DRAFT VICTOR DIAMOND MINE FOLLOW UP PROGRAM AGREEMENT EIGHTH ANNUAL REPORT 2014 REPORTING PERIOD Submitted to: De Beers Canada Inc. 900-250 Ferrand Drive Toronto, Ontario M3C 3G8 Submitted by: Amec Foster Wheeler Environment & Infrastructure a Division of Amec Foster Wheeler Americas Limited 160 Traders Blvd., Suite 110 Mississauga, Ontario L4Z 3K7 September 2015 TC140504 Victor Diamond Mine Follow Up Program Agreement Eighth Annual Report – 2014 Reporting Period September 2015 DRAFT EXECUTIVE SUMMARY This is the eighth annual Follow Up Program Agreement (FUPA) report for Victor Diamond Mine (VDM) covering the 2014 reporting period. FUPA is a program designed to monitor and verify the accuracy of federal Environmental Assessment (EA) predictions relating to the VDM, and to determine the effectiveness of applied environmental protection measures. The federal EA for the VDM was carried out pursuant to the Canadian Environmental Assessment Act (CEAA) at the Comprehensive Study level of investigation, as documented in the Comprehensive Study Report (CSR) dated June 2005. The First Annual FUPA Report, tabled in draft in March 2009, covered the 2006 and 2007 construction period. Subsequent annual FUPA reports have covered the ongoing mine operations phase for the years 2008 through 2014. Parties to the FUPA are Her Majesty the Queen in Right of Canada (the Government of Canada), De Beers, and the Attawapiskat First Nation (AttFN). Participants, or potential participants, to the Agreement include the Province of Ontario, the Fort Albany First Nation (FAFN), the Kashechewan First Nation (KFN), the Moose Cree First Nation (MCFN), the Taykwa Tagamou Nation (TTN), the MoCreebec Council of the Cree Nation, the Town of Moosonee, and the Mushkegowuk Council. FUPA allows for Participants, or potential participants, to become Parties to the Agreement. To date, no additional Parties have been added to the Agreement. The VDM encompasses the exploration, planning, design, permitting, construction, operation, and eventual closure and reclamation of an open pit diamond mine and associated processing plant in the James Bay Lowlands. The mine site is located approximately 90 km west of the First Nation (FN) community of Attawapiskat and is accessible seasonally by winter road and year-round by air. The principles of the FUPA involve the tenets of: open and honest participation; respect for the environment and traditional activities of the local FNs; full consideration of scientific and traditional knowledge; sustainable development; continual improvement; application of the precautionary principle; and the use of adaptive management strategies (AMS) and programs. Environmental aspects to be included in the FUPA program include: Atmospheric systems; Surface water systems; Groundwater systems; Terrestrial systems; Malfunctions and accidents; Traditional pursuits, values and skills; Heritage resources; Environmental health; and Business, employment and training. Page i Victor Diamond Mine Follow Up Program Agreement Eighth Annual Report – 2014 Reporting Period September 2015 DRAFT A major commitment of the FUPA is the preparation of an Annual Report. The purpose of the Annual Report is to summarize and interpret activities and monitoring results from the previous year, and to compare these results and longer-term data trends to expected conditions determined through the EA; and to make the data and interpretations available for review by the Parties and Participants. The Annual Report is to include, but is not restricted to, information on the following aspects: Summary of monitoring results and trends; Summary of studies and research; Summary of compliance reports; Rolling summary of mine operational activities; Actions taken or planned to address compliance problems; Verification of the accuracy of the EA; Determination of the effectiveness of mitigation measures; Summary and evaluation of Adaptive Environmental Management measures; Summary of public concerns and responses to those concerns; Summary of new technologies investigated; and A plain language executive summary in both English and Cree. The central theme in all of the above is that the Annual Reports are to be written as high level summary documents. Details are made available through the various compliance and study reports on request. This Eighth Annual FUPA Report, as stated above, covers the 2014 operation phase of the mine. Year 2015 data will be reported in the Ninth Annual Report. The report is structured into the following principal sections: Section 1 - Introduction; Section 2 - Summary of Mine Operations Facilities and Activities; Section 3 - Summary of Monitoring Results and Data Trends; Section 4 - Summary of Compliance Reports; Section 5 - Summary of Study and Research Programs; Section 6 - Actions Planned or Taken to Address Effects or Compliance Problems; Section 7 - Verification of the Accuracy of the Environmental Assessment; Section 8 - Determination of the Effectiveness of Mitigation Measures; Section 9 - Summary and Evaluation of Adaptive Environmental Management Measures; Page ii Victor Diamond Mine Follow Up Program Agreement Eighth Annual Report – 2014 Reporting Period September 2015 DRAFT Section 10 - Summary of Public Concerns and Responses to Public Concerns; and Section 11 - Summary of New Technologies Investigated. The introduction (Section 1) provides a general background of the VDM and to FUPA. The summary of mine operations facilities and activities in Section 2 identifies: the major components for both the mine site and its related off-site infrastructure that were in place as of the end of 2014; together with related information regarding permitting as well as business, employment and training programs associated with the mine. Permitting carried out in 2014 included a small number of permit renewals, amendments and revocations, together with four new permit applications related to waste management operations and transmission line maintenance. Business, employment and training efforts were focused mainly on the community of Attawapiskat, and to a lesser extent on the communities of the Kashechewan, Fort Albany, Taykwa Tagamou and Moose Cree First Nations. The value of contracts awarded to First Nation companies and joint ventures in the year 2014 was $67 million, which brings the cumulative total since the start of operations to $328.5 million, or $528 million since the start of construction of the VDM. These values exclude subcontractor work on the James Bay Winter Road. Actual revenue generated by the First Nation from these contracts is not known as De Beers is not privy to the Joint Venture agreement terms. Training has been a cornerstone of Aboriginal employment at the VDM, and during 2014 there was greater than 50% First Nation participation in the Victor workforce. Section 3 is the main body of the report and provides an overview of the various monitoring programs, their results and interpretation. There was a major focus during the EA and during follow-up permitting on the potential effects of mine dewatering on area muskeg systems, the potential for increased rates of mercury release to surface waters, the discharge of chloride in well field water to the Attawapiskat River, and effects of mine disturbance on caribou. All monitoring results obtained thus far are essentially consistent with EA predictions and regulatory standards. As of 2014: Muskeg systems have not been adversely affected (showing signs of drying out) as a result of mine dewatering; except for small, localized areas surrounding bedrock outcrops (bioherms) and areas where bedrock is very near surface, as predicted in the EA. Total and methyl mercury concentrations continue to be well below federal Canadian Environmental Quality Guidelines (CEQG) for the protection of aquatic life. Filtered methyl mercury levels in the Nayshkootayaow and Attawapiskat Rivers are at or below levels which would be of potential concern for fish eating birds and mammals such as bald eagles and otters (0.05 ng/L). A very minor increase in methyl mercury concentrations has generally been observed in downstream Granny Creek system waters over the period of monitoring, related to Page iii Victor Diamond Mine Follow Up Program Agreement Eighth Annual Report – 2014 Reporting Period September 2015 DRAFT localized sulphate releases. This localized increase appears to have resulted in an increase in the body burden mercury concentrations of small fish (Pearl Dace) in South Granny Creek. This increase in small fish body burdens in some instances is difficult to distinguish from background concentrations, and the effects of seasonal variation. De Beers is taking steps to further investigate and mitigate this localized effect. The slight increase in mercury body burdens observed in North Granny Creek in previous years has decreased to background levels, indicating that the localized impact is potentially short term. Further assessment of trends will be developed as monitoring continues. Actual mine dewatering rates to date have been lower than predicted in the federal EA (and slightly lower than those of 2013), to the current stage of development, suggesting that the hydrogeological model was conservative. Mine dewatering rates and chloride concentrations in the Attawapiskat River have remained below EA predictions. Caribou continue to use the area around the VDM site. In the occasional instance where monitoring results may deviate from EA predictions or regulatory standards, more detailed