September 2014

Mineral Resource Estimate Report of the Islands of Nonoc, Awasan, and Hanigad and Part of South Dinagat for Pacific Nickel Philippines Inc. (PNPI)

MPSA No. 072-1997-XIII

Provinces of Surigao del Norte and Dinagat Islands

ROGEL A. SANTOS, PhD Geochemist/Economic Geologist

Geologist – PRC No. 1022 Competent Person – CP No. 12- 10-12 INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

CERTIFICATE AND CONSENT OF THE COMPETENT PERSON

I, Rogel A. Santos, B.S. Geo, M.S. and Ph.D. Geochemistry and Economic Geology; post- PhD in Environmental Geochemistry, hereby certify that:

I am a Registered Professional Geologist under the Philippine Professional Regulatory Commission (PRC) with license number PRC-1022 and am an active member of the Geological Society of the Philippines since 1985;

I am a Competent Person (CP) under the Philippine Mineral Reporting Code (PMRC) system with CP number - 12-10-12 and recently elected as Secretary of the Competent Person Accreditation Committee (CPAC);

I am continuously practicing my profession for more than 25 years and my expertise is further supplemented by my graduate degrees, Master of Science, Doctor of Science, and post- Doctoral Fellowship, at the University of Tokyo after having my Bachelor of Science degree in Mapua Institute of Technology;

For the purposes of this Technical Report I serve as a Competent Person as defined in the PMRC with business address at 106 Cotabato St., Bago Bantay, Quezon City, Phillipines and email address and mobile number – [email protected]; +639399155580;

I am responsible for the preparation of the entirety of this report though geostatistical runs of analytical data are on a contracted basis with my full supervision. I have based the geological observations mainly from my routine visits to the property being the Project Manager for the PNPI nickel exploration project contract since April of 2014 and throughout the preparation of this report. The contents and substance of this report have been peer reviewed by a fellow Competent Person under the PMRC.

To this date, to the best of my knowledge, information, and belief, this PMRC-Compliant Report contains all the scientific and technical information that is required to be disclosed to make this Technical Report not misleading;

I consent for the public filing of this Technical Report for stock exchange purposes, business publication, or as part of the requirements by any regulatory authority.

Dated this 30 September 2014 at Quezon City, Philippines.

Rogel A. Santos, PhD Professional Geologist and Competent Person

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

EXECUTIVE SUMMARY

This technical report discloses the mineral resource estimate of a part of the Mineral Production Sharing Agreement (MPSA) of the Pacific Nickel Philippines Incorporated (PNPI) denominated as MPSA 072-1997-XIII. This work made use of all the historical data for test pitting, auger drilling, and mechanized drilling since the inception of the areas in consideration as part of the Surigao Mineral District sometime in 1939. Bulk of the data were generated through the series of exploration and geological studies initiated by the Philippine Bureau of Mines (PBM), the present Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources (DENR) between the years 1953 to 1958. Succeeding activities were conducted by Marinduque Mining and Industrial Corporation (MMIC) which later initiated the mining and the nickel processing plant operation from 1977 to 1986. The nickel resources herein declared include only that portion of the saprolite layer which was drilled during the previous exploration works. The present exploratory drilling programme is intended to cover the entire laterite section portion – from the top limonite horizon through the saprolite profile until bedrock.

The whole MPSA has an aggregate area of 23,877 hectares which covers almost a third of the mainland Dinagat Island (17,729 hectares) and the three adjacent islands in the south namely Nonoc (4,265.5 hectares), Hanigad (976 hectares), and Awasan (916 hectares). The latter islands and the South Dinagat peninsula (4,816 hectares) were the areas considered in this report. The database covers 35,214 drill holes and test pits location and an enormous amount of analytical assays at 256,950 mainly for the elements Ni and Fe and to a minor extent for Co, Mg, and Si. The database was built–up and compiled to a much later date by Minproc (1998) and its subsidiary, Vantage Mining Group (1996), for the purpose of reviving the mine and plant operation as commissioned by PNPI.

The mineral resource estimation of the historical data yields the following results:

 For Nonoc Island and adjacent areas of South Dinagat peninsula, Hanigad and Awasan Islands at 0.70%Ni cut-off for Measured Resource for all matrices yield a total resource of 143M Mt at 1.25%Ni average grade and iron contents averaging at 35%Fe:

AREA CATEGORY Cut-off %Ni Volume Resource Ni Wt% Fe wt % Nonoc Area 1 measured 0.7 11,512,600 11,374,528 1.26 39.73 Nonoc Area 2 measured 0.7 27,636,094 37,861,448 1.24 46.44 Gaboc Area measured 0.7 1,807,200 1,959,177 1.10 28.70 Nonoc Areas 3 & 4 measured 0.7 20,856,000 24,271,373 1.30 34.65 Nonoc Area 5 measured 0.7 26,581,100 32,979,946 1.43 34.35 Nonoc Sub- 0.7 88,392,994 108,446,472 1.27 36.77 TOTAL

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

AREA CATEGORY Cut-off %Ni Volume Resource Ni Wt% Fe wt % South Dinagat measured 0.7 24,602,700 30,487,065 1.45 34.72 Hanigad Island measured 0.7 1,137,500 1,218,674 1.09 32.95 Awasan Island measured 0.7 2,311,500 3,058,205 1.18 35.87 Islands Sub-TOTAL 0.7 28,051,700 34,763,944 1.24 34.51 Grand TOTAL 116,444,694 143,210,416 1.25 35.64

 For Indicated Resource at 0.70% cut-off the total resource yields 92M Mt with 1.23% Ni average grade and an average iron contents of 33%Fe broken down as follows: AREA CATEGORY Cut-off %Ni Volume Resource Ni Wt% Fe wt % Nonoc Area 1 indicated 0.7 3,987,200 4,432,616 1.17 32.68 Nonoc Area 2 indicated 0.7 27,585,898 30,395,880 1.31 33.99 Gaboc Area indicated 0.7 3,023,700 2,769,141 1.09 26.73 Nonoc Areas 3 & 4 indicated 0.7 5,786,200 6,525,154 1.13 34.63 Nonoc Area 5 indicated 0.7 9,010,600 11,098,219 1.38 35.68 Nonoc Sub-TOTAL 0.7 49,393,598 55,221,010 1.21 32.74

AREA CATEGORY Cut-off %Ni Volume Resource Ni Wt% Fe wt % South Dinagat indicated 0.7 25,297,100 28,218,422 1.41 35.21 Hanigad Island indicated 0.7 3,077,000 1,967,376 1.15 26.65 Awasan Island indicated 0.7 5,119,900 6,708,704 1.20 32.22 Islands Sub-TOTAL Resource 0.7 33,494,000 36,894,502 1.26 31.36 Grand TOTAL 82,887,598 92,115,512 1.23 32.05

 The combined resources (measured and indicated) of all the areas in consideration are at 235M Mt at an average of 1.25%Ni and the Fe average at 35%.

 The overall resource at a similar cut-off of 0.70%Ni yields 314M Mt at a weighted average grade of 0.95%Ni, thus, the inferred resource is at 79M Mt. The latter resource may progress to indicated or measured category upon further exploration.

AREA Cut-Off: %Ni Tonnes Grade: %Ni Nonoc Island 0.70 193,481,124 0.97 South Dinagat 0.70 94,561,908 0.91 Hanigad 0.70 5,825,977 0.90 Awasan 0.70 20,647,930 0.95 Total Resource 0.70 314,516,939 0.95

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

TABLE OF CONTENTS

EXECUTIVE SUMMARY

List of Tables ------7

List of Figures ------8

1.0 INTRODUCTION ------11 1.1 Terms of Reference ------11 1.2 Purpose and Compliance with PMRC ------11 1.3 Data Verification and Field Visits ------11 2.0 RELIANCE ON OTHER EXPERTS ------12 2.1 PNPI Technical Personnel ------12 2.2 GIS Expert and Geostatistics Expert ------12 3.0 DISCLAIMERS ------13 4.0 TENEMENT AND MINERAL RIGHTS ------14 4.1 Description and Location of Mineral Rights ------14 4.2 Brief History and Ownership of Mineral Rights ------14 5.0 GEOGRAPHIC FEATURES ------18 5.1 Location and Accessibility ------18 5.2 Physiography, Climate, and Vegetation ------18 5.3 Land Use and Infrastructures ------23 5.4 Socio-Economic Environment ------23 5.5 Environmental Features ------24 6.0 PREVIOUS WORKS ------25 7.0 HISTORY OF PRODUCTION (internal data) ------8.0 REGIONAL GEOLOGY ------26 8.1 Regional Geological Setting ------26 8.1.1 The Dinagat Ophiolite Complex ------26 8.1.2 The Metamorphic Basement ------29 8.1.3 The Sedimentary Formation ------29 8.2 Regional Structures ------29 8.3 Related Prospects and Other Deposits ------34

9.0 MINERAL PROPERTY GEOLOGY ------34 9.1 Lithological Distribution and Related Formation ------34

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9.2 Local Structures ------36 10.0 MINERALIZATION IN THE MINERAL PROPERTY------36 11.0 EXPLORATION HISTORY ------38 12.0 MINERAL RESOURCE ESTIMATES ------39 12.1 General Statement and Resources Summary ------39 12.2 Database for Estimation: Validation and Integrity ------40 12.3 Resource Estimation Parameters: Matrix Classification and Bulk Density ------40 12.3.1 Nonoc Island Resources ------42 AREA 1 ------42 AREA 2 (includes AREA 3) ------46 Gaboc Area ------48 AREA 4 ------52 AREA 5 ------56 12.3.2 South Dinagat Peninsula ------59 12.3.3 Hanigad Island ------62 12.3.4 Awasan Island ------65

INTERPRETATION AND CONCLUSIONS ------68 RECOMMENDATIONS ------72

ACKNOWLEDGMENT REFERENCES APPENDICES (see adjoining volume)

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LIST OF TABLES

Table 4.1.1. Technical Description and corresponding bearings ` of PNPI tenement in Dinagat Island group ------15

Table 8.1.4. Starigraphic column showing the various formation ages of formation and the Dinagat Ophiolite Complex ------31

Table 12.2.1. Summary of test pit and drill holes with corresponding accumulated number of analysis ------40

Table 12.2.2. Comparative bulk density determination conducted in-situ by PBM and MMIC ------41

Table 12.2.3. Parameters used in the computation of resources: bulk density values (PBM) and iron ranges (MMC) ------42

Table 12.3.1.1. The global resource (0% cut-off) for Mining Area 1. ------42

Table 12.3.2 Nonoc Island Mining Area 1 showing tonnages or various cut-off grades ------43

Table 12.3.1.4. The global resource (0% Ni cut-off) for Mining Area 2 of Nonoc Island ------46

Table 12.3.1.5. Nonoc Island Mining Area 2 showing tonnages for various cut-off grades of Ni ------46

Table 12.3.1.6. The global resource (0% Ni cut-off) for Gaboc Area of Nonoc Island ------49

Table 12.3.1.7. Gaboc Area in noerthern Nonoc Island showing tonnages for various cut-off grades ------49

Table 12.3.1.8. The global resource (0% Ni cut-off) for Area 4 of Nonoc Island ------53

Table 12.3.1.9. Ni resources of Area using various cut-off grades ------53

Table 12.3.1.10. The global resource (0% cut-off) for Area 5 of Nonoc Island. ------56

Table 12.3.1.11. Nickel resources at selected cut-off grades. ------56

Table 12.3.2.1. Tonnages based on Ni cut-off grades South Dinagat Island ------59

Table 12.3.2.2. The global or overall Ni resource (i.e., at 0% Ni cut-off) ------60

Table 12.3.3.1. Tonnages based on Ni cut-off grades to produce ores with various Ni grades in Hanigad Island ------62

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Table 12.3.3.2. The overall Ni resource i.e., at 0% cut-off) of Hanigad Island ------63

Table 12.3.4.1. Cut-off grades for nickel in Awasan Island ------65

Table 12.3.4.2. The computed tonnages for every resource category in Awasan Island ------66

Table 13.1.1. Total nickel resource of Nonoc, Hanigad, Awasan islands and the South DInagat peninsula at 0.70% Ni cut-off.------68

Table 13.1.2 Total nickel resource for Nonoc Island at 0.70%Ni cut-off per matrix per resource category ------70

Table 13.1.3. Total nickel resource for Hanigad, Awasan and South Dinagat peninsula at 0.70%Ni cut-off per matrix per resource category. ----- 71

LIST of FIGURES

Figure 4.1.1 Area coverage of the PNPI MPSA which is draped over an area of 25,000 hectares. ------16

Figure 5.1.1. Location of study area with adjacent islands in northeastern Surigao region. ------19

Figures 5.2.1. The topographic features of: (A) Nonoc Island and (B) South Dinagat peninsula. ------20

Figure 5.2.2. A 3D satellite imagery of the island of Nonoc, Hanigad, and Awasan and that of South Dinagat peninsula. ------20

Figure 5.2.3. Forest of “paguspus” and “maribujoc” in east of Lutawon north of Mining Area 4. ------21

Figure 5.2.4. The modified Corona Classification of Climates in the Philippines showing the study as part of Type II climate system. ------22

Figure 5.3.1. Part of the Special Economic Zone within the island of Nonoc covering the nickel processing plant and the old tailings pond. ------23

Figure 5.5.1. The coastal mangrove forest between the islands of Nonoc and Hanigad and Awasan. ------24

Figure 8.1.1. Some of the basic tectonic features of the Philippine archipelago and the spatial relationships of the ophiolite complexes. ------28

Figure 8.1.2. The comparative stratigraphies of Palawan Ophiolite Complex (POC) relative to Dinagat Ophiolite Complex (DOC). ------30

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Figure 8.1.3. Metasedimentary formation exposed along the western coastline of Nonoc Island. ------31

Figure 8.2.1. Regional geology and structures of Dinagat Island group and part of Surigao del Norte. ------31

Figure 8.2.2. Geology of the Dinagat Island group ------33

Figure 9.1.1. Simplified geological map of the islands of Nonoc, Hanigad, Awasan, and the South Dinagat peninsula. ------35

Figure 9.1.2. Outcrops and floats representing the major rock formations ------35

Figure 12.3.1.1. The grades-tonnage curve for Mining Area 1 of Nonoc Island. ------44

Figure 12.3.1.2. Drill hole and test pit distribution map for the whole study area. ----- 44

Figure 12.3.1.3. Series of GEMCOM-GEMS generated figure showing the distribution of Ni grades and resource categories. ------45

Figure 12.3.1.4. Drill hole and test pit distribution in Mining Area 2 &3 of Nonoc Island. ------47

Figure 12.3.1.5. The grade-tonnage curve for Mining Area 2 & 3 of Nonoc Island --- 47

Figure 12.3.1.6. Series of GEMCOM-GEMS generated figures showing the distribution of Ni grades and resource categories ------48

Figure 12.3.1.7. The grade-tonnage curve for Gaboc Area of Nonoc Island. ------50

Figure 12.1.1.8. Series of GEMCOM-GEMS generated figure showing the distribution of Ni grade and resource categories. ------51

Figure 12.3.1.9. Drill hole and test pit distribution of Gaboc area. ------52

Figure 12.3.1.10. The grade-tonnage curve for Area 4 of Nonoc Island. ------54

Figure 12.3.1.11. Drill hole and test pit distribution in Mining Area 4 ------54

Figure 12.3.1.12. Map series of Area 4 showing grade distribution of Ni per matrix per category ------55

Figure 12.3.1.13. Drill hole and test pit distribution map for Area 5 ------57

Figure 12.3.1.14. Grade –tonnage curve for mining Area 5. ------57

Figure 12.3.1.15. Map series of Area 5 showing grade distribution of Ni per matrix per category ------58

Figure 12.3.2.1. Grade-tonnage curve for South Dinagat peninsula. ------59

Figure 12.3.2.2. Drill hole and test distribution map in South Dinagat peninsula. ----- 60 Competent Person Report | RASantos 9

INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

Figure 12.3.2.3. Series of GEMS generated maps showing the Ni grade distribution per matrix with resource category ------61

Figure 12.3.3.1. The grade-tonnage curve for Hanigad Island. ------62

Figure 12.3.3.2. Drill hole and test pit distribution map of Hanigad Island. ------63

Figure 12.3.3.3. Series of maps showing the Ni grade distribution and resource category in limonite ------64

Figure 12.3.4.1. Grade-tonnage curve for Awasan Island. ------65

Figure 12.3.4.2. Drill holes and tes pit distribution map of Awasan Island ------66

Figure 12.3.4.3. Series of GEMCOM-GEMS generated maps showing the Ni grade per matrix for Awasan Island. ------67

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

1.0 INTRODUCTION

1.1. Terms of Reference

This report was prepared pursuant to the Philippine Mineral Reporting Code and follows the most recent recommended template for reporting of exploration results and mineral resources of nickel laterite (Template 1D) to support the public disclosure of Pacific Nickel Philippines, Inc. (PNPI) property which is being managed by Clariden Holdings Incorporated and the latter as a subsidiary of Top Frontier Investment Holdings, Inc. (TF) and in part as compliance to the requirements of regulatory authorities such as the Mines and Geosciences Bureau (MGB) and the Securities and Exchange Commission (SEC). The quality of information and estimates contained in this report is consistent with the amount of effort exerted by the Competent Person based on i) available data at the time of preparation; ii) the data supplied by PNPI; and iii) the assumptions and qualifications set forth in this report.

1.2. Purpose and Compliance with PMRC

Top Frontier Investment Holdings, Inc (TF) being a publicly listed corporation requires submission of resource estimates of its Nonoc Island and the adjacent islands of Awasan, Hanigad, and that of South Dinagat peninsula lateritic nickel property which are under the management of PNPI as part of the Registration Statement for Securities and Exchange Commission. This technical report has been prepared as a commissioned work pursuant to the Philippine Mineral Reporting Code or the PMRC.

1.3. Data Verification and Field Visits

The author has relied mainly on the information provided by the technical personnel of PNPI based on previous technical reports and raw data supplied to PNPI by previous exploration contractors. As of writing of this technical report the island of Nonoc is being re-drilled in its entirety by MacroAsia Mining Corporation. The drilling campaign has been programmed to hit the bottom of the laterite profile until bedrock. Some data and geological interpretation from this recent drilling campaign were incorporated in this report.

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

A detailed topographic survey was not conducted for the purpose of this report. Topographic features were build- up based on collar elevation data of the drill holes and test pits. Thus, on areas with high frequency of drill hole location the resulting topography yields detailed features close to actual land morphology. To support the volume calculation of the remaining resource of Nonoc Island and that of the laterite carapace of the South Dinagat, Awasan, and Hanigad Islands which is a vital stage for the resource evaluation the geomorphologic features in areas with few or relatively low frequency of drill hole location were based on digitized contours of commercially available maps.

Site visits were conducted by the author on several occasions (January and September, 2013; February, 2014) in Nonoc Island and ocular observations on the adjacent islands of Hanigad, Awasan, and the South Dinagat peninsula prior to formal commissioning of this resource assessment. During the preparation of this report, the author is the Project Manager of the exploration drilling services contract of MacroAsia Mining Corporation (MMC) with PNPI, thus, being in the island of Nonoc most of the time since April 2014. Throughout this time the preparer is directly coordinating with Mr. Edwin A. Rillon, Geology and Exploration Manager of Clariden Holdings Inc. as representative of PNPI.

2. RELIANCE ON OTHER EXPERTS

2.1. PNPI Technical Personnel

Mr. Edwin Rillon provided all the historical data on drilling and test pitting of the Nonoc and adjacent islands of Awasan, Hanigad, and the South Dinagat peninsula. Engineer Wendell Gador, Safety Engineer of PNPI, guided the author on initial visits to the island covering the five (5) mining areas, the tailings pond, and a tour of the abandoned nickel processing plant.

2.2 GIS Expert and Geostatistics Expert

Maps and sections preparation was through a contracted work. Maps were drawn and re-drawn until they meet the quality apt for this report and strictly follow the standard format of a map presentation. Aerial photos were excerpts from free wares of Google Earth. Along with this contracted maps are 3D terrain models based on digitized maps

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

available commercially in National Mapping and Resources Information Authority (NAMRIA) of the Department of Environment and Natural Resources (DENR).

Geostatistical runs using licensed GEMS software were also on a contracted service but under the full supervision of the undersigned CP. Several iterations were undertaken due to the enormity of the data sets generated by several workers in past years that utilized varying geographical references that if uncorrected and unchecked will result to numerous overlaps and mislocated points such as along beaches or in adjacent open seas. As such the GIS expert in coordination with the GEMS technician and the undersigned CP have to work repeatedly on several occasions in order to arrive at a consensus on the most possible distribution of test pits and drill holes that will constitute a unified and robust data base.

3. DISCLAIMERS

This commissioned technical report preparation focuses mainly on the historical resource assessment and the remaining resources for lateritic nickel of the PNPI property which covers the islands of Nonoc, Awasan, Hanigad, and the South Dinagat peninsula. The database does not indicate the contractor/worker responsible for the data collection nor the period the data was taken. Duplicate samples nor other check samples such as internal standards and even blank samples are neither indicated in the database nor submitted as separate lists. For conservatism, it is assumed that during the past drilling and test pitting periods such quality assurance/quality control measures during sample collection were not practiced in the absence of any evidence for such. The database is also not accompanied by sample log sheets nor pictures as documentation of the physical characteristics of the laterite profile. Since the last known drilling entity made use of NQ-size rod it is assumed that the rest of the drilling data are of the same core sizes. The integration of the various batches of data bases do include estimates of the resulting resources of nickel (Ni) and cobalt (Co) which are the only economic contained metals considered during those periods. The resulting data base is a combination of test pits and drill hole data. However there is no indication as to which data sets belong to such categories. For the purpose of this resource assessment the whole data set is treated to represent drill hole data at a uniform core size of NQ (65mm diameter).

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

Topograhic survey dedicated for this commissioned work was not undertaken. Since volume calculation is inevitable in the resource calculation surface morphology and elevation were based mainly on the collar elevation of each drill hole/test pit. As stated earlier in areas where the drill holes are of high frequency of occurrence the resulting topography assumes the actual surface morphology of the area. In areas of sparse drill hole data digitized contour of the area based on commercial maps is used to supplement the scant data to avoid as much as possible built-up of trapezoid which the software assumes by connecting adjacent drill holes. Thus, reliability of the resulting resource estimation in such areas is diminished. The last known topographic survey in the area was conducted in 2012 by Shuley Mines Incorporated (SMI) which was the last contract operator in the mine. Their survey covers only the parcels SMI operated which are Mine Areas 2 and 3.

This report also assumes that the analytical results fall within the 90% mark of true value since it is not possible to conduct quality assurance and quality control (QA/QC) assessment in the absence of known sets of check samples within the submitted database.

This technical report has been prepared for PNPI by the undersigned Competent Person (CP) based on aforementioned assumptions discussed throughout the text of this document. The undersigned CP is not in a position to, and does not, verify the accuracy of, or adopt as its own, the information and data supplied to him.

4.0 TENEMENT AND MINERAL RIGHTS

4.1 Descriptions and Location of Mineral Rights

The islands of Nonoc, Hanigad, and Awasan are all within the jurisdiction of the City of Surigao, Province of Surigao del Norte. The island of Nonoc covers within its jurisdiction Barangays Nonoc, the namesake of the island at the southwestern tip, Talisay at mid- south, and Cantiasay, west of the island. The whole island measures 4,265 hectares and forms part of the 23,877-hectare Mineral Production Sharing Agreement (MPSA) of the PNPI (Fig. 4.1.1) formerly Philnico Mining and Industrial Corporation (PMIC).

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

Hanigad Island covers 976 hectares while Awasan Island stretches for about 916 hectares. At the southern tip of Hanigad Island is the fishing community of Barangay San Pedro. Barangay San Pedro is linked to Barangay Cantiasay of Nonoc Island by almost a kilometer-long wooden foot bridge, a local attraction in which Barangay Cantiasay has become famous for (see cover photo). Awasan Island is not populated. All the three (3) islands are part of the aforementioned MPSA of PNPI (Table 4.1.1). Hanigad Island covers 976 hectares

Corner ID Latitude Longitude Remarks/Bearing

Point No. 1 10⁰-04‟-51.76” 125⁰-41‟-26.60” Between boundary of Parcel II and III

Point No. 2 9⁰-51‟-57.89” 125⁰-42‟-01.06” Southwards from Pt. 1 along coast

Point No. 3 9⁰-53‟-07.87” 125⁰-38‟-28.56” Westwards from Pt.2 along coast

Point No.4 9⁰-56‟-25.61” 125⁰-37‟-36.86” Northwards from Pt. 3 along west coast

Point No.5 9⁰-59‟-19.75” 125⁰-37‟-36.86” 5,350 meters due N from Pt.4

Point No.6 9⁰-59‟-19.75” 125⁰-37‟-02.55” 1,045 meters due W of Pt.5

Point No.7 10⁰-06‟-24.69” 125⁰-37‟-02.55” 13,055 meters due N from Pt.6

Point No.8 10⁰-06‟-24.69” 125⁰-40‟-30.81” 6,345 meters due E from Pt.7 Point No.1 Following coastline southwards to close

Table 4.1.1. Technical description and corresponding bearings of PNPI tenement in Nonoc, Awasan, Hanigad islands and in South DInagat Peninsula.

The South Dinagat parcel is the southernmost tip of the 17,720 hectares Dinagat Island portion of the MPSA. South Dinagat parcel alone encloses an area of about 4,816 hectares almost equal the size of Nonoc Island.

Although adjacent to Cagdianao Municipality South Dinagat parcel has two barangays in its perimeter, Barangay Mabini at the southern coast and close to the mouth of Gaboc Channel and Barangay Tigbao, west of the peninsula along the mouth of a river.

The PNPI having been granted the MPSA is obliged to manage its exploration, mining, and plant operations in the future in a technically, financially, socially, culturally, and environmentally responsible system.

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

Cagdianao AWASAN ISLAND AWASAN ISLAND Bgy. Tigbao HANIGAD ISLAND SOUTH DINAGAT HANIGAD ISLAND PENINSULA

Bgy. Mabini Bgy. Cantiasay Bgy. San Pedro Bgy. Cantiasay Bgy. San Pedro NONOC ISLAND NONOC ISLAND Bgy. Nonoc Bgy. Talisay Bgy. Nonoc Bgy. Talisay

Figure 4.1.1. Area coverage of the PNPI MPSA which is draped over an area of 23,877 hectares. This technical report covers the three islands of Nonoc, Hanigad, and Awasan and the South Dinagat Peninsula. The populated centers within the area of coverage: red circle – for municipality and yellow circles- for barangays.

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

4.2 Mineral Rights History and Ownership

The economic potential of the laterites of the provinces of Dinagat Islands and Surigao del Norte was first recognized in 1912. The interest then is on the iron content (Fe) of the material that it is then called ferruginous laterite (Santos-Ynigo and Esguerra, 1961). By 1914 the first Mineral Reservation of Surigao was proclaimed by the Commonwealth Government but covers only a fraction of the eastern part of the present Surigao del Norte. It was not until 1939 that the Mineral Reservation was extended to all the laterite- bearing islands north of mainland Surigao which encompasses in part the study areas covered by this technical report.

Marinduque Mining and Industrial Corporation (MMIC) in partnership with Sherritt Gordon Mines took the first interest of developing the laterites of Nonoc Island in 1967 (Vantage Mining Group, 1998). MMIC further expanded the exploration which was initiated then by the Philippine Bureau of Mines in this portion of the Mineral Reservation sometime in 1953 until 1958. MMIC was granted an Operating Contract by the Philippine government in July of 1968. In 1970, a feasibility study was conducted which yielded a geological resource of 80.75 Mt with an average grade of 1.24 wt% Ni and 37.5% wt% Fe at a cut-off grade of 0.9 wt%Ni for Nonoc Island. South Dinagat meanwhile bore 16.8 Mt with an average grade of 1.19% Ni and 39.3 %Fe for the same cut-off grade for Ni.

After this extensive study of the lateritic ores, subsequently mine development and plant construction were undertaken. Production of nickel commenced in 1974 and continued until 1986 when metal prices dropped making production operations unsustainable resulting to its closure. Since then, the refinery and mine is on care and maintenance.

The mineral concession, now converted to an MPSA, has been kept and retained by the management of PNPI. In recent years several operators were granted contracts for mining in small parcels within Nonoc Island. The present MPSA, denominated as MPSA No. 072-1997-XIII is valid until 6th August 2022.

To date, Top Frontier Investment Holdings, Inc., through its subsidiary, Clariden Holdings Inc., purchased the property from the former management of PNPI and is at present in the process of reassessing the remaining resources of the islands of Nonoc, Hanigad, and Awasan and that of South Dinagat peninsula. Competent Person Report | RASantos 17

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5.0 GEOGRAPHIC FEATURES

5.1 Location and Accessibility

Nonoc Island is situated at the southernmost end of mainland Dinagat Island wherein the only separating body of water is the Gaboc Channel transecting generally east-west in a sinuous manner. Commercial boats connects Surigao City to the island through Barangays Nonoc and Talisay crossing a roughly fifteen (15) areal kilometers across width of the channel known as the Hinatuan Passage in an east-northeast direction (Fig. 5.1.1). Surigao City is roughly 700 kilometers south-southeast of Manila and connected by commercial airline routes and by passenger ships.

Hanigad Island is connected to Nonoc Island by a wooden footbridge transecting the Cantiasay Bay (see cover photo). The bridge connects Barangay San Pedro of Hanigad Island and Barangay Cantiasay on Nonoc Island side on the other end. Awasan Island and South Dinagat Peninsula can be reached by light pump boats or motorized bancas by crossing the Gaboc Channel from Nonoc Island.

5.2 Physiography, Climate, and Vegetation

Nonoc Island is generally hilly with elevations hardly exceeding 330 meters above sea level. Peaks and ridges are generally sharp trending mostly towards north and northeast. Prominent among the peaks is Mt. Conico having a central peak with steep conical slopes (Fig. 5.2.1). Rolling areas and gentle slopes in between ridges within the island are generally considered as prospective for nickeliferous laterite mineralization. Major drainages flow north or south only.

On adjacent islands of Hanigad and Awasan sharp ridges paralleling the trend of the island forms the backbone of each island with gentle slopes along sides tapering towards the coast. Small streams drain from the ridge side towards the coast on varying directions. Peaks and ridges in these islands hardly exceed 150 meters in elevation.

Low sharp ridges with almost uniform elevation may imply mature geomorphology which have been uplifted and then again subsided on the latter stage of development. The Competent Person Report | RASantos 18

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Loreto

Basilisa

Cagdianao

Siargao Island

Hinatuan Passage

Hinatuan Island Surigao City

Bucas Grande Island

Taganito, Claver

Figure 5.1.1. Location of study area (in red square) with the adjacent islands in northeastern Surigao region. Localities and islands with known nickel laterite

prospects and mines (yellow circle with red rim).

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A

B

Figure 5.2.1. The topographical features of: (A) Nonoc Island showing the dominant rolling topography (foreground) though partially mined in contrast with the prominent peak of “Cantiasay Hill”; (B) the general topographic features of South Dinagat peninsula having Mt. Gaboc at eastern part (right of the picture and partly cloud covered).

South Dinagat Awasan Island Hanigad Island

N Gaboc Channel

Nonoc Island

Figure 5.2.2. A 3D Satellite imagery of the islands of Nonoc, Hanigad, and Awasan and that of South DInagat peninsula showing the general topography of the island group, the configuration of the coastlines, and the extent of Gaboc Channel (after Google Earth, 2014).

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almost uniform width along the sinuous channel of Gaboc and irregular coastlines of these islands are strong manifestations of the latter event (Fig. 5.2.2).

In contrast with the three aforementioned island, the South Dinagat Peninsula manifests high ridges having Mt. Gaboc as the prominent peak at around 540 meters elevation along its central ridge. The inner segment of the island is marked by these steep ridges and generally rugged terrain. The topography can be attributed to possible play of faults wherein the central segment may be a manifestation of a horst structure. Drainage is generally radial with two major river systems on the eastern and western side of the peninsula. The western river drains towards Barangay Tigbao and the other towards the Pacific Ocean.

Having a carapace of nickeliferous laterites the islands of Nonoc, Hanigad, and Awasan and that of South Dinagat Peninsula are sparsely vegetated. Such soil cover is deprived of minerals essential for the growth of vegetation. Stunted growth of trees are observable both in height and trunk diameter. Among the more prominent of these trees are the small-leafed “paguspus”, the indigenous deep red variety of iron wood locally called “mancuno” or “magcuno”, and sporadic occurrences of conifer known as “maribujoc”. Various vines of rattan palm, ferns, and orchids on branches of larger trees are notable throughout the study area. Pitcher plants and purple-flowered ground orchids patch the lateritic grounds at mid-elevation (Fig.5.2.3).

Figure 5.2.3. Forest of „paguspus” and “maribujoc” in east of Lutawon north of Mining Area 4. Inset is a cluster of pitcher plant and purple ground orchid in the vicinity of Mining Area 1.

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Where the bedrock changes to sedimentary or basalt, vegetal species, sizes, and frequency abruptly changes. Such an occurrence is best observed along the western half Nonoc Island at the vicinity of the abandoned nickel processing plant and the old housing areas along the recently declared special economic zone.

Surigao del Norte and Dinagat Islands Provinces fall under the Type II climate based on the modified Corona Classification of Climates in the Philippine. The region does not manifest a distinct wet and dry seasons but frequency of precipitation is highest during the months of October until March with peaks at around December to January. The season coincides with the northeast monsoon. Coastal waters are rough with large tidal swells (Fig. 5.2.4). The region is also with the typhoon belt of east Asia as shown inset in Fig. 5.2.4 which is based on the typhoon track passing by the Philippines for the last 60 years.

Fig. 5.2.4. The modified Corona Classification of Climates in the Philippine showing the study areas at the southern extreme of the Type II climate system. Note also that Surigao del Norte and Dinagat Island provinces are within the southern limit of the typhoon belt of east Asia (inset).

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5.3 Land Use and Infrastructures

Almost the entirety of Nonoc Island is meant for nickel mining. Major infrastructures at the core of the island are intended for the production of nickel and associated metals. Although the processing plant is no longer in production the whole zone has been declared as a special economic zone (Fig. 5.3.1). The airstrip for light aircraft, some settling ponds and the series of housing development for the staff of the past operation are the infrastructures within the Nonoc Special Land Use. Population centers are along coasts: Barangays Nonoc, Talisay, and Cantiasay.

In Hanigad Island, the only populated center is Barangay San Pedro on the southern tip of the island. Awasan Island remains unpopulated while South Dinagat Peninsula has Barangays Tigbao and Mabini as populated centers.

Although power lines have been built in these populated areas of Barangays Nonoc and Hanigad electricity is yet to be produced relayed from the mainland Dinagat Island.

Figure 5.3.1. Part of the Special Economic Zone within the island of Nonoc covering the nickel processing plant (background) and the old tailings pond (foreground).

5.4 Socio-Economic Environment

From the period of extensive exploration, mine development, and processing plant production, the working population of Nonoc, Hanigad, Awasan, and South Dinagat has been greatly dependent on mining industry until the cessation of operation of the last mining contractor on July of this year. During lulls in mining and exploration activities, the people are dependent on the produce of the surrounding seas having the City of Surigao as major market. Competent Person Report | RASantos 23

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5.5 Environmental Features

The MPSA areas covered by this report are characterized by island ecosystem. The terrestrial component consists of disturbed and undisturbed areas. The disturbed areas are the mining parcels (designated as mining areas 1 to 5), and areas used for facilities to support the mining operations such as stockpiles, tailings pond, water containment, camps and access roads. Most of these areas are bare although some of the mined-out areas were already rehabilitated through the planting of agoho and other local species. The undisturbed areas are either sparsely vegetated or covered by stunted forest growth due to the nutrient deficient topsoil cover. The settling and environmental ponds serve as refuge for many reptiles and birds in addition to the thick forest-like vegetation of areas immediately around the old nickel processing plant and former staff housing areas.

The coastal environment consists of sandy beaches, rocky shorelines and mangrove estuaries. The mangrove estuaries or swamps serve as natural filters for lateritic run-offs and hosts near-coast marine organisms. Shallow sandy deposits or coral growth underlies the floors of the water channels separating the islands. Reefs and coral growth characterize the shallow marine areas.

The sheared and deeply weathered character of the ultramafic bedrock makes it vulnerable to mass movements such as landslides and rock fall.

Figure 5.5.1. The coastal mangrove forest between the islands of Nonoc (foreground), Hanigad (hill on the left), and Awasan (right of the picture) at the west end of Gaboc Channel.

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6.0 PREVIOUS WORKS

Ever since the recognition of the expanded Surigao Mineral District in 1939, interest in the potential of the iron and lately on nickel and cobalt contents of the laterites situated in Dinagat Island group including Nonoc, Hanigad, and Awasan and that of South Dinagat peninsula, motivated various exploration and mining companies to take their chances of evaluating the economic potential of the district. Having been a mineral reservation the Philippine Bureau of Mines took the initiative of exploring the district to evaluate the laterite extent and the various metals grade within. The Philippine Bureau of Mines (PBM) started with a reconnaissance geological mapping in 1946. Succeeding works focused on metallurgical testing of the ores utilizing the materials delineated by the geologists and engineers of PBM from 1953-1958. By 1961 the group headed by Dr. Luis Santos-Ynigo and Fernando B. Esguerra made a compilation of the works done by PBM and published the only known comprehensive work on the Nonoc laterite prior to operation by MMIC. The PBM was able to finish 1,704 test pits and MMIC by 1967 further added 1,298 test pits along with 891 test pits in South Dinagat Peninsula.

After the nickel processing plant ceased operation in 1986, interests to the nickel deposits of Nonoc and adjacent islands was rekindled only in 1995. PNPI hired Minproc Engineers Limited of Australia along with its subsidiary, the Vantage Mining Group to assess the remaining resources and reserves of Nonoc and adjacent islands and peninsula. MMIC, prior and during its operations, termed the „inferred resource‟ (per PMRC and JORC) as „total or geologic reserve‟ which may roughly be the counterpart of the declared „Mineable Reserves‟ then, the reported resource of 81.2 Mt with an average grade of 1.23 % Ni and 37.6 % Fe at 0.9% Ni cut-off or at 64.1 Mt with an average grade of 1.31 %Ni and 36.6 % Fe at 1.0% Ni cut-off grade (Vantage, 1996).

By 2003 Hinatuan Mining Corporation leased the Mt. Sigbanog parcel, the designated Mining Area 5 of PNPI, for them to operate and market the raw ores with terms of royalty to PNPI. More recently in 2010, Shuly Mines Incorporated re-drilled and operated two mining areas of PNPI in Nonoc Island, i.e., Mining Areas 2 and 3 until July 2014. Likewise the ores were directly shipped out without prior processing.

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At present MacroAsia Mining Corporation is contracted to conduct exploratory drilling services along with the re-assessment of Nonoc Island and soon the adjacent peninsula of South Dinagat. Drilling to bedrock, test pitting for density determination, and geologic mapping are the main activities of the commissioned program. After the first phase of the contract that will end by 30th September 2014, resource modeling and calculation using statistical software will be conducted. The drilling services contract is intended to assess the remaining resources of the area by penetrating the full extent of saprolite layer until bedrock and further confirm the geology of the islands.

7.0 HISTORY OF PRODUCTION (internal data of PNPI)

8.0 REGIONAL GEOLOGY

8.1 Regional Geologic Setting

8.1.1 The Dinagat Ophiolite Complex

The Dinagat Ophiolite Complex (DOC) constitutes most of the Dinagat Island group and extends down south to Surigao del Sur and southwestwards along Mainit Range to the Municipality of Jabonga, Province of Agusan del Norte. The DOC forms part of the Eastern Bicol-Eastern Mindanao Ophiolite belt (MGB, 1986) and in particular the Samar- Surigao segment of the belt (Fig. 8.1.1). The age of the ophiolite is interpreted to be of Late Cretaceous (MGB, 2010) based on some potassium-argon dating (K-Ar) although isotopic age dating using the Re-Os isotope system yields much older ages (235 Ma) making it comparable to most of accreted terranes in the Philippine Sea Plate (Santos, 2013).

The DOC typifies an ophiolitic complex having the sedimentary carapace, basalt-diabase formation, gabbros, and the peridotite (Fig.8.1.2). The residual ultramafic rocks comprise the bulk of the exposed lithological units of the DOC to as much as 80% (MGB, 2010). These residual units manifest the highest relief and elevation within the island. Harzburgite composes the major fraction of the ultramafic rocks with minor dunite lenses and some dikes of medium-gained gabbro and minor pyroxenite. Harzburgite on occasion manifests layering of the orthopyroxene and to a minor extent the accessory spinel within its matrix. Isotropic gabbro is very scarce and was observed only as minor Competent Person Report | RASantos 26

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patches of probably tectonic windows or dragged slivers in Barangay Panamaon, Municipality of Loreto in the north and around Barangay Bitayon in Municipality of Tubajon at the center of the island. Basalts and the sheeted dike complex are exposed in valleys and in some coastal areas of the island. These rock units of DOC manifest low rolling relief and lower elevation relative to the ultramafic fraction and its sedimentary cover.

The north-south strip distribution of ophiolitic lithologies having the ultramafic complex as the dominant exposure from east and the upper units of gabbro and basalt towards west imply a tilted terrane towards west. The tilting is further manifested by the general westward dips of the younger sedimentary cover of the DOC (see section 8.1.3).

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Figure 8.1.1. Some of the basic tectonic features of the Philippine archipelago and the spatial relationships of the ophiolite complexes (purple patches). Enclosed in square is the Dinagat Island group where the study areas comprise the southern portion of the group.

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8.1.2 The Metamorphic Basement

Nueva Estrella Schist represents the metamorphic sole of the Dinagat Ophiolite Complex (DOC). The formation is composed mainly of amphibolite schist, quartzofeldspathic schist, and biotite-quartz schist with minor metamorphosed chert forming deep red bands alternating with bright yellowish-brown clastic metasediments. The metasediments on occasion express overturned beds and folding (Fig. 8.1.3). This basement formation is interpreted to be of Cretaceous Age.

8.1.3 The Sedimentary Formation

Younger sedimentary formation covers in part the ophiolitic members along the western coast of the island group. The Loreto Formation is the most pervasive clastic formation which is composed of conglomerate, interbeds of sandstone and mudstone, and shale. The clastic fragments are mainly from the ophiolitic members. The age is believed to be of Late Miocene (Table 8.1.4).

Perhaps the oldest clastic sedimentary formation in the district is the Madanlog Formation which is composed of conglomerate interbedded with calcareous sandstone and mudstone. The formation is interpreted to be of Late Eocene and distributed in the north western coast of the island. It lies unconformable with the basalt and diabase dikes of the DOC.

The possible Late Cretaceous non-clastic formation of Timamana Limestone is the dominant formation observable along coast of Dinagat Island which extends from the vicinity of San Jose in the south of the peninsula up to the western section of the town of Loreto. The limestone is massive and crystalline but shows distinct bedding. Typical of its color is grayish white to almost white.

8.2 Regional Structures

Two distinct structural lineaments are observable throughout the island: 1) the older northeast (NE) fabric which is best preserved north of the Municipality of Loreto at the vicinity of Panamaon and Masdang Point; and 2) the younger northwest (NW) fabric truncating in most parts the NE lineament and is the dominant structure from south of Competent Person Report | RASantos 29

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Loreto down to Nonoc Island and even up to the minute Rasa Island immediately south of Nonoc Island (Fig. 8.2.1). These NW structures even transect the sedimentary cover of the ophiolitic complex.

The DOC having been identified as an accreted terrane is believed to have overthrusted towards west. Thus, low-angle thrust faults mark the contact between the metamorphic sole and the ultramafic units. Thrust structures also separate the ultramafic units with the basalt and diabase occurrences (Fig. 8.2.2).

Figure 8.1.2. The comparative stratigraphies of Palawan Ophiolite Complex (POC) relative to Dinagat Ophiolite Complex (DOC). The DOC sequence typifies an ophiolitic complex but with layered gabbro section which at present have not been observed throughout Dinagat Islands (Santos, 1997).

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A B

Figure 8.1.3. Metasedimentary formation exposed along the western coastline of Nonoc showing: (A) tight folding and overturned beds and (B) folds with alternating beds of varying resistances to weathering.

Table 8.1.4. Stratigraphic column showing the vatious formation ages and the spatial relationships of the Dinagat Ophiolite Complex with adjacent sedimentary (partly as carapace)and metasedimentary (metamorphic sole) formations.

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Figure 8.2.1. Regional geology and structures of Dinagat Island group and part of Surigao del Norte. Note the frequency of the northwest structural fabric which if it serve as riedel or splay of the southern section of Philippine Fault confirms the left lateral movement of the latter (after UNRFNRE 1993; GOP, 2010).

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Figure 8.2.2.. Geology of the Dinagat Island group showing the structural fabric of the island group and the dominance of the ophiolitic rock units. Note that the island group apparently tilts towards the west exposing the ultramafic basement of the ophiolite and leads to westward dip of the sedimentary carapace (after UNRFNRE, 1993).

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8.3 Related Prospects and Other Deposits

Nickeliferous laterite deposit is very pervasive throughout Dinagat Island being the direct weathering product of the ultramafic fraction of the DOC. Several nickel prospects and mines abound within the island group (Fig. 8.2.1). As a consequence the whole of Dinagat Island is covered by various mining and exploration permit applications. Besides PNPI which has the largest nickel operation in Dinagat historically, the adjacent island of Hinatuan hosts the Hinatuan Nickel Mining Corporation‟s nickel operation and the Cagdianao Nickel Mining Corporation operates a property in eastern Dinagat Island which is along the Peninsula Point facing the Pacific Ocean. Both companies are under the umbrella corporation of Nickel Asia Corporation. North and east of Loreto are the MPSA‟s of Comet Exploration and Mining Corporation and Oriental Peninsula Corporation.

Chromite deposits are sporadically distributed throughout the island with well known deposits occurring adjacent to Mt. Redondo in Loreto which is under the claims of Krominco Mining Corporation and the Kongking deposit northwest of Krominco to the eastern shores which is being held by Loreto Mining Corporation. The Vel-ore Mine which used to be operated by North Dinagat Mining Corporation produces “lumpy” (in- situ chromitite) and “sandy” ores (through hydro-licking of laterite).

Quartz-gold veins and veinlets suspected to be hosted by basalt were mined by artisanal miners near Panamaon at the foot of Mt. Kambinlio. The workers make use of a small downhole shaft and an adit underneath follows the trend of the veins. A hydrothermal sulfide deposit near Osmena south of Libjo yields cobalt-rich pentlandite layer. The deposit is believed to be a type of skarn in which the hydrothermal fluids followed the calcareous layer probably below the Loreto Formation.

9.0 MINERAL PROPERTY GEOLOGY

9.1 Lithological Distribution and Related Formation

Nonoc and the adjacent islands of Hanigad and Awasan and South Dinagat Peninsula are all underlain mainly by the ultramafic units of the Dinagat Ophiolite Complex (Fig. 9.1.1). Harzburgite is the dominant lithology with occasional lenses of dunite that hardly Competent Person Report | RASantos 34

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Figure 9.1.1. Simplified geological map of the islands of Nonoc, Hanigad, Awasan, and the South Dinagat peninsula (after PNPI map file, 2014). The lineaments depicted in the map can be a series of thrust faults and some high angle faults related to ophiolitic terrain obduction.

A B C

Figure 9.1.2. Outcrops and floats representing the major rock formations: (A) mottled surface of weathered harzburite due mainly on resistance of pyroxenes to weathering relative to oilivine; (B) the smooth surface of weathered dunite which is attributable to dominance of olivine that weathers readily at similar pace; and (C) the lamination of the mudstone units (Loreto Formation).overlying the ultramafics of DOC.

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exceeds 1 meter in width at the thickest portion of lens. Gabbro dikes, medium to fine – grained, transect in part these ultramafic units.

Coastal areas west of the island of Nonoc yield outcrops of the metamorphic basement which forms part of the Nueva Estrella Schist. The exposure runs from Barangay Nonoc in the south towards west to Barangay Cantiasay and northwards approaching Gaboc Channel. Metasediments with deep red chert exhibit foliation and tight folding of beds along with the presence of some lenses of biotite-quartz schist and amphibolites (see Fig. 9.1.2). Large floats of amphibolites were found along a north-draining river east of Mining Area 1 which implies exposure of the metamorphic sole within the vicinity.

Post-ophiolite emplacement clastic units of the Loreto Formation can be observed as irregular patches in Nonoc Island. The formation is composed mainly of light –gray shale with minor intercalations of arkosic sandstones. Large angular grains are mostly composed of basalt and ultramafic fragments with some large limestone grains. The bedding and lamination trend northwest with gentle dips (30o) towards southwest. The large occurrence of this formation in west-southwest of the island is utilized as site for the nickel processing plant and in part as sector for housing of the plant and mine staff. A strong contrast with the type and frequency of vegetation is observable between areas underlain by Loreto Formation and that of the ultramafics of the Dinagat Ophiolite Complex.

9.2 Local Structures

Strong northwest –trending lineaments representing high –angle faults abound within the islands of Nonoc, Hanigad, and Awasan and in South Dinagat Peninsula. The structural fabric is observable from south of Loreto to the minute island of Rasa south of Nonoc Island. The north-south trending splays imply left-moving transform faults (sinistral faults). The curvilinear faults mapped earlier by PNPI with north-northeast trend and dip gently towards east may delineate series of thrust faults (Fig. 9.1.1).

10.0 MINERALIZATION IN THE MINERAL PROPERTY

Nickeliferrous laterite deposits are basically classified as residual ore in which the primary process in its formation is the extensive weathering of the ultramafic host rock Competent Person Report | RASantos 36

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leading to liberation of metallic ions and its eventual deposition in a matrix under favorable environmental condition. The ultramafic rocks contain predominantly magnesium (Mg)- and iron (Fe)- rich minerals such as olivine and pyroxene which have undergone various degrees of serpentinization. Subsequent weathering may lead to dissolution and transport of metallic ions at varying rates. This results in geochemical stratification within a laterite profile. The upper section is called the limonite layer or zone which is composed mainly of hydrous oxides of iron in the form of goethite with enrichment in cobalt, oxides of manganese, and those of chromium ions but mainly as discrete spinel. The zone exhibits deep reddish brown to dark brown color and minerals present are mostly amorphous. Dominance of harzburgite over dunite as protolith yields lesser or thinner iron hydroxide zone. Otherwise, oxide and oxihydroxide ores will form the major fraction of the ore. Hydroxides and oxy-hydroxides of iron have been found to have positive affinity with scandium (Sc) that in limonite zone the content may range from 60 to 90 ppm.

Iron gradually decreases towards depth thus the profile changes in color to yellowish brown to a lighter tinge at depth. This marked change signifies approach to the lower zone or layer called saprolite. Geochemically saprolite horizon marks the progressive increase in silica and magnesium contents as bedrock is approached. In contrast the iron, manganese, chromium, and cobalt contents decrease towards depth. Downward percolating ions of nickel are trapped at the interface of the bedrock and the saprolite zone. Silica enrichment at depth with hydrous ions of nickel may form hydrous nickel compounds as coating to bedrock surfaces and boulders and as fracture fill. These are called garnierite with characteristic bright, light green color. Pure garnierite compound may contain nickel to as high as 32 wt%.

Nickel contents of laterite along with metals of economic importance such as cobalt, manganese, and chromium are highest on more mature or well-formed laterite profiles. Thus, topography is one physical parameter that may dictate the grade of the metals. At gradients less than 20o laterite profile are usually thick and shows geochemically distinct layering from limonite to saprolite with various sub-stratification in-between. The thickness is usually at 15 meters or thicker. It has been found that weighted average grade of nickel improves by the thickness (or depth) of the host laterite (Fig. 10.1.3).

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11.0 EXPLORATION HISTORY

Nonoc Island and South Dinagat peninsula have been the targets of numerous exploration campaigns since the declaration of Surigao del Norte as a mineral reservation in 1939 which includes the Dinagat Island group. Early works were sporadic test pitting and geological mapping. After the recognition of the economic potential of ferruginous laterite of Surigao and having it declared subsequently as the first Mineral Reservation in the Philippines in 1912 more intensive exploration for ferruginous laterite commenced sometime in the early 1950‟s through the initiative of the Philippine Bureau of Mines (PBM). Initial topographic surveys made use of plane table method. Test pitting are the main activities then having a dimension of 2 x 4 feet with elongation oriented north-south. PBM geologists conducted channel sampling on two opposite faces of the pit while later sampling conducted by MMIC cuts the four walls. On-site sample preparation make use of hand-crushing of coarse fragments followed by mixing, coning, and quarter splitting to arrive at a sample size of about 4kg.

Manual and mechanized auger drilling succeeded the test pitting activity. On-site splitting follows the method imposed for test pitting. PBM samples were sent to government laboratory making use of mixed acid dissolution in atomic adsorption spectrometry (AAS) finish (Vantage, 1996). Based on the compilation of Vantage (1998) assay were based on the following sample sources:

 PBM pits – 1,932 test pits on 100 m x 100 m grid (1953-1958)

 MMIC pits – 1,962 pits on 100 m x 100 m grid, including 602 pits checking the PBM work (pre-1970)  MMIC hand auger drilling - on 25 m x 25 m grid in parts of Mining Area II and V (Nonoc Island only: 1974 -1986)  MMIC machine auger drilling - on 25 m x 25 m and 12.5 m x 12.5 m grids in parts of Mining Area II and V (Nonoc Island only: 1974 - 1986).

Cooperative projects between governments also conducted reconnaissance samplings and extensive geological mapping among which are the United Nations Revolving Fund (UNRF, 1993.) and the Japan International Cooperating Agency (JICA) – Metal Mining Agency of Japan.

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INERAL RESOURCE ESTIMATE REPORT FOR PACIFIC NICKEL PHILIPPINES INCORPORATED (PNPI) September 2014

12.0 MINERAL RESOURCE ESTIMATE

12.1 General Statement and Resource Summary

The Surigao Mineral Reservation has been in existence since 1914 (Santos-Ynigo and Esguerra, 1961) and the Dinagat Island group was incorporated as part of the reservation in 1939. The declaration of the mineral reservation is mainly due to the extensive presence of iron- bearing laterite or ferruginous laterite having iron as the commodity of interest then. The district as such prompted the Commonwealth Government then to conduct the initial studies on the potentials of the laterite. Thus, from 1953 to 1958 the Philippine Bureau of Mines (PBM), the precursor of Mines and Geosciences Bureau (MGB) of the DENR, took the initiative of conducting series of test- pitting and sent the initial set of samples for analysis and metallurgical testing. Adding further to the enthusiasm of exploration then, metallurgical extraction of nickel from laterite is beginning to be developed by 1953 in the Americas.

All geostatistical runs were done using the GEMCOM GEMS on a contracted basis along with the statistician operating the software. Initial runs were done using the MapInfo for raw data plot of nickel (Ni) and iron (Fe) grade. The principle is based mainly on simple Krigging of spatial data.

12.2 Data Base for Estimation: Validation and Integrity

The data based used are all historical data compiled by Minproc in 1998 for its resource assessment of the PNPI properties to include the islands of Nonoc, Hanigad, Awasan, and the South Dinagat Peninsula. The compilation is the combined results of the assays of samples collected from test pitting and drilling conducted from 1953 to 1958 by PBM; the succeeding test pitting and auger drilling of MMIC from 1967, and the confirmatory drilling of Hinatuan Mining Corporation for their intended operation of Mining Area 5. A total of 35,214 test pit and drill hole location producing 256,950 sample analysis were considered for statistical evaluation of the resources (Table 12.2.1)

Data integrity was verified by Vantage Mining Group (1996) where they conducted a program for pit resampling, hand auger, and Vibracore drilling mainly in Nonoc Island and in South Dinagat Peninsula. Standard deviation and mean difference (in%) were Competent Person Report | RASantos 39

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computed for the resulting duplicates. The tabulated results are presented in Appendix I.

Table 12.2.1. Summary of test pit and drill holes with corresponding accumulated number of analysis and the corresponding average depth per hole as compiled by Minproc (1998).

SUMMARY OF DATA Nonoc Location Assays Ave. Depth/Hole Drill holes 17,304 170,845 9.87 Test Pits 15,660 70,467 4.50 Total 32,964 241,312 7.32 South Dinagat Location Assays Ave. Depth/Hole Drillhole/Test Pit 1,634 12,169 7.45 Hanigad Location Assays Ave. Depth/Hole Drillhole/Test Pit 110 890 8.09 Awasan Location Assays Ave. Depth/Hole Drillhole/Test Pit 415 1,023 2.47 HMC Location Assays Ave. Depth/Hole Drillhole 91 1,556 17.10 TOTAL 35,214 256,950

Part of the assessment by Vantage (1996) is on the review of the topographic survey done which unfortunately produced discrepancies since PBM data is lost and they only have to rely on the old map for test pit distribution. For this work topography is based on the collar elevation of all the test pits and drill holes in consideration. The high density/frequency of hole locations serves as shot points for contour build-up.

12.3 Resource Estimation Parameters: Matrix Classification and Bulk Density

For bulk density consideration, this work adopted the values produced by the MMIC survey and correlated the matrix classification and description based on the ranges of the iron contents being used as determining parameter by the undersigned CP. Although the PBM procedure made use of samples of relatively low moisture (Table 12.2.2)

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contents which usually have bearing on the resulting density, the MMIC data is the more recent acceptable values and the trend and values are similar with that of PBM.

NONOC DEPOSIT – COMPARATIVE BULK DENSITY AND MOISTURE CONTENT

PBM MMIC

Matrix Bulk Density (t/m3) Moisture % Bulk Density (t/m3) Moisture %

Limonite 1 1.29 29.30 1.37 31.10

Limonite 2 1.16 29.25 1.19 36.30

Limonite 3 0.96 46.71 0.88 39.60

Serpentinite 4 1.20 30.40 0.97 35.20

Table 12.2.2. Comparative bulk density determination conducted in-situ by PBM and MMIC (after Vantage Mining Group, 1996). This work adopted the MMIC values having been used during production years of PNPI, thus, proven for its integrity. For purposes of this report, Limonite 1 value of MMIC is used to correspond for “Limonite” in the succeeding discussion. Limonite 2 corresponds to the earthy “Saprolite” of this report while Limonite 3 is meant to correspond to “Rocky Saprolite”. The bulk density values are of similar trend (surface heavy and lighter downwards) with that of southern Palawan laterites: Limonite – 1.23; Earthy Saprolite – 1.06; Rocky Saprolite – 0.98.

The whole data base is divided into eight (8) clusters based on the area or spatial distribution of hole (drill hole and test pit) location. Nonoc Island is divided into five (5) clusters which correspond to the five (5) mining areas that used to be the loci of Ni anomalies throughout the island. The islands of Hanigad and Awasan and the South Dinagat Peninsula are each regarded as separate clusters being physically discontinuous having bodies of water in between.

The iron (Fe) contents are considered as the discriminant parameters to separate the laterite matrix into limonite, earthy saprolite, rocky saprolite, and the serpentinized bedrock. Besides the fact that it is the most commonly analyzed element along with Ni and Co. Iron (Fe) contents also have linear trend which are very predictable and

behaves in contrast (almost mirror-image trend depthwise) to that of silica (SiO2) and magnesium (MgO). The amount of Fe also greatly affects the color of the laterite matrix, thus, the changes in Fe contents mark the variance in color of the laterite profile. A study by the undersigned CP on the laterites of Palawan led to establishing the range of

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Fe contents per matrix of a nickeliferrous laterite deposit (Table 12.2.1) which is applied in this report.

Based on MMIC Values This Report Bulk Density Iron Range Matrix Moisture % (t/m3) (MMC Fe range - Palawan) Limonite 1.37 31.10 Above 43 wt% Fe Earthy Saprolite 1.19 36.30 35 to 42 wt% Fe Rocky Saprolite 0.88 39.60 8 to 34 wt% Fe Bed rock (serp) 0.97 35.20 Below 8 wt % Fe

Table 12.2.3. Parameters used in the computation of resources: bulk density values (MMIC) and iron (Fe) ranges (MacroAsia Mining Corporation-MMC) for matrices, e.g., limonite, earthy saprolite, and rocky saprolite.

12.3.1 Nonoc Island Resource Estimate and Model

AREA1

The most extensively explored among the islands covered by this report in terms of test pitting and drilling is Nonoc Island. It covers almost 95% of both the number of holes and the number of samples analyzed. Nonoc Island data treatment is divided into 5 parcels corresponding to the five (5) mining areas that used to be the plan for mine operation. On per matrix and deposit category, the resource is as follows:

Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe Limonite Measured 8,551,700 11,715,829 11,031,693 0.90 47.38 Indicated 3,530,800 4,837,196 4,554,732 0.81 47.33

Inferred 4,256,200 5,830,994 5,490,498 0.78 46.99

Sub-Total 16,338,700 22,384,019 21,076,923 0.85 47.27

Sub-Total Meas + Ind 12,082,500 16,553,025 15,586,425

Earthy Measured 788,000 937,720 914,080 1.14 39.20 Saprolite Indicated 493,000 586,670 571,880 1.06 34.59

Inferred 462,100 549,899 536,036 1.01 18.63

Sub-Total 1,743,100 2,074,289 2,021,996 1.08 32.44

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Sub-Total Meas + Ind 1,281,000 1,524,390 1,485,960

Rocky Measured 4,575,600 4,026,528 4,392,576 0.97 16.31 Saprolite Indicated 1,550,700 1,364,616 1,488,672 0.80 15.87

Inferred 1,541,700 1,356,696 1,480,032 0.81 15.51

Sub-Total 7,668,000 6,747,840 7,361,280 0.90 16.06

Sub-Total Meas + Ind 6,126,300 5,391,144 5,881,248

Grand Total Meas + Ind 19,489,800 23,468,559 22,953,633

Overall TOTAL 25,749,800 31,206,148 30,460,199 0.88 39.53

Table 12.3.1.1. The global resource (0 % Ni cut-off) for mining Area 1 of Nonoc Island. Note that comparative resource are considered using the bulk density values by MMIC and PBM. Ni and Fe weighted average grades are based on MMIC values. “Measured” and “Indicated” categories are computed separately since these are the only categories acceptable to PMRC for economic consideration

The Grade-Tonnage curve shows the various tonnages and the resulting Ni grade at any desired cut-off grade (Fig. 12.3.1.1). An example of which is in Table 12.3.2 on the assumption of producing Ni ores at grade ranges of 1.0%, 1.2%, and 1.80%.

Nonoc Mining Area 1 Cut-Off: % Ni Tonnes Ave. Grade: %Ni 0.7 24,291,322 0.93 0.8 19,518,813 1.01 1.1 4,826,068 1.27 1.7 120,021 1.81

Table 12.3.2. Nonoc Island Mining Area1 showing tonnages for various cut-off grades of Ni (in Ni %) to produce Ni ore grades which may correspond to 1.0%, 1.2%, and 1.8%. To compare with previous resource assessment by Minproc(1998) the 0.7%Ni cut-off is also considered.

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Figure 12.3.1.1. The grade- tonnage curve for Mining Area 1 of Nonoc Island. Various combinations of grade-tonnage vs. the cut-off grades for nickel can be projected in this figure.

Mining Area 1

Fig. 12.3.1.2. Drill hole and test pit distribution map for the whole study area . Enclosed is Mining Area 1 discussed in this section. Note the density/frequency of drill hole/test pit locations within the pemeters of the mining areas.

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LIMONITE

Terrain Model based on Resource collar Categories elevation

LIMONITE

Ni grade on all resource categories

EARTHY SAP EARTHY SAP

Ni grade on all resource Resource categories Categories

ROCKY SAP ROCKY SAP

Ni grade on all resource Resource categories Categories

Fig. 12.3.1.3. Series of GEMCOM-GEMS generated figures showing the distribution of Ni grades (in %Ni) and categories (measured -RED, indicated-GREEN, and inferred-LT. BLUE) per matrix of the laterite profile (limonite (LIM), earthy saprolite (ES), and rocky saprolite(RS)) in Mining Area 1. See inset legend for the color attributes of corresponding Ni grades. For Fe grade and resource category distribution please refer to Appendix I.

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AREA 2

Area 2 (combining mining parcels 2 and 3) is the biggest of the five (5) areas (Fig. 12.3.1.4) considered in the resource assessment and has been the most active in terms of contractual exploration and production in the recent past. Shuly Mines Incorporated (SMI) sourced its ore shipment from this area and the adjacent Mining Area 4 until end of July 2014. Besides the large area coverage and, thus, the Ni resource, Area 2 is also nearest to the loading facilities of the island which makes the production operation to have economic advantage. Resource assessment of the area yields the following (Table 12.3.1.4):

Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) %Ni %Fe Limonite Measured 33,561,722 45,979,559 43,294,621 0.90 46.60 Indicated 11,040,489 15,125,470 11,592,513 0.77 46.80

Inferred 7,738,355 10,601,546 7,428,821 0.74 44.35

Sub-total Overall 52,340,566 71,706,575 62,315,956 0.85 46.31 Sub-total Meas + Ind 44,602,211 61,105,029 54,887,135

Earthy Indicated 11,770,467 14,006,856 13,653,742 0.89 35.95 Saprolite

Rocky Indicated 17,304,092 15,227,601 20,072,747 0.92 16.89 Saprolite Grand Total Meas + Ind 73,676,770 90,339,486 88,613,623

Overall Total Overall 81,415,125 100,941,032 96,042,444 0.87 40.43

Table 12.3.1.4. The global resource (0 % Ni cut-off) for Mining Area 2 of Nonoc Island. Note that comparative resource are considered using the bulk densities done by MMIC and the one by PBM. Ni and Fe weighted average grades are based on MMIC values. Note that “Measured” and “Indicated” categories are computed separately since these are the only categories acceptable to PMRC for economic consideration.

Mining Area2 Cut-off: %Ni Tonnes Grade: %Ni 0.7 74,677,972 0.96 0.8 57,373,555 1.04 1.1 17,109,858 1.28 1.8 154,069 1.85

Table 12.3.1.5. Nonoc Island Mining Area2 showing tonnages for various cut-off grades of Ni (in Ni %) to produce Ni ore grades which may correspond to 1.0%, 1.2%, and 1.8%. To compare with previous resource assessment by Minproc (1998) the 0.7%Ni cut-off is also considered.

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Mining Area 2

Fig. 12.3.1.4. Drill hole and test pit distribution in Mining Area 2 & 3 (enclosed in red polygon). Note the frequency/density of drill hole location within bounds of the Mining Area 2. Proximal holes to the perimeter of the mining area is included in the resource assessment in this section.

Table 12.3.1.5. The grade-tonnage curve for Mining Area 2 & 3 of Nonoc Island. Various combinations of grade-tonnage vs. the cut-off grades for nickel can be projected in this figure.

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Ni Grade in Resource LIMONITE Category in LIMONITE

Overall

Resource Category

Terrain model based on collar elevation Ni Grade in Resource EARTHY Category in

SAPROLITE EARTHY SAPROLITE

Ni Grade in Resource Category ROCKY in EARTHY SAPROLITE SAPROLITE

Fig. 12.3.1.6. Series of GEMCOM-GEMS generated figures showing the distribution of Ni grades (in %Ni) and categories (measured -RED, indicated-GREEN, and inferred-LT. BLUE) per matrix of the laterite profile (limonite (LIM), earthy saprolite (ES), and rocky saprolite (RS)) in Mining Area 2. See inset legend in Fig. 12.3.1.4 for the color attributes of corresponding Ni grades. For Fe grade and resource category distribution please refer to Appendix I.

GABOC AREA

Gaboc area covers the northern parcel of Mining Area 2 (Fig. 12.3.1.9). For the purpose of resource assessment Gaboc was separated from the nearest parcel which is Mining Area 2 having been pristine in terms of mining operation and the drill hole and test pit frequency is not as much as Area 2. Noticeable in the series of figures on resource categories and grades the built up of polygons in the terrain model based on collar elevation due to scarcity of interpolation points and the resource category is very patchy which implies distant and relatively shallow holes. Through ordinary Krigging the resource evaluation yields as follows:

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Resource Tonnes Tonnes Wgd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe Limonite Measured 574,700 787,339 741,363 0.86 43.43 Indicated 1,404,200 1,923,754 1,628,872 0.81 42.98

Inferred 2,447,600 3,353,212 2,349,696 0.76 41.90

Sub-total Overall 4,426,500 6,064,305 4,719,931 0.79 42.44 Sub-total Meas+Ind 1,978,900 2,711,093 2,370,235

Earthy Measured 1,010,900 1,202,971 1,304,061 0.77 22.15 Saprolite Indicated 1,620,500 1,928,395 1,879,780 0.76 11.21

Inferred 1,376,300 1,637,797 1,321,248 0.69 1.73

Sub-total Overall 4,007,700 4,769,163 4,505,089 0.74 10.72 Sub-total Meas+Ind 2,631,400 3,131,366 3,183,841

Rocky Measured 3,671,400 3,230,832 4,736,106 0.60 17.09 Saprolite Indicated 4,934,000 4,341,920 5,723,440 0.59 17.12

Inferred 4,136,600 3,640,208 3,971,136 0.58 12.46

Sub-total Overall 12,742,000 11,212,960 14,430,682 0.59 15.60 Sub-total Meas+Ind 8,605,400 7,572,752 10,459,546

Grand -Total Meas+Ind 13,215,700 13,415,211 16,013,622

Overall total 21,176,200 22,046,428 23,655,702 0.68 21.93

Table 12.3.1.6. The global resource (0 % Ni cut-off) for the Gaboc Area of Nonoc Island. Comparative resource are considered using the bulk densities done by MMIC and the one by PBM. Ni and Fe weighted average grades are based on MMIC values. “Measured” and “Indicated” categories are computed separately since these are the only categories acceptable to PMRC for economic consideration.

GABOC AREA Cut-Off: Ni% Tonnes Grade: Ni% 0.7 9,300,170 0.90 0.9 3,533,660 1.09 1.1 1,418,327 1.24 1.5 30,583 1.50

Table 12.3.1.7. Gaboc Area in northern Nonoc Island showing the tonnages for various cut-off grades of Ni (in Ni %) to produce Ni ore grades which may correspond to 1.0%, 1.2%, and 1.5%. To compare with previous resource assessment by Minproc (1998) the 0.7%Ni cut-off is also considered. To compare with previous resource assessment by Minproc (1998) the 0.7%Ni cut-off is also considered.

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Fig. 12.3.1.7. The grade tonnage curve for Gaboc Area of Nonoc Island. Various combinations of grade-tonnage vs. the cut-off grades for nickel can be projected in this figure.

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Overall Resource Category

Terrain model based

on collar elevation

Resource Ni Grade in LIMONITE Category in LIMONITE

Ni Grade in Resource EARTHY Category in SAPROLITE EARTHY SAPROLITE

Ni Grade in Resource ROCKY Category in ROCKY SAPROLITE SAPROLITE

Figure 12.3.1.8. Series of GEMCOM-GEMS generated figures showing the distribution of Ni grades (in %Ni) and categories (measured -RED, indicated-GREEN, and inferred-LT. BLUE) per matrix of the laterite profile (LIMONITE, EARTHY SAPROLITE, and ROCKY SAPROLITE) in GABOC Area. See inset legend in Fig. 12.3.1.4 for the color attributes of corresponding Ni grades. For Fe grade and resource category distribution please refer to Appendix I. Competent Person Report | RASantos 51

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Gaboc Area

Fig. 12.3.1.9. Drill hole and test pit distribution map of Gaboc Area (enclosed in red polygon).

AREA 4

Area 4 were combined having contiguous distribution of drill holes and test pits. Mining Area 5 was excluded to limit the number of analyses on per run basis of the statistical software GEMCOM-GEMS. As such processing time for the analysis was lessened and errors are relatively easier to detect. The hole distribution in the north, Lutawon Area, is much less dense relative to the southern portion (Fig. 12.3.1.8). The difference in the frequency/density of holes has marked impression in the terrain mode wherein the mottling in relief is marked by areas with relatively less holes. The resource assessment of the area yields the following results:

Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe LIMONITE Measured 13,246,300 18,147,431 17,087,727 0.79 45.92 Indicated 3,828,700 5,245,319 4,441,292 0.72 45.53

Inferred 2,180,200 2,986,874 2,092,992 0.69 41.92

Sub Total 19,255,200 26,379,624 23,622,011 0.76 45.39

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Sub total Meas+Ind 17,075,000 23,392,750 21,529,019

EARTHY Measured 6,212,200 7,392,518 8,013,738 0.91 38.69 SAPROLITE Indicated 2,256,600 2,685,354 2,617,656 0.88 37.28

Inferred 1,516,900 1,805,111 1,456,224 0.84 37.95

Sub Total 9,985,700 11,882,983 12,087,618 0.89 38.26

Meas+Ind 8,468,800 10,077,872 10,631,394

ROCKY Measured 8,348,300 7,346,504 10,769,307 0.92 22.46 SAPROLITE Indicated 3,418,900 3,008,632 3,965,924 0.79 21.63

Inferred 2,624,600 2,309,648 2,519,616 0.74 22.50

Sub Total 14,391,800 12,664,784 17,254,847 0.86 22.27

Meas+Ind 11,767,200 10,355,136 14,735,231

Total Meas+Ind 37,311,000 43,825,758 46,895,644

Overall Total 43,632,700 50,927,391 52,964,476 0.82 37.98

Table 12.3.1.8. The global resource (0 % Ni cut-off) for Mining Area 4 of Nonoc Island. In the table the comparative resources are considered using the bulk densities done by MMIC and by PBM. Ni and Fe weighted average grades are based on MMIC values. The “Measured” and “Indicated” categories are computed separately since these are the only categories acceptable to PMRC for economic consideration.

. Mining Area 4

Cut-Off: %Ni Tonnes Grade: %Ni

0.7 34,933,110 0.93 0.6 43,108,576 0.88

0.9 16,856,856 1.07

1.5 291,038 1.57

Table 12.3.1.9. Ni resources of Area 4 using various cut-off grades to produce target grades of 0.8 %Ni, 1.0 %Ni, and 1.5 %Ni. The values were based on the grade vs. tonnage curve below (Fig. 12.3.1.8). To compare with previous resource assessment by Minproc (1998) the 0.7%Ni cut-off is also considered.

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Figure 12.3.1.10. . The grade - tonnage curve for Mining Area 4 of Nonoc Island. Various combinations of grade-tonnage vs. the cut-off grades for nickel can be projected using this figure.

Mining Area 4

Figure 12.3.1.11. Drill hole and test pit distribution in Mining Area 4 (in red polygon). Note the continuity with Mining Area 5 in extreme east of Nonoc Island.

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Terrain Model Overall based on Collar Resource Elevation Category

AREA 4

Ni-grade Resource Distribution in Category in LIMONITE LIMONITE

Ni-grade Resource Distribution in Category in EARTHY EARTHY SAPROLITE SAPROLITE

Ni-grade Resource Distribution in Category in ROCKY ROCKY SAPROLITE SAPROLITE

Figure 12.3.1.12. Map series of Mining Area 4 showing grade distribution of Ni per matrix

(limonite, earthy saprolite, and rocky saprolite) and the resource category per matrix (measured -red, indicated-green, and inferred-blue). The figures are GEMCOM-GEMS generated. Refer to Fig. 12.3.1.4 for the Ni grade attributes.

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AREA 5

Area 5 covers the easternmost parcel of the island. It is adjacent to Area 4 and the drill holes and test pit distribution appear contiguous. The area used to contain the highest grade ores and, thus, became the target for mining by Hinatuan Mining Corporation (HMC) in the recent past. At present the area is under rehabilitation by the latter mining operator. From historical data, Area 5 hosts the following resource:

Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe LIMONITE Measured 20,154,700 27,611,939 25,999,563 0.91 47.41 Indicated 6,986,400 9,571,368 8,104,224 0.88 47.38

Inferred 4,104,600 5,623,302 3,940,416 0.86 45.92

Sub-total 31,245,700 42,806,609 38,044,203 0.90 47.21

Sub-total Meas+Ind 27,141,100 37,183,307 34,103,787

EARTHY Measured 3,307,500 3,935,925 4,266,675 1.06 40.03 SAPROLITE Indicated 1,435,300 1,708,007 1,664,948 1.06 39.88

Inferred 785,600 934,864 754,176 1.09 26.85

Sub-total 5,528,400 6,578,796 6,685,799 1.06 38.12

Sub-total Meas+Ind 4,742,800 5,643,932 5,931,623

ROCKY Measured 6,234,700 5,486,536 8,042,763 1.33 17.40 SAPROLITE Indicated 2,289,900 2,015,112 2,656,284 1.18 19.77

Inferred 1,458,200 1,283,216 1,399,872 1.04 18.31

Sub-total 9,982,800 8,784,864 12,098,919 1.26 18.08

Sub-total Meas+Ind 8,524,600 7,501,648 10,699,047

Total Meas + Ind 40,408,500 50,328,887 50,734,457

Grand total Overall 46,756,900 58,170,269 56,828,921 0.97 41.78 Table 12.3.1.10. The global resource (0 % Ni cut-off) for Mining Area 5 of Nonoc Island. The “Measured” and “Indicated” categories are computed separately since these are the only categories acceptable to PMRC for economic consideration.

AREA 5 Cut-Off: %Ni Tonnes Grade: %Ni 0.70 50,278,550 1.03 0.80 42,294,865 1.08 1.60 2,010,606 1.84 1.90 593,663 2.08 Table 12.3.1.11. Nickel resources at selected cut-off grades with due consideration on 0.7%Ni for comparison with Minproc (1998). Competent Person Report | RASantos 56

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Area 5

Figure 12.3.1.13. Drill hole and test pit distribution map with Mining Area 5 enclosed in polygon.

Figure 12.3.1.14. Grade-tonnage curve for Mining Area 5. Note the flat- linear values of the Ni ore grade once it gets the 0.8 %Ni cut-off

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Terrain Model Overall Resource Based on Collar Category for Area5 Elevation

Ni grade Distribution Resource Category in Limonite for Limonite

Ni grade Distribution Resource Category in Earthy Saprolite for Earthy Saprolite

Ni grade Distribution Resource Category in Rocky Saprolite for Rocky Saprolite

12.3.1.15. Map series of Mining Area 5 showing grade distribution of Ni per matrix (limonite, earthy saprolite, and rocky saprolite) and the resource category per matrix (measured-red, indicated-green, and inferred-blue). The figures are GEMCOM-GEMS generated. Refer to Fig. 12.3.1.4 for the Ni grade attributes.

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12.3.2 South Dinagat Peninsula

South Dinagat Peninsula is comparative in lateral extent to Nonoc Island but of higher relief and elevation. Throughout the peninsula pockets of rolling terrain abound on the flanks of Mt. Gaboc and with its proximity to Nonoc Island makes the peninsula lucrative for exploration and mining operation. Majority of the exploration activities done in the area is test pitting with minor auger drilling. Results of such activities yield the following resources: South Dinagat

Cut-Off: %Ni Tonnes Grade: %Ni

0.7 94,561,908 0.91 0.9 41,038,461 1.06 1.6 734,877 1.83 1.8 305,969 2.03

Table 12.3.2.1. Tonnages based on Ni cut-off grades to produce ores with Ni grades of 1.0%, 1.2%, 1.8%, and 2.0%. Tonnage at a cut-off of 0.70%Ni is also considered for purposes of comparison with earlier assessment conducted.

Figure 12.3.2.1. The Grade-Tonnage curve for South Dinagat peninsula. Note the resource is almost zero at cut-off grade of 1.5 %Ni.

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Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe Limonite Measured 20,800,000 28,496,000 26,832,000 0.82 46.25 Indicated 20,703,600 28,363,932 24,016,176 0.83 46.39

Inferred 22,367,800 30,643,886 21,473,088 0.82 43.70

Sub total 63,871,400 87,503,818 72,321,264 0.82 45.40

Sub-total Meas+Ind 41,503,600 56,859,932 50,848,176

Earthy Measured 3,541,400 4,214,266 4,568,406 0.94 39.78 Saprolite Indicated 4,147,700 4,935,763 4,811,332 0.89 39.65

Inferred 5,748,300 6,840,477 5,518,368 0.81 29.63

Sub total 13,437,400 15,990,506 14,898,106 0.87 35.40

Sub-total Meas+Ind 7,689,100 9,150,029 9,379,738

Rocky Measured 8,674,700 7,633,736 11,190,363 0.84 19.82 Saprolite Indicated 11,432,600 10,060,688 13,261,816 0.76 19.81

Inferred 13,605,500 11,972,840 13,061,280 0.72 11.74

Sub total 33,712,800 29,667,264 37,513,459 0.76 16.55

Sub total Meas+Ind 20,107,300 17,694,424 24,452,179

Total Meas+Ind 69,300,000 83,704,385 84,680,093

Grand Total Overall 111,021,600 133,161,588 124,732,829 0.82 37.77 Table 12.3.2.2. The global or overall Ni resource (i.e., at 0 % Ni cut-off) of South Dinagat Peninsula.

South Dinagat Area

Figure 12.3.2.2. Drill hole and test pit distribution map in South Dinagat peninsula (enclosed in red

polygon). Note the hole density on the northeast and southwestern extreme of the area.

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Overall Resource Terrain Model Based Category for South on Collar Elevation Dinagat

Ni grade Dsitribution for Rocky Saprolite

Ni grade Distribution in Resource Category Limonite for Limonite

Ni grade Distribution in Resource Category for Earthy Saprolite Earthy Saprolite

Ni grade Distribution for Resource Category Rocky Saprolite for Rocky Saprolite

Fig. 12.3.2.3. Series of GEMS generated maps showing the Ni grade distribution per matrix with resource categorization.

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Due to the relative scarcity of drill holes and test pits in South Dinagat the holes were “snapped” to a digitized base map from a commercially printed map. It is meant to reduce the effects of interpolation of collar elevation which may increase the volume of the resource. The preceding series of maps shows the grade distribution per matrix (limonite,earthy saprolite, rocky saprolite) on per resource category (measured, indicated, inferred) (Fig. 12.3.2.3).

12.3.3 Hanigad Island

Hanigad is situated in the westernmost end of Nonoc Island. Though explored the drill hole and test pitting density is not as high as South Dinagat and Nonoc Island. Geostatistical analysis of the historical data in this island yields the following resources:

Hanigad Island Cut-Off: %Ni Tonnes Grade: %Ni 0.7 5,825,977 0.90 0.9 2,276,802 1.04 1.1 533,314 1.25 1.5 4,634 1.53 Table 12.3.3.1. Tonnages based on Ni cut-off grades to produce ores with Ni grades of 1.0%, 1.2%, 1.8%, and 2.0%. The cut-off grade of 0.7% Ni is hereby considered for comparative purposes on previous resource estimates.

Figure 12.3.3.1. The Grade-Tonnage curve for Hanigad Island.

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Resource Tonnes Tonnes Wtd. Ave. Grade Matrix Volume Category (MMIC) (PBM) Ni Fe Limonite Measured 424,600 89,216 547,734 0.84 49.25 Indicated 1,938,700 650,605 2,248,892 0.67 5.47

Inferred 658,500 902,145 632,160 0.70 9.63

Sub total 3,021,800 340,756 3,428,786 0.78 27.95

Sub-total Meas+Ind 2,363,300 739,821 2,796,626

Earthy Measured 553,800 659,022 714,402 0.79 38.69 Saprolite Indicated 1,179,900 1,404,081 1,368,684 0.77 29.62

Inferred 1,273,600 1,515,584 1,222,656 0.76 17.54

Sub total 3,007,300 3,578,687 3,305,742 0.77 26.18

Sub-total Meas+Ind 1,733,700 2,063,103 2,083,086

Rocky Measured 1,180,600 1,038,928 1,522,974 0.66 15.88 Saprolite Indicated 3,142,500 2,765,400 3,645,300 0.64 15.80

Inferred 6,308,000 5,551,040 6,055,680 0.56 12.31

Sub total 10,631,100 9,355,368 11,223,954 0.60 13.74

Sub total Meas+Ind 4,323,100 3,804,328 5,168,274

Total Meas+Ind 8,420,100 6,607,252 10,047,986

Grand Total Overall 16,660,200 13,274,811 17,958,482 0.65 17.46 Table 12.3.3.2. The overall Ni resource (i.e., at 0 % Ni cut-off) of Hanigad Island.

Hanigad Island

Figure 12.3.3.2. . Drill hole and test pit distribution map of Hanigad Island (enclosed in red polygon). Competent Person Report | RASantos 63

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Overall Resource Category

Topography Based on Collar Elevation

Resource Category in Ni grade distribution in Resource Category in Limonite Limonite Limonite

Ni grade distribution in Resource Category in Earthy Saprolite Earthy Saprolite

Ni grade distribution in Resource Category in Rocky Saprolite Rocky Saprolite

Figure 12.3.3.3. Series of maps showing the Ni grade distribution and resource category in Hanigad Island. Top left map is the digital terrain model based on collar elevation.

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12.3.4 Awasan Island

The Island of Awasan is apparently contiguous with Nonoc Island and South Dinagat Peninsula but with Gaboc Channel in between them. Drill holes and test pits are largely spaced that the resulting resource is mainly categorized as Indicated or Inferred with barely a few points as Measured. Resource assessment yields the following results:

Awasan Island Cut-Off: %Ni Tonnes Grade: %Ni 0.7 20,647,930 0.95 0.8 13,830,501 1.05 1.1 5,617,965 1.25 1.6 199,232 1.84

Table 12.3.4.1. Cut-off grades for nickel and the corresponding tonnages to produce grades of 1.0%, 1.2%, and 1.8%Ni.

Figure 12.3.4.1. Grade – Tonnage curve for Awasan Island. Note that at Ni cut-off grade of 1.5% the laterite material is almost none.

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Resource Tonnes Tonnes Wtd. Ave.Grade Matrix Volume Category (MMIC) (PBM) Ni Fe Limonite Measured 5,594,800 7,664,876 7,217,292 0.66 48.76 Indicated 13,716,500 18,791,605 15,911,140 0.64 48.78

Inferred 19,904,200 27,268,754 19,108,032 0.66 40.27

Sub total 39,215,500 53,725,235 42,236,464

Sub-total Meas+Ind 19,311,300 26,456,481 23,128,432

Earthy Measured 419,400 499,086 541,026 0.55 39.01 Saprolite Indicated 944,500 1,123,955 1,095,620 0.57 27.28

Inferred 2,160,000 2,570,400 2,073,600 0.72 9.89

Sub total 3,523,900 4,193,441 3,710,246

Sub-total Meas+Ind 1,363,900 1,623,041 1,636,646

Rocky Measured 873,900 769,032 1,127,331 0.56 20.71 Saprolite Indicated 2,064,900 1,817,112 2,395,284 0.59 17.82

Inferred 4,120,800 3,626,304 3,955,968 0.65 8.42

Sub total 7,059,600 6,212,448 7,478,583

Sub total Meas+Ind 2,938,800 2,586,144 3,522,615

Total Meas+Ind 23,614,000 30,665,666 28,287,693

Grand Total Overall 49,799,000 64,131,124 53,425,293 0.65 39.65 Table 12.3.4.2. The computed tonnages for every resource category of the entirety (0 % cut-off) of the laterite materials in Awasan Island.

Awasan Island

Figure 12.3.4.2.. Drill holes and test pits distribution map of Awasan Island.

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Terrain Model Based Overall Resource on Collar Elevation Category in Awasan Island

Ni grade distribution Resource Category in in Limonite Limonite

Ni grade distribution Resource Category in in Earthy Saprolite Earthy Saprolite

Ni grade Resource Category distribution in in Rocky Saprolite Rocky Saprolite

Figure 12.3.4.3. Series of GEMCOM-GEMS generated maps showing the Ni grade per matrix and the resource category for each matrix for Awasan Island nickel resources.

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13.0 INTERPRETATION AND CONCLUSION

The islands of Nonoc, Hanigad, and Awasan and South Dinagat peninsula are almost in its entirety underlain by the ultramafic rock fraction of the Dinagat Ophiolite Complex (DOC). Patches of younger sedimentary formation (Loreto Formation) made up mainly of fine clastics were delineated in Nonoc Island wherein the largest of which occurs west of the island. This patch of non-nickeliferrous laterite area was chosen to become the nickel processing plant site and support facilities such as power generation housing, coal pad and stockyard, offices, and most of the housing units for the company personnel then. Uplifted coastlines in the west of Nonoc and some high-angle faults transecting most of the rivers expose the metamorphic sole composed mainly of metasediments to include chert and schists and metavolcanic outcrops in form of amphibolites (Nueva Estrella Schist). The latter formation defines the bottom of the ophiolitic complex and thus the maximum extent of the source bedrock for nickel and related deposit

Resource assessment utilizing the historical data accumulated throughout the exploration and eventual operation of Pacific Nickel Philippine Inc. (PNPI) yields 195M Mt at a cut-off grade of 0.70%Ni with a resulting grade of 0.97%Ni for the whole island of Nonoc. The combined resources of South Dinagat peninsula and the islands of Hanigad and Awasan accumulate to 121M Mt at similar cut-off grade of 0.70 %Ni and resulted in a grade of 0.92%Ni (Table 12.1). Thus, at 0.70%Ni cut-off grade the combined resources of the four (4) areas in consideration yield 315M Mt at a weighted average grade of 0.95%Ni.

AREA Cut-Off: %Ni Tonnes Grade: %Ni Nonoc Island Mining Area 1 0.70 24,291,322 0.96 Mining Area 2 0.70 74,677,972 0.97 Gaboc Area 0.70 9,300,170 0.90 Mining Area 3 & 4 0.70 34,933,110 0.93 Mining Area 5 0.70 50,278,550 1.03 Sub-Total 0.70 193,481,124 0.97 South Dinagat 0.70 94,561,908 0.91 Hanigad 0.70 5,825,977 0.90 Awasan 0.70 20,647,930 0.95 Sub-Total 0.70 121,035,815 0.92 Total Resource 0.70 314,516,939 0.95

Table 13.1.1. Total nickel resource of Nonoc, Hanigad, and Awasan islands and the South Dinagat Penisula at a cut-off grade of 0.7% Ni. Competent Person Report | RASantos 68

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Taking into consideration the matrices (limonite, earthy saprolite, rocky saprolite) and the resource categories (measured, indicated) which in effect removes the contribution of inferred category, the resulting resource for the whole island of Nonoc is at 165M Mt and an improved average grade of 1.24 %Ni for the same cut-off grade of 0.70%Ni. The adjacent islands of Hanigad and Awasan and that of South Dinagat peninsula meanwhile yield a total resource of 72M Mt with an average grade of 1.25%Ni. It is curious to note that improving average nickel grade towards depth, limonite to earthy saprolite to rocky saprolite, were observed in all the assessed areas. The South Dinagat peninsula laterite manifests similar geochemical signature with that of Mining Area 5 of Nonoc Island having an average nickel grade of 1.40 % with highest average Ni grade at rocky saprolite section of 1.70% to 1.80% Ni and the Fe contents average at 35% (Table 12.1.2 and 12.1.3). These characteristics define the high potential of South Dinagat peninsula for its nickel resources. The combined resources of all the areas in consideration are at 235M Mt at an average of 1.25%Ni and the Fe average at 35%.

It has to be noted that the resource assessment done can be considered as a first approximation having to rely on some external parameters such as topographic survey based on digitized commercial map and the resulting topography based on collar elevation. A more precise topographic survey being the basis for volume calculation of the lateritic material will definitely change the resulting resources by a certain percentile. Density values which are critical factors in the resource calculation were adopted from the works of Philippine Bureau of Mines in the 1950‟s and that of the former mine and nickel processing plant operator, Marinduque Mining and Industrial Corporation (MMIC) and requires further verification as to integrity and accuracy.

The present contracted exploration services being conducted by MacroAsia Mining Corporation will confirm the present remaining resource of the areas in consideration and the adjoining parameters used such as density and topographic survey data. This work will also update the remaining resource after several contracted mining activities have been done after the cessation of nickel processing plant activity by mid-1980‟s. Initial results of the project yield limonite: saprolite (earthy and rocky saprolite) ratio of 1:2 on thick (approx. 25-to 35-meter drill holes) laterite section in an undisturbed area. Such ratio implies that improvement in nickel grades is to be expected having the dominance of saprolite material which is the usual high-grade nickel carrier.

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Cut-off Ni Fe wt AREA Matrix CATEGORY Volume Resource %Ni Wt% % Nonoc Limonite Measured 0.7 7,344,600 10,062,102 1.09 47.20 Area 1 Indicated 0.7 2,611,000 3,577,070 1.05 47.26

Earthy Saprolite Measured 0.7 740,600 881,314 1.30 39.23

Indicated 0.7 428,600 21,658 1.15 32.87

Rocky Saprolite Measured 0.7 3,427,400 431,112 1.40 32.77

Indicated 0.7 947,600 833,888 1.29 17.92

Sub-total 0.7 15,499,800 15,807,144 1.21 36.21

Nonoc Limonite Measured 0.7 27,636,094 37,861,448 1.24 46.44 Area 2 Indicated 0.7 7,261,992 9,948,929 1.14 47.05

Earthy Saprolite Measured 0.7

Indicated 0.7 8,264,238 9,834,442 1.39 37.47

Rocky Saprolite Measured 0.7

Indicated 0.7 12,059,668 10,612,509 1.39 17.44

Sub-Total 0.7 55,221,992 68,257,328 1.29 37.10

Gaboc Limonite Measured 0.7 414,900 568,413 1.10 43.25 Area Indicated 0.7 984,600 1,348,902 1.09 43.27

Earthy Saprolite Measured 0.7 534,000 635,460 1.16 21.37

Indicated 0.7 929,700 1,106,343 1.15 14.27

Rocky Saprolite Measured 0.7 858,300 755,304 1.05 21.47

Indicated 0.7 1,109,400 313,896 1.05 22.66

Sub-total 0.7 4,830,900 4,728,318 1.10 27.71

Nonoc Limonite Measured 0.7 8,724,300 11,952,291 1.14 43.31 Area 3 Indicated 0.7 1,841,300 2,522,581 1.04 43.22

Earthy Saprolite Measured 0.7 5,300,600 6,307,714 1.51 38.63

Indicated 0.7 1,713,100 2,038,589 1.14 38.45

Rocky Saprolite Measured 0.7 6,831,100 6,011,368 1.24 22.00

Indicated 0.7 2,231,800 1,963,984 1.20 22.24

Sub-total 0.7 26,642,200 30,796,527 1.21 34.64

Nonoc Limonite Measured 0.7 17,708,400 24,260,508 1.19 47.41 Area 5 Indicated 0.7 5,683,900 7,786,943 1.19 47.74

Earthy Saprolite Measured 0.7 2,940,200 3,498,838 1.40 39.13

Indicated 0.7 1,238,000 1,473,220 1.35 39.15

Rocky Saprolite Measured 0.7 5,932,500 5,220,600 1.70 16.51

Indicated 0.7 2,088,700 1,838,056 1.60 20.16

Sub-total 0.7 35,591,700 44,078,165 1.40 35.02

Nonoc Sub-TOTAL 0.7 137,786,592 163,667,482 1.24 34.14

Table 13.1.2. Total nickel resource of Nonoc Island at a cut-off grade of 0.7% Ni on per matrix and resource category. Competent Person Report | RASantos 70

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Cut-off Ni Fe wt AREA Matrix CATEGORY Volume Resource %Ni Wt% % South Limonite Measured 0.7 16,145,400 22,119,198 1.30 46.42 Dinagat Indicated 0.7 16,418,100 22,492,797 1.24 46.63

Earthy Measured 0.7 2,985,300 3,552,507 1.25 39.54 Saprolite Indicated 0.7 3,281,200 799,561 1.30 39.13

Rocky Measured 0.7 5,472,000 4,815,360 1.80 18.18 Saprolite Indicated 0.7 5,597,800 4,926,064 1.70 19.87

Sub-total 0.7 49,899,800 58,705,487 1.43 34.96

Hanigad Limonite Measured 0.7 196,100 61,756 0.99 36.65 Island Indicated 0.7 923,300 296,672 1.16 19.35

Earthy Measured 0.7 320,000 380,800 1.15 39.92 Saprolite Indicated 0.7 652,200 349,384 1.14 37.19

Rocky Measured 0.7 621,400 776,118 1.14 22.27 Saprolite Indicated 0.7 1,501,500 1,321,320 1.15 23.41

Sub-total 0.7 4,214,500 3,186,050 1.12 29.80

Awasan Limonite Measured 0.7 2,024,300 2,773,291 1.14 47.59 Island Indicated 0.7 4,347,700 5,956,349 1.09 47.44

Earthy Measured 0.7 103,800 123,522 0.99 39.84 Saprolite Indicated 0.7 234,900 279,531 1.15 33.28

Rocky Measured 0.7 183,400 161,392 1.40 20.17 Saprolite Indicated 0.7 537,300 472,824 1.37 15.94

Sub-total 0.7 7,431,400 9,766,909 1.19 34.04

TOTAL 3 Areas 0.7 61,545,700 71,658,446 1.25 32.93 Resource

Table 13.1.3. Total nickel resource of Hanigad and Awasan Island and that of South Dinagat peninsula at a cut-off grade of 0.7% Ni on per matrix and resource category.

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14.0 RECOMMENDATIONS

Confirmatory works are being done throughout Nonoc Island and soon similar contracted exploration activities will be conducted in South Dinagat and the adjacent islands of Hanigad and Awasan. These exploration activities will address the recommendations to be done in relation to this resource assessment and confirm at the same time the data generated through time from the series of exploration works conducted by several workers. The activities include the following:

 Drilling using NQ-size rods (64mm diameter) up to bedrock to optimize the laterite resource potential;

 In-fill drilling in order to upgrade to measured and indicated categories of selected drilling areas with delineated anomalies;

 Density determination using sand-replacement method (“sand cone” method) at intervals of about 250 to 300 meters in grid for each matrix (limonite, earthy saprolite, rocky saprolite) for verification of old density values and to build a robust density database;

 Geochemical interpretation of the mineralization signature and confirm further the mineralization controls in a nickeliferous laterite;

 Geochemical analyses of value-adding metals such as rare-earth elements to include scandium (Sc);

 Establish NAMRIA certified monuments and build-up of more monuments (every nine (9) hectares) as controls for future mining and exploration activities;

 Extensive geostatistical runs to optimize resource calculation;

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ACKNOWLEDGMENT

The author would like to thank the invaluable support of the management and technical personnel of PNPI and Clariden Holdings Inc particularly to Secretary Horacio C. Ramos, President and General Manager of PNPI, for the unconditional trust he provided to the author; to Mr. Edwin A. Rillon, Geology and Field Exploration Manager of Clariden Holdings Inc., for providing the much needed data and supplemental information and review of this earlier draft; Engineer Manny Banaag, for scrutinizing further the this technical report for an unprecedented accuracy of the information within;.to Engineer Wendell Gador of PNPI who did led the author to a series of extensive tours within the project areas; and to Ms. Nilda Magtoto, Chief Finance Officer of Clariden Holdings Inc., for prompt facilitation of fees and administrative support.

Map preparation and drafts of images and sections were carefully drawn by Mr. JayR F. Gabinete, the GIS Specialist of MacroAsia Mining Corporation. Mr. Ramon N. Santos, VP for Mine Operation, has been very supportive of this endeavor who even provided advices in the preparation of the draft.

This report has benefited much from the peer review by a Fellow Competent Person in Reporting Exploration Results and Mineral Resource Estimates, accredited by the Geological Society of the Philippines in conformity with the Philippine Mineral Reporting Code. The bulk of the resource assessment proper has gone handy despite the enormous volume of data due to the expertise of our geostatistician through GEMCOM GEMS use.

My son Keith and my wife Lori serve as my technical assistants in printing and archiving of data and the series of drafts done.

RAS

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REFERENCES Mines and Geosciences Bureau. 2010. Geology of the Philippines. Aurelio, M. A. and Pena, R. (eds.), Manila. 406 p.

MMAJ-JICA. 1992. Report on the cooperative mineral exploration: geological assessment of chromite, base metals, platinum and related precious metal occurrences in south central Palawan, the Republic of the Philippines, phase II. JICA-MMAJ, 75p.

MMAJ-JICA. 1993. Report on the cooperative mineral exploration: geological assessment of chromite, base metals, platinum and related precious metal occurrences in south central Palawan, the Republic of the Philippines, consolidated report. JICA-MMAJ, 127p.

Santos, R.A. 1993. Characterization of solid inclusions in chromites of Palawan Ophiolite, Philippines and its genetic significance. unpub. M.Sc. Thesis, Univ. Tokyo. 90p.

Santos R.A. 1997. Chromite and platinum-group elements in arc-related ophiolites: constraints from Palawan and Dinagat Ophiolite Complexes, Philippines. Unpub. Ph.D. dissertation, Univ. Tokyo, 209p.

Santos-Ynigo, L. and Esguerra, F.B. 1961. Geology and geochemistry of nickeliferous laterites of Nonoc and adjacent islands, Surigao Province, Philippines. Special project series No. 18, Philippine Bureau of Mines, Manila. 208p.

UNRFNRE. 1993. Chromite exploration in the Philippines. (exploration Area I, Palawan Island). unpub. Final Report vol.II, 1-37p.

UNRFNRE. 1993. Chromite exploration in the Philippines. (exploration Area II, Dinagat Island). unpub. Final Report vol.III, 1-163p.

Vantage Mining Group. 1998/1999. Nonoc Nickel Project for Pacific Nickel Holdings Limited. Internal report. Surigao, 23p.

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