metallurgical Engineering and Master of Engineering Science both from the University of Melbourne in 1983 and 1985 respectively 3. I am a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM) and an accredited Chartered Professional (Metallurgy) I am also a Registered Professional Engineer of Queensland (RPEQ 08522). 4. I have worked as a Metallurgist and Project and Study Manager for a total of 27 years since graduation in base metals and industrial minerals including research and development, project and study management, project development, engineering design, plant operations, engineering services and consulting. My commodity experience includes copper, lead, zinc, gold, silver, uranium, tin, tungsten, molybdenum, nickel, cobalt, germanium, cadmium, arsenic, bismuth, antimony, sulphur, sulphuric acid, limestone and cement. I have worked throughout Australia, The Netherlands, Finland, UK, Canada, The Philippines and Indonesia. 5. I have read the Policy and this report is prepared in compliance with its provisions. I have read the definition of Qualified Person set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a Qualified Person for the purposes of NI 43-101. 6. For the purposes of the Technical Report entitled: “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project and dated 12 June 2012” of which I am a part author, I am a Qualified Person as defined in national Instrument 43-101 (“the Policy”) and a Competent Person as defined under the JORC Code (2004) 7. I am responsible for the preparation of the Sections 13, 17 and Sections 21.2 and 21.8 of the Technical Report to Crazy Horse Resources, Inc. entitled “Prefeasibility Study for a 15 Million Tonne Per Annum Mine, Taysan Copper Gold Project” and dated 12 June 2012, relating to the Project areas. 8. I have read National Instrument 43-101 and Form 43-101 F1, and the Technical Report has been prepared in compliance with that instrument and form. 9. I have had an involvement in the Project areas since October 2010 The nature of this involvement includes project reporting, study management, full technical and commercial review and management of the Scoping and Prefeasibility studies, metallurgical testwork and project budgets. I have visited the Project area a total of three days and the Batangas Port for two days. 10. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading. 11. I am independent of the issuer applying all of the tests in Section 1.5 of NI 43-101. 12. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report. 13. I have had prior involvement with the property that is the subject of this Technical Report in managing the Scoping Study and preparation of previous NI 43-101 reports for the property. 14. I have no direct or indirect interest in the property that is the subject of this report.

CZH-003 Page 212