Chamber of Mines News Briefs – January 19 - 21, 2013 [Note: News headlines are hyperlinked to their stories in this document.] NWT News...... 1 Too Close for Comfort? ...... 1 Resource Development and Energy News ...... 2 Mining News Nuggets ...... 2 board to review Bathurst Inlet port and road project ...... 4 Baffinland talks with communities ...... 4 Baffinland project needs speedy green light ...... 5 There’s a New Diamond Player in Town ...... 6

NWT NEWS

Too Close for Comfort? Up Here Business – December 2012 Guy Quenneville Standing on the front deck at Blachford Lake Lodge last winter, a visitor from China peered into the sky, training his eyes on a glowing pool of light hovering under low clouds. “Oh, there it is on the horizon!” he cooed, referring, he thought, to the dazzling Northern Lights that attract more than 7,000 tourists to the Northwest Territories every year. But Mike Freeland, owner and operator of the remote fly-in lodge, had some bad news for him. “No, that’s not aurora,” Freeland reported to his client, nor was it the glow from , located 90 kilometres of the southeast. “That’s the light from Avalon’s project,” he said. The complaints about the sky-altering glow started trickling in three to four years ago, says Freeland. That’s about the time Toronto-based Avalon Rare Metals began aggressively developing the Nechalacho rare earth deposit a mere seven kilometres from Blachford. The lodge dates back to the mid-70s and, thanks to the millions Freeland has invested in it, offers the comforts of any prestige getaway spot: cozy log cabins, delicious dishes, the obligatory outdoor hot tub. But its main selling point, especially with aurora viewers (“a big chunk of our business”), has long been its utter dislocation from the outside world. In a September 2010 letter to the Mackenzie Valley Environmental Impact Review Board, Freeland didn’t mince words. “Bluntly,” he wrote, “a fly-in wilderness resort and a rapidly expanding mining development within seven kilometres of each other are not compatible!” Besides the light pollution, Freeland is worried about noise: the revving of plan engines, the pounding of exploration drills. “It takes away from the wilderness,” he says. “We need those things minimized in the future… but we’re also pushing for increased business from that development so we get some revenues from it.” Once the mind undergoes construction, Freeland figures, why couldn’t Avalon house workers at his plus resort? Avalon is aware of Freeland’s concerns and has met with him three times. It’s even offered to deliver Blachford’s bulk fuel. Discussions have been cordial so far, according to both Freeland and David Swisher, Avalon’s vice president of operations.” …we will absolutely continue to utilize the lodge when we can,” says Swisher. As for what Avalon can do to minimize its impact on Blachford, Swisher didn’t get

Chamber News Briefs 1 into specifics – though Freeland has some ideas. “There’s certainly things that they or anyone can do with new lighting [by] reflecting any light downwards onto a road…” Theoretically speaking, if Freeland grew dissatisfied, he could file a claim of private nuisance under the law of tors, according to Fred Kozak, an attorney with -based Reynolds Mirth Richards and Farmer. Freeland would have to prove that Avalon’s use of nearby land is both a “substantial and unreasonably interference,” says Kozak. That, as with many things, is very much dependent on context. Still, adds Kozak, a lodge located in an industrial heartland “would have a much harder time proving that extra noise from a nearby mining camp would constitute a nuisance than a lodge located in pristine wilderness.” And even if the review board ultimately recommends Nechalacho move forward, that wouldn’t put an end to Freeland’s (again theoretical) cause. A positive environmental assessment doesn’t prevent or determine a nuisance claim, says Kozak. It may very well never come to that, though. Freeland says the lodge has been in talks for two years now with a local aboriginal-owned development corporation about granting it an equity stake in Blachford. He won’t say which company, but since the lodge sits on leased federal land within the traditional (and unsettled) territory of the Yellowknives Dene, that First Nation’s Det-on Cho Corporation is a likely suspect. Such a partnership might help raise Blachford’s profile in the eyes of Avalon. After all, as Swisher says, the company prizes its closely cultivated relationship with local First Nations. “Any discussions we have with Blachford are always on the premise that we are in Chief Drygeese territory, and with that, it’s important that Avalon, first and foremost, is going to work through its Yellowknives partners first.”

RESOURCE DEVELOPMENT AND ENERGY NEWS

Mining News Nuggets Northwest Territories GOLD – Nighthawk Gold Corp. Jan. 16 reported additional assay results from six holes drilled by Royal Oak Mines Inc. in 1997 within the Colomac sill on Nighthawk’s Colomac gold property in Northwest Territories. The company said the results and previously reported results in December further validate the historic assay results and confirm the high-grade nature of Zone 3.5 and its continuity to depth. To date 13 historic holes have been reported from a total of 20 historic holes being assayed. Results from the seven remaining historic holes that were drilled north of this area will be released as they are finalized. Highlights of the latest results include 9.15 meters of 3.38 grams per metric ton gold, including 3.66 meters of 5.58 g/t gold intersected in hole 97-04; 31.09 meters of 2.27 g/t gold, including 8.83 meters of 3.73 g/t gold, and 0.60 meters of 32.84 g/t gold intersected in hole 97-07; 45.72 meters of 1.84 g/t gold including 0.91 meters of 23.07 g/t gold, 12.19 meters of 3.24 g/t gold and 4.27 meters of 8.44 g/t gold intersected in hole 97-08; and 23.47 meters of 2.12 g/t gold including 10.67 meters of 3.86 g/t gold and 4.57 meters of 8.60 g/t gold, and 0.92 meters of 27.91 g/t gold intersected in hole 97-11. In 1997, Royal Oak drilled 21 holes (7,884 meters) within the Colomac sill to explore the dimensions of high-grade zones 3.0 and 3.5. These holes were not included in Nighthawk’s previously announced resource estimate as certain required information was lacking at the time. In August, Nighthawk re- logged and re-assayed drill core from 20 of these holes in order to meet the necessary quality assurance and quality control requirements. As a result, the historic holes are now eligible to be included in an updated resource estimate for the Colomac property.

Chamber News Briefs 2 The holes reported herein were drilled within the southern portion of Zone 3.5, south of Nighthawk’s subvertical hole (C12-15) that intersected 203.4 meters of 2.49 g/t gold, including 25.75 meters of 7.78 g/t gold, and immediately south of the seven historic holes previously reported for Zone 3.5. This drilling has extended Zone 3.5 further south. The zone remains open along strike and to depth. Royal Oak also drilled a single 1,000-meter hole (Z3.5-97-08) to test the sill at depth beneath Zone 3.5. Gold intersections were reported to a downhole depth of 965 meters highlighted by 45.72 meters of 1.84 g/t gold, including 4.27 meters of 8.44 g/t gold. Deep drilling has established that the mineralized sill continues uninterrupted to great depths and validates this untested potential along its seven kilometer length. Results from the seven remaining historic holes that were drilled north of this area will be released as they are finalized. CLARIFICATIONS – Tyhee Gold Corp. Jan. 14 said that as a result of a review by the British Columbia Securities Commission, it was issuing clarifications to its disclosure record. SRK Consulting, Knight Piésold and Lyntek Inc. completed an independent feasibility study on the company’s Yellowknife Gold Project in August, which is filed on SEDAR that included the results from the feasibility study reported Aug. 15, Oct. 1 and Dec. 17 in news releases, in a Nov. 9 corporate investor presentation, in its corporate fact sheet dated September 2012 and updated in November 2012 and on its website. When Tyhee previously disclosed the results of the economic analysis from the feasibility study, it only disclosed pre-tax numbers. To ensure shareholders understand the value of the Yellowknife gold project and to provide balanced disclosure, the company would like to present the economic analysis with both pre-tax and post-tax numbers: This $1,400-per-ounce base-case gold price is calculated based on the 36- month trailing average gold price as of Aug. 1, 2012. Tyhee also revised its corporate presentation and corporate fact sheet and updated its website disclosure to present its economic analysis with pre-tax and post-tax numbers. The company retracted its disclosure of gold price sensitivity analysis, and in particular, the sensitivity analysis based on the then-current gold price of $1,770/oz., found in its Oct. 1 news release. To provide a more balanced disclosure of the sensitivity analysis, the company has updated its disclosure to highlight the use of the $1,400/oz. base-case gold price, and to present the gold price sensitivity analysis disclosed in accordance with data presented in the NI 43-101 technical report “NI 43- 101 Technical Report Yellowknife Gold Project, Northwest Territories, Canada, effective date Sept. 7, 2012” available on SEDAR. Nunavut GOLD – Prosperity Goldfields Corp. Jan. 14 provided details of a planned 4,000-meter diamond drill program scheduled to begin in early March at its 590-square-kilometer (228 square miles) Kiyuk Lake property in southern Nunavut. The focus of the 16-to-18-hole drill campaign will be the Rusty zone where drilling in 2011 and 2012 returned intercepts including 37.8 meters averaging 4.18 grams per metric ton gold from surface and 61.5 meters grading 3.34 g/t from 159 meters. The objective of the 2013 drilling at Rusty is to expand and further define breccia-hosted gold mineralization. The location and orientation of the planned holes are based on previous drilling, ground magnetics, till geochemistry, gold grain counts and grain shape analyses from bulk till samples. Abundant gold grains with pristine shapes (758 grains), suggesting limited glacial transport, found 400 meters down-ice from the original Rusty discovery, suggests a southward extension of the known mineralization. Drilling is also planned for the Cobalt and Amundsen zones. Drilling at Cobalt will test an undrilled area directly up-ice of a till sample with a highly anomalous number of pristine gold grains (762 grains) and

Chamber News Briefs 3 several mineralized boulders with grades from below detection to 14 g/t gold. One of the planned holes at Cobalt will test an undrilled chargeability anomaly outlined by induced polarization geophysical surveys completed in 2007 and 2009. Drilling at Amundsen will test for an extension to surface and along strike of the known gold mineralization (42.4 meters grading 0.97 g/t gold) intersected during drilling in 2012. Additionally, drilling is planned at the untested Bancroft and Rasmussen showings. Bancroft is defined by mineralized boulders with gold values up to 6.7 g/t gold coinciding with highly anomalous gold values and a geophysical anomaly. Rasmussen is defined by gold mineralization in frost heaved boulders which are interpreted to have undergone minimal transport. Gold values from boulders at the Rasmussen showing range from 0.1 to 6.9 g/t gold. “The Prosperity Goldfields technical team is eager to get back to Nunavut with this two drill program. We feel there is excellent potential at Rusty to define a large gold system,” said Prosperity CEO Adrian Fleming. “In addition wildcat drilling of new highly prospective targets is likely to further confirm our view that Kiyuk Lake has the hallmarks of a major gold camp.” Initial assay results from the spring program are expected in April.

Nunavut board to review Bathurst Inlet port and road project Project would see new port, roads to mining sites in Kitikmeot region CBC News – January 20, 2013 Nunavut regulators are seeking comment on plans to revive a mega-project in the Kitikmeot region. The Bathurst Inlet port and road project has been dormant for several years. The idea is to build a major port with roads to nearby mining projects. An environmental review got underway in 2004, but was suspended after the proponents decided the project wasn't feasible. Now its new proponents — Sabina Gold & Silver, and Xstrata Zinc Canada — want the review to continue. The Nunavut Impact Review Board is asking stakeholders what they think. Sabina and Xstrata hope the project will support any future mining operations in the area. Sabina has been exploring for gold at its Back River property, and Xstrata's Hackett River project is looking for zinc. The review board is accepting comments on reviving the Bathurst Inlet port and road project until the end of the month.

Baffinland talks with communities Nunavut News/North – January 18, 2013 Company consults about scaling back proposed operations at Mary River Lyndsay Herman Baffinland is stopping to take a breath and is proposing a new approach to the development of its Mary River Project. In turn, communities are weighing the pros and cons of having more time before the project reaches its maximum scale. "There is a general feeling that (communities) want to see something happen now," said Greg Missal, vice-president corporate affairs for Baffinland. "So thankfully, by coming up with this early revenue phase and concept, it allowed that to happen and it allows things to start happening on the ground this year. " In a letter to the Nunavut Impact Review Board, Baffinland Iron Mines Corporation stated the world financial environment and the project's large capital costs made the project difficult to finance.

Chamber News Briefs 4 As a result, Baffinland returned to the idea of an "early revenue phase," which had been included in its draft environment impact statement in 2011. For the company to go back to that phase, however, would require an amendment to its project certificate which was awarded Dec. 28 by the review board. While the change does not require a review, one may occur if a high level of concern for the change is raised by affected parties. Under the new plan, production will start at 3.5 million tonnes of iron ore per annum and the company will only ship during the open-water season.. The currently approved plan calls for 18 million tonnes of iron ore to be shipped year-round from a new port at Steensby Inlet. The biggest hurdle in Baffinland's currently approved plan was a massive $4-billion construction phase which included a 149-km railway and a port at Steensby Inlet. Now, neither project will take place until after the early revenue phase, should it be approved. Baffinland asserts it will see the project through to its full potential and that this plan simply allows the company to bypass the immense capital cost hurdle and start building revenue sooner. Communities toured Baffinland representatives toured , Pond Inlet, Iglulik and Hall Beach last week to talk with communities about the proposed changes. Hall Beach economic development officer Shelly Brake said Hall Beach community members appreciated the communication and is glad at least some work on the project would begin this year. "The community doesn't seem to mind too much," Brake said. "They're still going to be hiring some people and they know that when they do get the funding there will be more going ahead. "There was disappointment, of course, from Baffinland and (community members), but they also know what it's like when you're trying to get funding." Brake said some community members have completed heavy equipment training in anticipation of the project starting and others are waiting for training funds to be available in the new fiscal year to follow suit. Lucie Idlout, economic development officer for Iglulik, stated the reactions among Iglulingmiut include those who are anxious to get started, those who are relieved to hear the project would ultimately reach its maximum scale, and those who are glad to have more time before the project reaches its higher level of production. "I think there is a general sense of relief over the likely reduction in environmental impacts since shipping will now only take place over 70-80 days during the summer instead of being year-round," Idlout stated in an e-mail to News/North. "Hopefully that means reduced numbers in whale strikes and other effects on marine mammals and, temporarily at least, reduced impacts on the environment in general with the railway's construction also being on hold." Idlout stated the community has eight heavy equipment operators ready to go and residents are looking to take advantage of spin-off business opportunities once mine activity picks up.

Baffinland project needs speedy green light Baffinland's decision to downsize its plans at Mary River speaks to the high quality of the site's iron ore. Nunavut News/North – January 21, 2013 The rocky global financial market made it hard for Baffinland to find funding for the full scope of its original $4 billion project. The 149-km railway railroad and Steensby Inlet port are being shelved until

Chamber News Briefs 5 the capital is raised to build them. Milne Inlet will be open seasonally to ship the 3.5 million tonnes of iron ore to overseas markets every year. The previous target had been 18 million tonnes. The Nunavut Impact Review Board will be looking for the input of Nunavummiut on whether it should put the project back through the environmental process now that it's been, at least temporarily, reduced in size. Is another review necessary? The project has already been studied comprehensively over the past several years. As long as the recommendations NIRB put forth remain in place, why go back through the process? At stake are jobs for our heavy equipment operators and others who've undergone training to work at the project . While the company has said it will be hiring less workers for this phase, production looks to start sooner now that the project's downsized. Nunavut already lost a significant project in the Kitikmeot when then-owner Newmont Mining Corp. put the Hope Bay gold project into care and maintenance early last year. The costs of operating just weren't worth the profit potential. This is just the nature of the industry. Now that the economic and environmental aspects of the Mary River mine have been studied and accepted, every effort should be made to ensure the territory's iron goose will still produce.

There’s a New Diamond Player in Town Up Here Business – January 2013 Drew Hasselback Harry Winston Diamond Corp. has generated some news that must warm the hearts of hometown cheerleaders. If you’re not aware of the basics, Harry Winston is buying the diamond business of mining giant BHP Billiton PLC for $500 million. That means Harry Winston will acquire BHP’s 80-per-cent stake in the Ekati diamond mine. This is a stellar addition to Harry Winston’s existing 40-per-cent stake in the Diavik diamond mine. Harry Winston has emerged as a homegrown national champion for Canada’s diamond business. As great as the news might be for Canada, I wonder if the transaction reveals an important weakness in the Northern diamond business. BHP’s exit leaves a big financial hole in the Canadian mining scene. This hole might even get bigger if Rio Tinto PLC, 60 per cent owner of Diavik, finds a buyer for its diamond assets. BHP and Rio represent two of the richest mining companies in the world. With them gone, who will be around to fund development of the next generation of Northern diamond mines? Diamonds might be a massive part of the Northern economy, but it’s important to remember that they’re a marginal slice of the global mining business. Big miners prefer volume over value, steady over sexy. They’d rather sell massive amounts of low-priced commodities – such as coal or iron – rather than small amounts of high-priced finds, such as diamonds. Coal and iron might seem relatively dull to the average joe, but they’re the commodities that unleash the streams of cash flow that interest big investors. This spells trouble for smaller mining companies. Once upon a time, the juniors could pitch investors on the potential for a quick, large return if their properties hit pay dirt. Now they’re competing with big companies who promise investors slow but steady growth. Mine exploration costs millions, but mine construction cost billions. Ekati and Diavik each came with a massive price tag, and it took companies with the financial clout of BHP and Rio to build them. The big companies are retrenching around their core businesses. Diamond mining, just isn’t one of those. It’s not that diamond mining is a bad business. It’s just that it’s too small to interest them. Who does that

Chamber News Briefs 6 leave to buy up and to develop any of the better diamond exploration properties that juniors are currently exploring in Northern Canada? An obvious answer is De Beers Canada. The company already has an enormous presence in Canada, particularly through its two operating mines, Snap Lake in the NWT and Victor in Ontario. De Beers also has a sizable portfolio of Canadian development projects; more recently, it signed an agreement giving it the option to take an ownership stake in Peregrine Diamond’s Chidliak exploration project on Nunavut’s Baffin Island. De Beers would have the financial capacity to expand, but it may have enough on its plate right now as it is. And then there’s Harry Winston. The company has come a long way from the day when it was a junior exploration company known as Aber Diamond Corp. This was the junior company that discovered the Diavik property in 1994. It eventually went on to buy out famed luxury jewelry chain Harry Winston, and thus acquire its current name. The company is demonstrating some heft and seems to have negotiated a good price on the BHP deal, and it obtained financing for the purchase at a time when there’s not exactly a lot of capital sloshing around the marketplace. So the deal moves Harry Winston up in the world. The bigger question is whether this growth will happen fast enough for Harry Winston to start throwing some weight around the Northern mining scene. Hopefully it can, because the certain departure of BHP and the possible exit of Rio will leave some big shoes to fill. Even Germany, that one-time bastion of all that is green in energy, is now expanding the use of coal thanks to new technologies making it more efficient. Coal is now cost-competitive with Russian natural gas. And while North American use of coal is generally on the downturn thanks to low natural gas prices, mines all over the continent are looking to export their unneeded coal so that it can be used elsewhere in the world. So when your Tuktoyaktuk beach becomes an Inuvik front yard, you will indeed be facing a coal’ed, dark night.

Chamber News Briefs 7