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P. DOWNEY AND ASSOCIATES

INDEPENDENT TECHNICAL REPORT

on the

NorthMet Project

Located in N-E Minnesota, USA, near the town of Babbitt

Technical Update of the NorthMet
  Project Incorporating the 
  established Cliffs-Erie crushing/milling/concentration facilities with 
  the Hydrometallurgical processes described in the May 2001 
  Pre-feasibility study.

for

POLYMET MINING INC.

PATRICK G. DOWNEY, P.ENG
  P. DOWNEY AND ASSOCIATES

July 2004

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Table of Contents

|1.  | Title Page                                                                                             
|--- | -------------------------------------------------------------------------------------------------------
|2.  | Table of Contents                                                                                      
|3.  | Summary                                                                                                
|4.  | Introduction and Terms of Reference                                                                    
|5.  | Disclaimer                                                                                             
|6.  | Property description and Location                                                                      
|7.  | Accessibility, Climate, Local Resources, Infrastructure & Physiography                                 
|8.  | History                                                                                                
|9.  | Geological setting                                                                                     
|10. | Deposit Types                                                                                          
|11. | Mineralization                                                                                         
|12. | Exploration                                                                                            
|13. | Drilling                                                                                               
|14. | Sampling Method and Approach                                                                           
|15. | Sample Preparation, Analysis and Approach                                                              
|16. | Data Verification                                                                                      
|17. | Adjacent Properties                                                                                    
|18. | Mineral Processing and Metallurgical Testing                                                           
|19. | Mineral Resource and Mineral Reserve Estimates                                                         
|20. | Other Relevant Data and Information                                                                    
|21. | Interpretation and Conclusions                                                                         
|22. | Recommendations                                                                                        
|23. | References                                                                                             
|24. | Date                                                                                                   
|25. | Additional Requirements for Technical Reports on Development Properties
      and Production Properties
|26. | Illustrations                                                                                          
|   

|Appendix I  | Mining-
      Independent Mining Consultant update report May 2003           
|----------- | -----------------------------------------------------------------------------
|           
|Appendix II | Penguin
      Automated Systems Inc. - update report on capital and          
|            | operating
      costs for process plant and infrastructure; using the Cliffs-
|            | Erie plant                                                                   

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GLOSSARY OF TERMS

|Au                        | Gold                                                 
|------------------------- | -----------------------------------------------------
|Co                        | Cobalt                                               
|Corps                     | United States Army Corps of Engineers                
|Cu                        | Copper                                               
|Definition Study Estimate | Early Estimate of Capital and Operating
      Costs  
|DNR                       | The Minnesota Department of Natural
      Resources  
|EIS                       | Environmental Impact Statement                       
|Fleck                     | Fleck Resources                                      
|G & A                     | General and Administrative                           
|IMC                       | Independent Mining Consultants Inc.
      of Tucson  
|IPGMT                     | International PGM Technologies Ltd.                  
|Lakefield                 | Lakefield Research Limited                           
|NRRI                      | Minnesota Natural Resources  Research
      Institute
|NaHS                      | Sodium Hydrosulphide                                 
|Ni                        | Nickel                                               
|North                     | North Limited                                        
|NSR                       | Net Smelter Return                                   
|PASI                      | Penguin Automated Systems Inc.                       
|PCA                       | Pollution Control Agency of Minnesota                
|PGM                       | Platinum Group Metals                                
|PlatSol Process          | Patented Pressure Oxidation Leach Process            
|PolyMet                   | PolyMet Mining Corp.                                 
|RC                        | Reverse Circulation Drilling                         
|Rio Tinto                 | Rio Tinto Limited                                    
|SO2                       | Sulphur Dioxide                                      
|SRK                       | SRK Consulting                                       
|SX-EW                     | Solvent Extraction and Electro-Winning               
|The Company               | PolyMet Mining Corp.                                 
|The Project               | NorthMet Project                                     
|USX                       | US Steel                                             

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|3. | Summary
      PolyMet Mining Corporation ("PolyMet") is currently
        reviewing development options for their wholly owned NorthMet project
        located in St. Louis County, Minnesota.
      The NorthMet Project (the "Project") is a large, polymetallic
        disseminated magmatic sulphide deposit containing copper, nickel, palladium,
        platinum, cobalt, gold and silver. It is located in northern Minnesota,
        USA, close to the Canadian border in the Duluth Complex (the world ́s
        fourth largest layered mafic intrusive complex) and is approximately ten
        kilometers from large LTV Steel's Mine (now called "Cliffs-Erie") iron
        ore mill/concentrator with its established infrastructure. The Duluth
        Complex is a similar geologic setting to the very large Ni-Co-PGM Noril'sk
        deposit in Russia. NorthMet is one of the largest undeveloped nonferrous
        metals projects in North America. The geological resource at a 0.2% copper
        cut-off amounts to greater than 900 million tons containing low grades
        of copper, nickel, cobalt, platinum group metals ("PGM's"), silver and
        gold.
      The NorthMet deposit was originally targeted for copper
        and nickel values. With low grades and poor quality concentrates, NorthMet
        and other neighbouring deposits remained undeveloped. The key to advancing
        the NorthMet project was the development of a propriety hydrometallurgical
        process for the treatment of a bulk concentrate on site. This single step
        process, now trademarked as the PlatSol Process, has the advantage
        of extracting the PGM's in addition to the base metals. After dissolution
        of the metals in the PlatSol Process step of the process, they can
        then be individually extracted on site -thereby avoiding dependence on
        off-site smelters. A successful pilot plant using the PlatSol Process
        on NorthMet ores was completed at Lakefield Research in 2000. An independent
        Pre-feasibility study was subsequently completed in April 2001 under the
        supervision of Independent Mining Consultants ("IMC") of Tuscon, Arizona
        with input from several international consulting firms including AMEC
        Mining and Metals ("Amec").
      This study, for a 50,000 tonnes per day ("tpd") mine,
        demonstrated unacceptable project economics due to low mined grades and
        high capital costs. Subsequently, due to funding restraints, PolyMet was
        not able to optimize the study. The reader is requested to refer to the
        PolyMet Pre-feasibility study of April 2001 which can be found on the
        SEDAR website.
      In March 2003, new management took over PolyMet to complete
        optimization work and to study ways of improving project economics. A
        new technical program, supervised by the author, and a project execution
        strategy was completed in July 2003. Recommendations included:
      Re-working the mining data base to produce a mine
            plan at the 25,000 tpd levelto increase mined head-grade.
        Simplification of the process circuits by only
            producing copper metal on site and producing separate PGM's and nickel
            hydroxide concentrates for off-sitetreatment.
        Acquiring the nearby Cliffs-Erie mothballed crusher/mill/concentrator
            and all ofthe land needed for stockpiles, tailings disposal, water
            supply and storage. This
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | facility also provides preferential electricity rates and includes a fully
        establishedinfrastructure of roads, rail, warehouses, offices, workshops
        and spare parts. SeeFigure 3.1.
        Utilizing a mining contractor, to avoid up front capital on the mining
          fleet.This rework of the Pre-feasibility material indicated that a technically
        simpler project, with lower daily tonnage, higher grades and considerably
        lower up front capital could result in a viable economic project. PolyMet
        subsequently completed an option agreement with Cleveland Cliffs Inc.
        to acquire key buildings, land and equipment from the recently closed
        Cliffs-Erie mill/concentrator.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Figure 3.1 - Aerial photograph of the Cliffs-Erie facilities:




The area within the black line has been optioned by PolyMet Cliffs-Erie was built in 1955 and processed 100,000 tpd of
    taconite ore prior to closure in 2000. This report deals mainly with the option agreement dated
    February 16, 2004 whereby PolyMet has the right to acquire certain key assets
    of the Cliffs-Erie process plant and infrastructure (outlined in the above
    photograph) which are located within 10 km of PolyMet's proposed open pit.
    The focus of this report is on the integration of the established Cliffs-Erie
    infrastructure plus existing crushing, milling and flotation circuits with
    a new hydrometallurgical plant for on site metal recovery. In addition certain
    process simplifications have been made to the 2001 Pre-Feasibility. The 2001
    study was based on producing nickel and cobalt metal. The current flowsheet
    is based on production of separate nickel metal hydroxides and PGM hydroxides,
    thereby greatly simplifying the process circuit. No new work has been done on geology, exploration or resource
    definition. However certain relevant sections of the 2001 PolyMet Pre-feasibility
    study have been included for ease of reference.


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Re-use of this "brownfields" facility and its established
    infrastructure could, by current estimate, enable (fully loaded) capital cost
    savings of approximately US$196 million, based on the figures produced for
    the 2001 Pre-Feasibility Study. The elimination of the circuits to produce
    nickel metal and a cobalt salt on site could also reduce up-front capital
    by approximately $60 million and use of a mining contractor could reduce the
    preproduction capital by approximately $95 million in capital costs based
    on the 2001 Pre-feasibility. Together these approaches should reduce technical
    risk and financial exposure. The scoping level capital required for an initial
    25,000 tpd operation is estimated to be US$235 million with an expected accuracy
    range of +30%/-20%. The capital costs were completed by Penguin Automated
    Systems Inc. ("PASI") for the mill and infrastructure which were supervised
    and reviewed by the author. The mining capital costs are based on the original
    Pre-Feasibility study completed by IMC and updated to reflect a smaller tonnage
    throughput and contract mining. The estimated operating cost is US$ 10.44/tonne of ore based
    on first quarter 2004 dollars. These costs reflect the current mine plan with
    mining by contractor. The costs also reflect the simplified flowsheet and
    current power costs for the Cliffs-Erie facility. A contingency of 5% has
    also been included. The operating costs exclude the selling costs, shipping
    and smelting costs associated with the products. The scoping study is based on measured indicated and
    inferred resources that are considered too speculative geologically to have
    economic considerations applied to them that would enable them to be categorized
    as mineral reserves. Therefore there is no certainty that the results produced
    by this scoping study will be realized. The results of this scoping study do indicate that the NorthMet
    project, integrated with the existing Cliffs-Erie, facilities, shows sufficient
    potential to be carried forward into the next phase of engineering, a feasibility
    study. The purpose of the feasibility will be to examine further all aspects
    of the project and establish with greater accuracy its technical and economic
    viability. This conclusion is based on the resource data and order-of-magnitude
    capital and operating costs presented in this study.


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|4. | Introduction and Terms of Reference
      The author was initially retained in 2000-2001 by PolyMet
        to review the pre-feasibility study completed for PolyMet in April 2001
        and conduct a technical audit of process and infrastructure matters on
        behalf of PolyMet at that time. The author has therefore been intimately
        involved with the project with particular reference to process development
        of the new PlatSol Process, the mining program and the infrastructure
        required for the initial planned development. No further technical work
        was conducted on the NorthMet project between the completion of the 2001
        Pre-feasibility and this report.
      The author was retained by PolyMet in 2001 to conduct
        a technical audit of the processing aspects of the Pre-feasibility study
        and visited the project site at that time. The PlatSol Process was
        developed at Lakefield Research, Ontario, under the supervision of Messrs
        O'Kane, Dreisinger, Fleming and Feron; who subsequently became the patent
        holders of PlatSol. Amec (formerly Agra Simons - Mining & Metals
        group) of Vancouver, B.C., was the company responsible for developing
        the engineering parameters of the process as well as infrastructure aspects
        for the 2001 Pre-feasibility study. Ore resource calculations, mine plan
        and mine capital and operating costs were completed by IMC.
      PolyMet subsequently retained the author in May 2003
        to conduct an assessment of the project whereby the infrastructure, material
        transport, crushing, milling and flotation elements of the original Amec
        study were to be replaced by the established Cliffs-Erie plant and infrastructure.
        The author either directly produced the new project data or supervised
        the work of other specialists. The results of this technical program are
        contained in this interim report.
      IMC was also retained in May 2003 to re-examine their
        resource data base, established for the 2001 Pre-feasibility study, and
        requested to produce a new mine model for a reduced production rate. This
        work is included as Appendix I.
      A scoping study by PASI was completed in April 2004
        and is included as Appendix II to this report. The PASI study integrated
        the existing front end of the Cliffs-Erie plant and infrastructure with
        new hydrometallurgical plant at the Cliffs-Erie site. Capital and operating
        costs were updated to March 2004.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|5. | Disclaimer
      Amec was the company responsible for developing
        the engineering parameters of the process as well as infrastructure aspects
        for the 2001 Pre-feasibility study. Ore resource calculations, mine plan
        and mine capital and operating costs, were completed by IMC. A scoping
        study by PASI was completed in April 2004 and is included as Appendix
        II to this report.
      The author visited the NorthMet site in 2001 as part
        of his responsibility in completing an audit review of the process and
        infrastructure work conducted by Amec Engineering Co.
      The costs reported here have been updated to March 2004.
        In the recalculation of mineable grade, IMC used operating costs prepared
        by P. Downey and Associates but did not factor in the improved capital
        costs in terms of determining mineable tonnage.
      The author has relied on the data that was made available
        to him by, Lakefield Research, AMEC, IMC, PASI, the 2001 Pre-feasibility
        Study, and does not take any responsible for any errors or omissions.
        Reports that contain information relevant to this report are listed in
        item 23. The material supplied and that in the public domain, combined
        with personal knowledge-observations were sufficient to allow a comprehensive
        examination of the NorthMet Project.
      P. Downey and Associates has no propriety interest in
        the technology described here and does not own any equity stake in PolyMet.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|6.  | Property Description and Location                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|6.1 | Areas and location
      The NorthMet project is located in northern Minnesota,
        USA, close to the Canadian border, in the Duluth Complex. See Figure 6-1.
        The NorthMet Project is located in the Great Lakes region of North America,
        near the town of Babbitt, Northern Minnesota, USA. The area is approximately
        65 km from the Canadian border and 75 miles from a bulk materials dock
        on Lake Superior. Materials and supplies may be brought in by an extensive
        rail and road network accessing destinations across North America.
      The proposed NorthMet open pit lies immediately south
        of the mined out Cliffs-Erie taconite iron ore open pits and about 10
        km to the N-S-E of the Cliffs-Erie plant. The Minnesota Iron Range extends
        for approximately 200 km, east to west, and the iron formations dip gently
        to the south at about 5 degrees. At the eastern end of the range, south
        of the town of Babbitt, there are certain magmatic deposits which overlie
        the iron formations. The deposits are low grade and polymetallic- typically
        0.4% copper; 0.12% nickel; 0.05 grams per tonne (g/t) gold; 0.08 g/t platinum
        and 0.36 g/t palladium.




Figure 6.1 - Location of NorthMet Project

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|6.2 | Ownership
      The underlying mineral rights are owned by US Steel Corp and a 3% NSR
        royalty applies to production from the project. Most of the surface land
        is controlled by the US Forestry Service ("USFS"). The rights to the project
        are held by PolyMet's US subsidiary, PolyMet Mining Inc.
      In 1989, PolyMet (as Fleck Resources) acquired a twenty year renewable
        lease for the mineral rights to the NorthMet deposit from USX-see Figure
        6.2. The lease is subject to a yearly lease payment before production
        and then to a 3 to 5% sliding scale Net Smelter Return royalty based on
        the value of the ore. The lease payments prior to production are considered
        advance royalties and will be credited to the production royalty.
      The USFS acquired the surface rights to the NorthMet property from USX
        in the 1930's and, at present, the USFS remains the surface rights owner
        of most of the NorthMet property. USX retained the mineral rights and
        the right to explore and mine on the site. As a result of this retention,
        while the USFS is the surface rights owner for most of the NorthMet Property,
        they cannot prohibit mining on the site. LTV Steel Mining Company/Cliffs
        Erie Mining Company owns portions of sections 10, 11 and 12 near their
        private railroad. However, it may be beneficial for the Project to enter
        into land swap arrangements with the USFS to simplify the permitting process
        and to allow the project access to lands for waste rock stockpiling. The
        use of the existing Cliffs-Erie abandoned pits for waste storage from
        the Northmet mine could obviate such forestry issues and this will be
        evaluated during the feasibility study. US regulations require an equivalent
        value of land to be swapped for the land to be used by the Project. The
        USFS has indicated to PolyMet their willingness to carry out such a land
        swap. Costs for completing land swap arrangements have not been included
        in Estimates of Capital Costs.
      As both the Environmental Impact Statement ("EIS") and permitting of
        the project will be subject to the arrangements of the land swap, PolyMet
        believes that this land swap with USFS should be completed in conjunction
        with the Bankable Feasibility Study. PolyMet therefore intend to commence
        those negotiations with USFS early in the Bankable Feasibility Study timetable.
      Table 6.2 - Land Swap
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Task
    Cost (US$ Million)
    Start (MonthNumber)
    Timing (Months)US Forest Service Land Swap
    3.5
    1
    24


Figure 6.3 shows surface owners in
  the area of the potential NorthMet pit and waste dumps. Information on the land
  map was compiled from preliminary work done by North Mining and from the St.
  Louis County Land Atlas and Plat Book (1996).

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Figure 6.2  Mineral Rights Owners

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Figure 6.3  Surface Owners

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|6.3 | Environmental
      During the Pre-feasibility study, PolyMet had on staff
        a number of environmental consultants to coordinate both the environmental
        studies and the permitting required to bring the NorthMet Project to production.
        No cultural sites were identified either from a review of existing data
        and literature, or from aerial photographs. The neighboring Babbitt Project
        (also called Minnmax) completed a full EIS which was filed as a public
        document by then operator Amax Mining and this study did not produce any
        significant findings. NorthMet completed their-own preliminary Baseline
        Environmental Study in April 2000. This study addressed:
      Wildlife Usage, including threatened and endangered wildlife;
        Preliminary Wetlands Survey;
        Ground Water Quality; and
        The Development of the Geochemical Study Plan.No evidence was found of any threatened or endangered
        animals in the area. The area was identified as a major wetland area with
        some 70% of the land being classified as wetlands. The wetlands that will
        be disturbed by operations at NorthMet will have to be replaced on at
        least a 1:1 ratio in terms of the existing wetland mitigation scheme.
        The practice of replacing wetlands is well established in the area and
        this can be a relatively high ongoing operating cost for a project. The
        use of the extensive tailings and water storage areas which are part of
        the Cliffs-Erie deal should mitigate most of such costs. Disturbance of
        the wet lands in the open pit area would be the most affected area.
      Table 6.3 - Estimated NorthMet Wetlands Mitigation
        Requirements
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Area
      AcresPit
      1020Rock Dump West -  CE Pit back fill
      0Rock Dump East -  CE Pit back fill
      0Flotation Tailings Dam -  CE permitted site
      0Hydro-Metallurgical Residue Dam -  CE existing
      0Plant and Roads -  CE existing
      0Total
      1020Wetlands Mitigation Requirement at 70%
      714


In terms of the Federal and State Wetland
  Mitigation legislation, the NorthMet Project must replace any wetlands disturbed
  on the NorthMet property on at least an acre for acre basis. Initial surveys
  undertaken have shown 70% of the NorthMet open pit area is classified as wetlands.
  Land use estimates from the 2001 Pre-feasibility study by Steffen Robertson
  & Kirsten ("SRK") and IMC are given in Table 6.3. The use of Cliffs-Erie
  obviates almost all of the previous requirements from the 2001 study.

The option to use key lands and impoundments
  in the Cliffs-Erie deal lessens the original estimates of the Wetlands Mitigation
  requirements. These are currently considered to be limited to the open pit area
  of 1020 acres. Wetlands Mitigation is a key step in bringing the NorthMet Project
  into production. With this reduced Wetlands Mitigation scope the costs will
  now be part of the required project capital and not an up-front cost component
  within the Bankable Feasibility Study.

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|    | The major steps, estimated costs and timetable required
        to complete all environmental matters to obtain the necessary State and
        Federal permits are generally described in Table 6.4 below. The use or
        re-use of the Cliffs-Erie site will obviate much of the costs and requirements
        projected in the 2001 Pre-feasibility study since critical items like
        tailings areas are already included.
      The land swap with USFS has been included separately
        in the cost and timing estimates given in Table 6.4. While it could have
        a significant impact on the EIS and permitting process, the early completion
        of this land swap should simplify and accelerate the EIS and permitting
        process .
      Ground water quality was also found to be very good.
        Given the extensive waterways and related fishing activities in Minnesota,
        there are exceptionally low State limits (0.0013 micrograms/litre) for
        mercury discharges. There was no evidence of mercury in the NorthMet ore
        body, and process and pilot plant test work to date have not shown any
        mercury in tailings or residues.
      During the Bankable Feasibility Study, further geochemical
        work on the waste rock and various process plant tailings and residues
        should be conducted to test for their acid forming and metal release potentials
        under normal climatic conditions. This work will determine storage and
        disposal solutions for mine and plant waste, tailings and residues.
      In order to enable the timely completion of project
        permitting and meet Federal and State environmental requirements, the
        EIS process will be initiated during the Bankable Feasibility Study. The
        Pertinent aspects of the permitting process must be constantly monitored
        during the feasibility study. A draft EIS will be released for public
        comment prior to completion of the Bankable Feasibility Study. Subject
        to the satisfactory completion of the EIS, the Project will then apply
        to obtain the necessary construction and operating permits to develop
        the Project. The EIS will include the following:
      Collection of all Baseline data for submission to EIS team;
        Development and submission of Plan of Operation;
        Minnesota Department of Natural Resources ("DNR") selection and appointment
          ofsub-contractor (environmental consultants) to prepare EIS;
        Sub-contractor preparation of draft EIS;
        Draft EIS released for public comment;
        Final EIS prepared and issued;
        Federal Findings of No Significant Impact and Record of Decision;
        Awarding of State Environmental Permits.
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6.4 | Permits
      The major permits required by the Project are:
      Plan of Operations/Environmental Impact Statement;
        Mining and Reclamation Permit (Mining and Closure Plan) issued by
          the DNR;
        Air Emissions Permits (one for construction and one for operations)
          issued byPollution Control Agency of Minnesota ("PCA");
        State Wetlands Review;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| | Minnesota Non Ferrous Mine Permit and Five Year Operating Plan;
        Storm Water Permit;
        401 Water Quality Certification;
        Water Discharge Permits (Surface and Ground Water) issued by PCA;
          and
        404 Wetlands Mitigation Permit issued by the United States Army Corps
          of Engineers("Corps").As the project moves forward PolyMet will need to work
        with the relevant agencies to amend existing permits where required for
        use on the base metal operations at NorthMet and Cliffs-Erie.
      Table 6.4 - NorthMet EIS and Permitting Cost and Timing Estimates
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Task
      Cost              
           (US$ Million)
      Start   (Month  Number)
      Timing 
                (Months)Baseline Study
      0.45
      1
      6-10Plan of Operations
      0.15
      6
      2Preparation of Draft EIS
      0.30
      11
      12Preparation of Final EIS
      0.60
      23
      6Major Permits
      0.40
      8
      22-29Federal Record of Decision
      
      30-32
      1Total
      1.90
      
      34


As can be seen from Table 6.4, the expected
  time line from start to receipt of the required permits for the operations could
  be approximately 3 years at an estimated cost of US$1.90 million. This excludes
  any cost of land acquisition or swapping for wetlands mitigation and the estimated
  cost of US$3.5 million for the USFS land swaps.

The political climate in Minnesota is
  favourable for permitting of a new mining operation. The communities in the
  Iron Ore Range have been badly affected by the recent mine closures, and the
  existing labour force is seeking employment. Officials throughout the Minnesota
  state government have indicated a strong desire to replace the lost income and
  jobs and to assist in getting new economic development underway in the area.

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|7.  | Accessibility, Climate, Local Resources, Infrastructure & Physiography                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|7.1 | Topography, elevation and vegetation
      The surrounding country is flat lying with some low rolling
        hills. Much of the terrain has relatively poor drainage, with numerous
        lakes and wetlands. Much of the NorthMet pit is covered with poor quality
        second growth timber and the land is generally of a marshy nature and
        poorly drained.
      The deposit is within 10 km of the Cliffs-Erie crusher/mill/concentrator
        facility. The project area is essentially flat and at an elevation of
        around 490m above sea level.                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7.2 | Access, towns and transport                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    | The large iron ore mines in the area have been developed
        since the mid 1950's and the NorthMet project lies immediately adjacent
        to one of these mines. As such, there exists, fully developed transportation,
        infrastructure and communication systems close to the NorthMet property.
        A well maintained system of road and rail transport allows shipment in
        of supplies and export of finished product. The property is located 95
        km by rail to a harbour on Lake Superior and certain materials for the
        NorthMet project will be subject to marine transport.
|   
|    | The NorthMet property is located close to various
        townships that served the iron ore mines. With the closure of certain
        taconite operations, there is a sizeable and trained workforce available
        in the immediate area. The nearby town of Hoyt Lakes was built specifically
        for the Cliffs-Erie operation.                                                                                                                                                                                                                                                                               
|   
|    | The acquisition of the Cliffs-Erie site will provide
        greater than 80% of infrastructure required for the development of the
        project, including excellent road and rail access and low cost industrial
        power. The Cliffs-Erie rail tracks and established roads run alongside
        the planned NorthMet pit and a new spur and rail load-out facility will
        link to this existing rail infrastructure.                                                                                                                                                                                   
|   
|    | The electrical distribution and sub-stations from
        the main feed at the plant site are fully operational and will be used
        for the PolyMet project. Water permits also exist for the Cliffs-Erie
        facility. The town of Babbitt, 10 km to the north of NorthMet, and Hoyt
        Lakes 10 km to the south have the community infrastructure to support
        the requirements of the NorthMet workforce.                                                                                                                                                                                          
|   
|    | Reclaim water, utilities and services, compressed
        air supply, power supply and distribution, offices, warehousing and laboratories
        will all be provided for by existing facilities at the Cliffs-Erie plant
        site. New assay laboratory equipment will be purchased for the NorthMet
        project.                                                                                                                                                                                                                                                                                              
|   
|7.3 | Climate
      The northern Minnesota climate is continental, characterized
        by wide variations in temperature. The temperature in Babbbit (10 miles
        north of the property) averages -14oC (7oF) in January and 19oC
        (66oF) in July. The average annual precipitation is 28 inches with
        about 30% during the months of November and April and 70% from May through
        October.                                                                                                                                                                                                         

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|8. | History
      The NorthMet Project was discovered by US Steel Corp.
        ("USX") in 1969. Originally, it was thought to be a high-grade, underground
        copper-nickel resource. Drilling in the 1970's demonstrated that it was
        in fact a high tonnage, low grade deposit, amenable to open pit mining.
        The grade improved at depth. The inability to produce separate clean nickel
        or copper concentrates led to further process evaluation and development.
        At that time there was no recognition of any contained PGM's.
      The Minnesota Department of Natural Resources ("DNR")
        subsequently discovered that PGM's were associated with the nickel and
        copper in the resource. In 1989, Fleck Resources ("Fleck") acquired a
        20-year renewable mining lease over the property from USX and commenced
        an investigation into the potential for mining and recovering copper,
        nickel and PGM's. Fleck re-assayed pulps and rejects from previous drilling
        to obtain data on PGM's. The encouraging potential to produce extra revenue
        attracted joint venture partners (Nerco and Argosy Mining) who assisted
        in identifying and quantifying the PGM values. However these companies
        were not able to develop a metallurgical process that could economically
        produce separate acceptable concentrates for sale to a smelter, or economically
        extract the contained metals from a bulk concentrate.
      In the mid-90's, Fleck began investigating the use of
        hydrometallurgical processes, including bio-leaching and pressure oxidation,
        to determine the benefit to the Project. Fleck Resources changed its name
        to PolyMet Mining Corporation in 1998 and focused on a hydrometallurgical
        extractive technology. This led to the development of the PlatSol
        Process in 1998. The operating conditions of the PlatSol Process
        are such that the copper, nickel, cobalt and precious metals are all placed
        in solution in a single operation. Since the initial PlatSol Process
        testwork, the process has evolved and testwork on concentrates other deposits
        around the world led to improved recoveries of PGMs from the 92% level
        to 97%.
      In July 2000, PolyMet entered into a joint venture arrangement
        with North Limited ("North"), a major Australian mining company, to progress
        the NorthMet Project to commercial production. Under the joint venture
        arrangement, North had the opportunity to ultimately earn an 87.5% interest
        in the PolyMet Project through funding and production of a Bankable Feasibility
        Study and funding 100% of the total capital costs to develop the project.
      In August 2000 Rio Tinto Limited ("Rio Tinto") completed
        an on-market takeover of North. Subsequently, Rio Tinto decided not to
        proceed with the NorthMet project and PolyMet exercised its 30-day pre-emptive
        right, under a "change of control" clause, to terminate the joint venture
        arrangement. Consequently, PolyMet has regained a 100% interest in the
        NorthMet Project.
      Following completion of the metallurgical pilot plant
        work in November 2000, PolyMet commissioned a Pre-Feasibility Study on
        the project in November 2000, based on the PlatSol Process. This
        study was completed in April 2001. The Pre-Feasibility Study was for a
        50,000 tpd operation. The economics of this project were found to be unacceptably
        low and required a high up front capital expenditure. No further work
        was done until March 2003, when new management took over the company and
        commenced a detailed review of the project.
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|9.  | Geological Setting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|9.1 | Regional Geology
      The geology of northeastern Minnesota is predominantly
        Precambrian in age. Approximately 1.1 billion years ago, intra-continental
        rifting resulted in mafic volcanics and associated intrusions along a
        portion of the Midcontinent Rift System, which extends through the Lake
        Superior Region to Kansas (Figure 9.1) . The rift system is characterized
        by a gravity high and the thinning or absence of continental crust.
      The Midcontinent Rift consists of three parts: thick
        lava flows, intrusive rock and overlying sedimentary rock. The volcanic
        sequences are generally tholeiitic to sub-alkaline flood basalts derived
        from a mantle source. Minor felsic to intermediate flows exhibit crustal
        contamination. There are three major intrusive complexes: the Coldwell
        Complex of Ontario, the Mellen Complex along the south shore of Lake Superior
        and the Duluth complex along the north shore. The sedimentary rocks are
        mainly fluvial red beds filling the rift structure. The Duluth Complex
        (Figure 9.2) is the host of NorthMet mineralization. The complex lies
        along the projection of the Great Lakes Tectonic Zone, an Archean suture
        zone, the Archean Vermilion Fault and the Early Proterozoic shelf margin.
        It extends in an arcuate belt from Duluth to the northeastern tip of Minnesota.
        Emplacement of the intrusion appears to have been along a system of northeast-trending
        normal faults that form half-grabens stepping down to the southeast (Figure
        9.3) . The magma was intruded as sheet-like bodies along the contact between
        the Early Proterozoic sedimentary rocks of the Animikie Group and the
        basaltic lava flows of the North Shore Volcanic Group.

18

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Figure 9.1  Midcontinent Rift System

19

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Figure 9.2 - Regional Geology

20

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Figure 9.3  West Edge Deluth Complex

21

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|9.2   | Local Geology and Deposit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|9.2.1 | Rock Types
      The Duluth Complex is represented by the Partridge River
        Intrusion in the NorthMet area. The intrusion consists of light to dark
        gray troctolitic rock varying from troctolitic anorthosite to augite troctolite,
        with thin layers of melatroctolite or picrite. The rock types are classified
        by percentage of plagioclase, olivine and clinopyroxene. The melatroctolite
        layers tend to be fine grained with distinct layering. The Partridge River
        Intrusives have been sub-divided into seven lithologic units (Figure 9.4):
      Unit 7 and Unit 6  texturally homogeneous
            plagioclase-rich troctolite, each with apersistent ultramafic base.
            Unit 6 contains a mineralized horizon in the southwesternportion of
            NorthMet which is relatively enriched in PGM's relative to copper.
            Units 6and 7 are each about 400 ft. thick.
        Unit 5  coarse grained anorthositic troctolite
            (300 ft.) grading down to Unit 4.
        Unit 4  homogeneous augite troctolite and
            troctolite, with a less persistent ultramafichorizon. The contact
            between 4 and 5 is difficult to establish and the two units mayactually
            be a single unit.
        Unit 3  the most easily recognized unit
            because of its mottled appearance due toolivine oikocrysts. It is
            fine grained troctolitic anorthosite to anorthositic troctolite.
            Average thickness is 250 ft. but locally can be up to 500 ft.
        Unit 2  homogeneous troctolite with abundant
            ultramafic units and a generallypersistent basal ultramafic. This
            unit shows the most variation in thickness and maybe absent entirely.
        Unit 1  the most heterogeneous unit, both
            texturally and compositionally. Grain sizeis generally coarser at
            the top of the unit and fines downward. The unit containsabundant
            inclusions of the footwall rock and is noritic towards the base. This
            is themain sulfide bearing unit. Two ultramafic layers are generally
            present. Unit 1 isprobably the result of multiple pulses of magma
            injection. Average thickness is about450 ft.

22

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Figure 9.4  Generalized Igneous Stratigraphic Column

The footwall consists of Proterozoic
  sedimentary rocks of the Animikie Group, which resulted from a single depositional
  sequence in a transgressive sea. The oldest formation, the Pokegama Quartzite,
  represents well sorted clastic material deposited on a stable shelf. The Biwabik
  Iron Formation contains alternating sequences of ferruginous chert and slate.
  The Iron Formation has been extensively studied because of its importance to
  the iron mining industry and contains several members and sub members. The youngest
  formation is the Virginia Formation, consisting of argillite and graphitic argillite
  with interbeds of greywacke, siltstone and minor calc-silicate. The Virginia
  Formation appears to decrease in thickness from the surface contact with the
  Duluth Complex toward the interior of the Complex to the southeast. Inclusions
  of the Virginia Formation, as biotite hornfels, can be found in all units, but
  are especially abundant in Unit 1.

23

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|9.2.2 | Structure
      The general trend of the sedimentary rocks at the NorthMet deposit is
        to strike to the east-northeast and to dip to the southeast about 15-25°,
        and the Partridge River Intrusion appears to follow this general trend.
        Two east-northeast trending faults have been identified through the construction
        of cross sections. The faults are steeply dipping and normal in character;
        offset ranges from negligible to 600 ft. down to the southeast. A third
        major fault has been identified in the western portion of the area and
        can be traced to the Northshore Mine in the north. Movement on this fault
        is down to the east. Numerous other faults can be identified in the cross-sections,
        but offset is small and they lack continuity. The cross-sectional view
        shows considerable offset in the more southerly fault, and less offset
        on the more northerly fault. This relationship can vary over the strike
        of the deposit.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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|10. | Deposit Types
      There are two types of mineralization related to the
        rift system: hydrothermal and magmatic. The hydrothermal deposits include
        native copper in basalts and sedimentary interbeds, such as on the Keewenaw
        Peninsula, sediment-hosted copper sulfide and native copper, represented
        by the White Pine Mine of Michigan, copper sulfide veins in volcanics
        and polymetallic veins (Ag-Ni-Co-As-Bi) in volcanics. The magmatic deposits
        include Cu-Ni-PGM mineralization and Ti-Fe mineralization in the Duluth
        complex, uranium and rare earth elements in carbonatites and Cu-Mo in
        breccia pipes. More locally (Figure 10.1), the magmatic deposits lie along
        the northwestern contact of the Duluth Complex with the underlying sediments
        and Giants Range Batholith. NorthMet and the Babbit (or Minnamax) deposits
        are the largest of the Cu-Ni-PGM mineralization.
      The majority of the rock at NorthMet is unaltered, with
        minor alteration found along fractures and micro-fractures. Alteration
        consists of serpentine, chlorite and magnetite replacing olivine, uralite
        and biotite replacing pyroxene, and sausserite and sericite replacing
        plagioclase. As would be expected in a magmatic deposit of this type,
        sulfide mineralization does not appear to be directly related to alteration.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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Figure 10.1  Midrift Cross Section

26

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|11. | Mineralization
      The metals of interest at NorthMet are copper, nickel,
        cobalt, platinum, palladium, gold and lesser amounts of rhodium and ruthenium.
        In general, the metals are positively correlated with copper mineralization;
        cobalt is the main exception. Mineralization occurs in four horizons throughout
        the NorthMet property. Three of these horizons are within basal Unit 1
        and in some drill holes the horizons are indistinguishable from each other.
        The thickness of each of the three horizons varies from 5 to more than
        200 feet. Unit 1 mineralization is found throughout the deposit. A less
        extensive mineralization zone is found in Unit 6 and it is relatively
        enriched in PGM's compared to Unit 1.
      Sulfide mineralization consists of chalcopyrite, cubanite,
        pyrrhotite and pentlandite with minor bornite, violarite, pyrite, sphalerite,
        galena, talnakhite, mackinawite and valleriite. Sulfide minerals occur
        mainly as blebs interstitial with plagioclase, olivine and augite grains,
        but also occur within plagioclase and augite grains, as intergrowths with
        silicates, or as fine veinlets. The percentage of sulfides varies from
        trace to about 5%. Palladium, platinum and gold are associated with the
        sulfides.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

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|12. | Exploration
      Exploration has been on-going on the NorthMet property
        since the 1960's by various companies. The stage of exploration has advanced
        through several drill programs sufficient to complete a resource estimate
        and a Pre-feasibility study. Detailed discussion of the drill programs
        are addressed in Item 13  Drilling.
      Prospectors first discovered copper and nickel near
        Ely, Minnesota about 20 miles north of NorthMet in the 1940's. Subsequently,
        Bear Creek Mining Company conducted a regional exploration program resulting
        in the discovery of the Babbitt or Minnamax deposit (northeast of NorthMet
        and within the Duluth Gabbro). US Steel (USX) stated an exploration program
        in the Duluth Complex in the late 1960's and over the next few years frilled
        112 core holes into the NorthMet property (then called Dunka Road). USX
        investigated the deposit as a high-grade, underground copper-nickel resource,
        but it was considered to be uneconomic due to lower than expected copper
        and nickel grades, and the inability to produce separate, clean nickel
        and copper concentrates. At this time, there was no recognition of any
        contained platinum (PGM's) or gold in the deposit.
      In 1987, the Minnesota Natural Resources Research Institute
        ("NRRI") published data suggesting that a large resource of platinum group
        minerals or PGM's could be contained within the base of the Duluth Complex.
        PolyMet leased the NorthMet property from USX in 1989. PolyMet re-assayed
        pulps and rejects from the previous USX drilling to obtain data on the
        PGM's.
      Nerco Minerals and later Argosy Mining leased the property
        from PolyMet in the early 1990's. Work continued on the delineation of
        the contained PGM's and a few additional core holes were drilled. At that
        time there was no metallurgical process that could economically produce
        either (a) separate, clean copper and nickel concentrates for sale to
        a smelter, or (b) economically extract the various contained metals from
        a bulk concentrate.
      From 1998 to present, PolyMet has conducted three drilling
        programs totaling 87 holes for approximately 49,500 ft. of core and reverse
        circulation drilling. The third drilling program (13 holes for about 9,000
        ft.) was completed in December, 2000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28

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|13. | Summary of Drilling Programs
      No further drilling has occurred since the 2001 Pre-Feasibility
        Study however; the following is included for reference purposes.
      Table 13.1 summarizes the drilling campaigns for the
        NorthMet property. Figure 13.1 and 13.2 summarize the drill campaigns.
        The US Steel drilling which was done during the late 1960's. The original
        US Steel work was based on a copper/nickel underground mining scenario.
        US Steel's assaying did not include the PGM's.
      In 1989, PolyMet (then Fleck Resources) entered into
        a 20-year renewable lease with US Steel for the NorthMet (then Dunka Road)
        deposit. At that time, PolyMet did some logging and considerable re-assaying,
        including gold and PGM assays, but did not drill additional holes.
      Nerco Mineral Co. leased the property from PolyMet during
        1990 and drilled 4 holes (2 were unsampled metallurgical holes) and did
        a resource calculation as part of an evaluation of the property. Nerco
        allowed their option to expire during 1991.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Table 13.1: Summary of Drilling ProgramsCompany
      Drilling Type
      No.
        of Holes
      No. of Feet
      Assay IntervalsUS Steel
      BX Core
      112
      133,909
      5,037Nerco(met only)
      BQ Core
      2
      842
      1671998 PolyMet
      RC
      14
      6,370
      1,2741999 PolyMet
      BTW Core      RC 
            Mixed Core/RC
      3 
                      18    
                   3
      2,476    9,300  
         2,660
      455      
         1,868        5342000 PolyMet
      BTW Core      RC
      16 
                      20
      10,714    8,980
      1,984      
         1,798PolyMet Total
      
      74
      40,500
      7,913TOTAL
      
      188
      175,251
      13,117Core Total      RC
        Total      Mixed Total
      133 
                      52    
                   3
      147,941    24,650  
         2,660
      7,643      
         4,940        534


During 1998, 1999 and 2000, PolyMet
  did considerable additional RC core drilling, as shown in Table 13.1. Much of
  this drilling was to supply material for metallurgical testing, as well as resource
  definition.

Table 13.1 shows that the drilling through
  October 2000 consists of 133 core holes for 147,941 ft., 52 RC holes for 24,
  650 ft. and 3 mixed holes (initial RC followed by core) for 2,660 ft. PolyMet
  drilled 13 core holes in November-December 2000 that are not included in this
  Pre-feasibility study.

Figure 13.3 is a map showing the locations
  of the US Steel and PolyMet drilling. The NERCO holes are also posted, but they
  are not obvious since they twinned US Steel

29

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holes. The map shows that the PolyMet
  drilling is mostly in the area where the deposit is near the surface (since
  the deposit strikes about N57oE and dips 25o to 36oSE.
  The only deep drilling is provided by the US Steel holes.

Figure 13.4 shows a cross section of
  the deposit with the rock type geology included. It can be seen that the geologic
  interpretation consists of 20o dipping rock units offset by near
  vertical faulting. Copper grades are also shown on the section.




Figure 13.1  Area 1999 - 2000 Drilling

30

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Figure 13.2  Location of Metallurgical Samples

31

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Figure 13.3  US Steel and PolyMet Drilling

32

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33

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Figure 13.4  Cross Section Drill Holes

34

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35

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|14. | Sampling Method and Approach
      This was reported on in the 2001 Pre-Feasibility Study. There is nothing
        further to report.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

36

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|15. | Sample Preparation, Analysis and Security
      This was reported on in the 2001 Pre-Feasibility Study. There is nothing
        further to report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

37

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|16. | Data Verification
      This was reported on in the 2001 Pre-Feasibility Study.
        There is nothing further to report.
|--- | ---------------------------------------------------------------------------------------------------------------------------

38

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|17. | Adjacent Properties
      This section is not applicable to PolyMet as it does not own any adjacent
        properties.
|--- | -----------------------------------------------------------------------------------------------------------------------

39

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|18.  | Mineral Processing and Metallurgical Testing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|18.1 | Process Technology
      The PlatSol Process metallurgical extraction process
        was developed in 1998/99 at Lakefield Research Ltd. In May 2000, a continuous,
        fully integrated pilot plant testing program was initiated at Lakefield
        to demonstrate this hydrometallurgical extraction process for the NorthMet
        Project.
      Both bench and pilot plant testwork for NorthMet used
        mineralized material obtained from reverse circulation ("RC") drilling
        samples. A total of 26 tonnes of RC cuttings was used for the bench tests
        and a further 33 tonnes of RC cuttings was used for the pilot plant tests.
        For the pilot plant tests, the 33 tonnes of RC cuttings were milled to
        the prescribed fine grind size and concentrated into a bulk concentrate
        of 839 kg using flotation. This bulk concentrate, combined with the remaining
        concentrate from the bench tests, was treated in an autoclave under the
        PlatSol Process operating conditions.
      The PlatSol Process entails an autoclave operating
        at 225oC with 100 psi oxygen over pressure. The addition of
        a small amount of chloride creates a unique leaching environment whereby
        all the base metals (copper, nickel and cobalt) and precious metals (gold,
        silver, platinum, palladium, etc.) are brought into solution in one step.
        The ability to recover the PGM's into solution is what makes the PlatSol
        Process unique and patentable. The metals can then be recovered sequentially
        from the solution, commencing with the PGM's.
      The precious metals (PGM's, silver and gold) are precipitated
        using sodium hydro-sulphide. The copper recovery uses well established
        solvent extraction and electro-winning ("SX-EW") techniques. In its new
        approach, PolyMet has elected not to recover nickel metal on site. The
        process circuits have been dramatically simplified to convert the remaining
        metals in solution after copper SX/EW (dominantly nickel with small amounts
        of cobalt, copper and zinc) into a nickel concentrate. PolyMet is currently
        planning to produce a nickel hydroxide which is a precipitate. The precipitate
        will be filtered, dried and shipped off-site to a metal refinery. Production
        of nickel sulphide is an alternative to hydroxide.
      In general, mineral recoveries and values for the bulk
        concentrate produced in the pilot plant confirmed the results obtained
        in the bench top testwork. Nickel recovery in the flotation concentrate
        was lower than expected. Mineralogical testwork showed that this was due
        to nickel in association with silicates which is not amenable to flotation
        recovery. Overall flotation and hydrometallurgical recoveries for the
        pilot plant tests are given in Table 18.1.

40

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Table 18.1 - Pilot Plant Metal Recoveries

Percent
      Grams/TonneCu
      Ni
      Co
      Au
      Pt
      PdOre Grade
      0.43
      0.12
      0.009
      0.05
      0.08
      0.36FlotationConc. Recovery
      93.7
      69
      42
      75.7
      76.9
      79.6Conc. Grade
      14.6
      3.1
      0.15
      1.4
      2.3
      10.4PlatSol ProcessProcess Recovery
      98.1
      96.9
      92
      88.4
      95
      93.6Overall Recovery
      91.9
      66.9
      38.6
      66.9
      73.1
      74.5


PolyMet has attempted to keep the new operation as simple
    as possible. The crushing, grinding and flotation processes proposed for the
    NorthMet Project are tried and tested and are used extensively in other processing
    plants worldwide. The Cliffs-Erie mill concentrator which functioned efficiently
    prior to shut down in 2001 will be utilized for these process steps. Similarly,
    the SX-EW process which will be used to produce cathode copper on site is
    industry standard. Copper will be the only metal produced on the NorthMet site.
    Since copper is the largest contributor to revenue, the project is being characterized
    as a copper project - with important credits obtained from nickel and the
    PGM's. The PGM's are recovered first and precipitated as sludge immediately
    prior to copper SX/EW. After copper extraction, the metals remaining in solution
    are principally nickel with small amounts of copper, cobalt and zinc. This
    solution is first treated to remove iron. Magnesium oxide is then added which
    causes the remaining metals to precipitate as the hydroxide. When filtered
    and dried, nickel hydroxide concentrate can be shipped off - site for treatment
    in an established facility. This eliminates the complex circuits for nickel
    and cobalt recovery described in the original 2001 flow sheet. The objective
    is to start the project with minimum technical risk. The proposed autoclave circuit for the pressure oxidation
    process at NorthMet is similar to several other operations - principally the
    gold autoclaves operating at Barrick's mines in Nevada and a new copper project
    at Phelps Dodge's Bagdad operation in Arizona. The PlatSol Process uses relatively low levels of
    chloride in the leach solution which allows efficient leaching of the PGM's
    and precious metals (gold and silver) as well as the base metals. Process
    recoveries of PGM's in the 2000 pilot plant have been improved from approximately
    94% to 98% in recent test programs. International PGM Technologies Ltd. ("IPGMT"),
    an Ontario, Canada, corporation developed the PlatSol Process and has
    patented the technology in a number of countries. PolyMet has an agreement
    with IPGMT for the use of this technology, free of any royalty charge.


41

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The PlatSol Process performed
  well during the continuous, fully integrated pilot plant operations conducted
  in 2000. The simultaneous leaching of base and precious metals in the autoclave
  from the bulk concentrate was confirmed. Optimum operating conditions established
  in the pilot plant were:

| | • | % solids               | 10.5  11% 
| | - | ---------------------- | -----------
| | • | temperature            | 225°C      
| | • | oxygen overpressure    | 100 psi    
| | • | retention time         | 120 minutes
| | • | chloride concentration | 9 g/l      

Under the optimized operating conditions
  tested in the autoclave, the leach efficiencies obtained for all the pay metals,
  with the exception of gold, were either equal to or better than those achieved
  in bench testing in 1999.

42

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|19.  | Mineral Resource and Mineral Reserve Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|19.1 | Resource estimates and categorization
      The resource estimates were completed by Independent Mining Consultants
        Inc. of Tucson ("IMC") for the 2001 Pre-feasibility study and the May
        2003 re-statement for a lower tonnage higher grade pit are shown in Table
        19.1, below. IMC used the assumptions detailed in Appendix I to prepare
        the estimates in this summary and their May 2003 report is included as
        Appendix I. It should be noted that in this mine modeling, completed in
        May 2003, IMC did not factor in the benefit of reduced capital by use
        of the Cliffs-Erie facilities because this had not been finalized at the
        time. In their limited review, at lower daily tonnages, IMC also did not
        introduce smaller scale mining equipment for a selective mining approach.
        They continued to use the same scale of equipment as described in the
        50,000tpd (2001) Pre-feasibility study with attendant high dilution factors.
        For this 2003 technical update, IMC were directed to produce a mine plan
        with smaller daily tonnage, reduced mine life - all in an attempt to obtain
        higher metal grades.
      The pit resource completed by IMC has a maximum 50 degree pit wall slope
        angle. IMC's estimates show a measured, indicated and inferred resource
        of 139 million tonnes. There is the potential to add to this resource
        base, as the deposit is open at both ends and at depth (see Appendix I).
      The drilling to date has been adequate to complete the Pre-feasibility
        level work required for mine planning. It is proposed to complete further
        in-fill drilling, sufficient to establish a mineable pit reserve, as part
        of a Bankable Feasibility Study.

Table 19.1

|Status                         | Ktonnes Above Cutoff | % Of Total | Average Grades | Total  Ktonnes | Waste To Ore Ratio
|------------------------------ | -------------------- | ---------- | -------------- | -------------- | ------------------
|NSR                            | CuEq                 | Cu         | Ni             | Co             | Pd                
|US$/t                          | %                    | %          | %              | g/t            | G/t               
|Geologic Resource             
|Measured                       | 315,618              | 33.05%     | 11.82          | 0.847          | 0.333             
|Indicated                      | 295,601              | 30.96%     | 12.76          | 0.914          | 0.338             
|Inferred                       | 343,509              | 35.99%     | 13.16          | 0.943          | 0.347             
|Total                          | 954,738              |            | 12.59          | 0.903          | 0.333             
|Preliminary Pit Resource      
|Measured, Indicated & Inferred | 139,145              | 100%       | 10.00          | 0.97           | 0.40              

43

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|20.  | Other Relevant Data and Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|20.1 | Mining
      The original mine plan for the Pre-feasibility study
        of 2001 was for a mining rate of 20,075 ktons per year (55,000 tpd for
        365 days). This plan was modified for the current update to 9,125 ktonnes
        per annum (25,000 tpd for 365 days). The mine is scheduled to operate
        360 days per year. The new mine plan is based on using a mine contractor
        to complete all mining operations with PolyMet staff supervising mine
        plan operations and mine geology.
      Mine development will generally follow that outlined
        by IMC in the Pre-feasibility study with the exception that Phase 6 and
        7 will only occur if metal prices and capital and operating costs warrant
        this development. The goal of the phases is to develop the mine in a logical
        order by commencing the mine with the higher grade material which also
        has lower strip ratio. The mine plan will then progress to higher strip
        ratios. Phase 1 is in the northeastern part of the deposit with phase
        2 in the southwestern portion. The remaining three phases will push the
        hanging wall south. Exits will be maintained to the south during all phases
        of mining so that access can be obtained to the rail load-out facility.
      Waste rock will be stored in dumps located to the north
        and east of the main ore body The waste dumps will be located outside
        of any potential ore body extensions should PolyMet decide to expand the
        pit. Waste facilities will be constructed in 7m lifts with an overall
        slope angle of 22° (2.5H:1V) .
      Mining operations will be carried out by a mining contractor.
        The contractor will provide all necessary fleet requirements for a turn-key
        mining operation based on the required annual mine production schedule.
        Work activities will include:
      Construction of the initial out-of-pit access roads from the pit
            area to the rail load-outfacility and the mine rail spur and to the
            waste rock storage areas.
          Removal of all topsoil from the mine and waste storage areas. Replace
            topsoil on thewaste storage areas at completion of mining as part
            of ongoing mine reclamation.
          Pre-production development required to expose ore for initial production.
          Mine and transport ore to the rail load-out facility.
          Maintain all mine work areas, in-pit haul roads, and external haul
            roads.
          Maintain waste storage areas.
      The major mine fleet will consist of nine 185 t trucks,
        one 18m3 and one 11m3loaders, two 23 m3shovels
        and two blasthole drills. Support equipment will include track dozers
        and motor graders to maintain road surfaces, dumps and operating benches.
      Mining will be conducted year round based on three 8
        hour shifts per day.
      Mine operating costs are based on data from similar
        mining operations and contract mining costs. The costs cover all general
        labour and consumable costs, amortization of initial equipment capital
        investment, equipment depreciation and contractor profit.
      The costs associated with PolyMet mine personnel and
        administration associated with direct mine operations are included separately
        within the operating cost section.

44

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|20.2 | Process Plant
      A revised process plant design has been completed by
        PASI. The revised flowsheets are based on a throughput of 25,000 tpd and
        utilizing the existing Cliffs-Erie crushing and grinding facilities. The
        flotation plant and all downstream process will be new but will generally
        utilize existing buildings and infrastructure within the Cliffs-Erie facilities
        as follows:
      one circuit of the rail dump pocket and the 60" gyrosphere crusher;
        the withdrawal feeder and the transfer conveyors to the coarse ore
          bins;
        2-7' standard cone crushers and associated feeders;
        4-7' short head cone crushers and associated feeders and screens;
        belt conveyors and tripper to the fine ore bins;
        8 sets of rod/ball mill circuits;
        three regrind mills (two for concentrate regrind and one for limestone);
        ancillary facilities and offices;
        infrastructure including power supply and distribution; and
        tailing storage and reclaim water facility.An overall mass balance was developed for the NorthMet
        process based on the hydrometallurgical mass balance provided by PolyMet,
        which set the feed headgrades and recoveries for copper, nickel, cobalt
        and PGM's at and a throughput of 9,125,000 tonnes per annum.
      The development of the flowsheet and equipment sizing
        for the crushing, grinding and flotation process facilities was based
        on flowrates derived from this mass balance, plus process design criteria
        developed from the AMEC study and information by SGS Lakefield who were
        responsible for the pilot plant flotation trials. The flowsheet for the
        hydrometallugical facilities  pressure oxidation, solid-liquid separation,
        PGM recovery, copper SX/EW and nickel/cobalt hydroxide recovery 
        was derived primarily from the AMEC study with equipment resized accordingly
        for the new plant throughput. Testwork data from SGS Lakefield was reviewed
        for sizing of thickeners and filters.
      Work indices used for crushing and grinding circuit
        calculations are estimates provided by SGS Lakefield based on limited
        grinding testwork.
      Process Design Criteria
      The detailed process design criteria is presented in
        Appendix II and the key criteria is summarized in Table 20.1.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

45

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Table 20.1 - Process Design Criteria Summary

|Parameter                       | Design Criteria              
|------------------------------- | -----------------------------
|Annual mill throughput          | 9,125,000 tonnes             
|Average daily mill throughput   | 25,000 tpd dry               
|Plant Availability              | 91.34 %                      
|Operating Hours per day         | 24                           
|Hourly Throughput               | 1140 tph dry                 
|Concentrate produced            | 703 tpd dry                  
|Rod mill work index             | 14 kWh/t                     
|Ball mill work index            | 17 kWh/t                     
|Regrind work index              | 7.5 kWh/t                    
|Feed size to flotation          | 200 micron                   
|Feed size to pressure leach     | 15 micron                    
|Pressure leach residence time   | 2 hours                      
|Autoclave operating temperature | 225 C                        
|Autoclave operating pressure    | 475 psig                     
|H2SO4 concentration             | 50-60 g/l                    
|Cl concentration                | 10 g/l                       
|Cu SX plant                     | 2 extraction; 1 wash; 2 strip
|Organic / Acid ratio            | 1.5:1                        
|PLS Cu                          | 18.4 g/l                     
|Raffinate Cu                    | 0.99 g/l                     
|SX Cu recovery                  | 94.62 %                      
|E/W current density             | 260 amp/m2                   
|Cathodes per cell               | 54                           
|Total cells required            | 125                          

46

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Process Description

The overall process flow is described in Figure 20.1.

Crushing

Run of mine ore will be delivered by
  rail to the Cliffs-Erie process plant and dumped into the primary crusher surge
  pocket. From the surge pocket, the ore will flow to a single existing 60"
  by 89" gyratory crusher set to produce a nominal coarse ore product with
  a P80 sizing of 6 inches. The existing secondary gyratory crushers
  will be removed and a surge pocket will be constructed allowing the crushed
  ore to discharge onto an existing apron feeder. The apron feeder will in turn
  discharge onto the exiting coarse ore surge bin feed conveyor. Ore from the
  coarse ore surge bin will discharge via the existing vibrating feeders onto
  existing belt feeders feeding two existing 7' standard cone crushers. Each 7'
  cone will discharge onto two existing vibrating feeders, each feeding an existing
  6' x 10' vibrating screen. Screen oversize discharges into one of four existing
  7' shorthead cone crushers. The minus 1⁄4" discharge from the tertiary
  shorthead crushers will combine with the screen undersize onto the existing
  feed conveyor to the existing fine ore bin.

Grinding

Ore from the fine ore bin will discharge
  via existing vibrating and belt feeders to the existing rod and ball mill circuits.
  For the design throughput of 25,000 tpd, 8 of the existing 12 circuits will
  be utilized. Each rod mill will operate in open circuit, with the rod mill discharge
  feeding a ball mall in closed circuit with new hydrocylones. The grinding circuit
  will produce a flotation feed of 30% solids at a P80 sizing of 200
  micron.

47

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Figure 20.1  Blocked Flowsheet

48

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Flotation and Regrind Cyclone overflow from the grinding circuits combine to feed
    a conditioning tank with a 5-minute retention time. The conditioner will feed
    a single bank of 4-160m3rougher tank cells providing a total residence
    time of approximately 8 minutes. Rougher discharge will feed 2 parallel banks
    of 5-160m3 tank cells providing a residence time of 20 minutes. Rougher concentrate combines with re-cleaner tail to feed
    the first cleaner flotation circuit. The cleaner flotation circuit will consist
    of a single bank of four 20m3conventional cells providing 16 minute
    retention time. Scavenger concentrate, mixed with cleaner tail, will be reground
    in an existing regrind ball mill to a target P80 of 30 micron prior
    to recirculation back to the conditioning tank. Cleaner concentrate will be
    fed to a single re-cleaner column cell, providing 16-minute retention time,
    for final concentrate cleaning. Cleaner concentrate will report to the concentrate
    regrind mill where the concentrate will be reground to the target P80
    sizing of 15 micron, prior to pressure oxidation. A second existing regrind
    mill (using ceramic balls as grinding media to reduce iron contamination)
    will be used for this purpose. Reground concentrate thickened to 50% solids and stored
    in a concentrate storage tank, which provides 12 hours of surge capacity between
    the flotation circuit and downstream hydrometallurgical processing. Flotation tailings will be pumped to the existing Cliffs-Erie
    tailings impoundment. The flotation circuit reagents (MIBC, PAX, Flex 31,
    and WW1 752) are based on the AMEC study and was developed for effective base
    metal recoveries with associated high PGM recovery. Pressure Leaching Pressure Leaching is based on standard Autoclave technology
    and utilizes the patented PlatSol Process. Concentrate will be blended
    in the autoclave feed tank with sodium chloride prior to pumping into the
    autoclave at 50% solids. Recycled copper SX/EW raffinate will be pumped into
    the autoclave to maintain temperature control. The two autoclaves will provide the required 2-hour residence
    time for the feed slurry. Each autoclave will have 6 compartments, and will
    be designed to operate at 225°C and approximately 475 psig. These pressures
    and temperatures are standard for autoclave design in the refractory gold
    ore/concentrate oxidation process. The NorthMet autoclave design will comprise
    a mild steel pressure vessel with a polymer-thermoplastic membrane corrosion
    barrier and two layers of acid resistant brick for thermal and abrasion resistance.
    This design follows the reported design of the Phelps Dodge copper concentrate
    autoclave at Bagdad, Arizona. The Phelps Dodge autoclave has been designed
    for temperatures up to 235°C and pressures of up to 4000 kPa.


49

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The slurry is cooled to below 63°C via a single stage
    let down and slurry coolers prior to downstream metal extraction processes. Leach Residue Prior to metal recovery, the leach residue will be separated
    from the pregnant leach solution (PLS) to provide a high recovery of solute
    via filtration and washing of the leach residue. To accomplish this, the circuit
    will include a primary thickener followed by a pressure plate filter unit.
    A wash ratio of 4:1 will be used to maintain high solute recoveries. Autoclave
    residue filter cake will be re-pulped and fed to a scavenger flotation circuit
    to recover residual PGM's. The PGM concentrate will be re-circulated back
    to the feed end of the autoclave and the flotation tailing will be pumped
    to a new hydromet tailings impoundment constructed inside the existing tailings
    impoundment. PGM Recovery The PLS will be mixed with S02 to ensure total
    reduction of oxidized iron species in solution (Fe (III) is reduced by Fe
    (II) in solution by SO2). The SO2 will be produced by
    a packaged sulphur burner system. After ferric iron reduction, the solution
    will be processed through a two-stage pipe reactor system, with the addition
    of NaHS, to precipitate the platinum and precious metals. After filtration,
    the PGM precipitate will be releached in a sulfuric acid solution in a batch
    autoclave to leach any co-precipitated base metals (Cu, Ni, Co) and sulfur/sulfides
    to produce a high grade PGM precipitate for toll refining. Batch autoclave
    leach solution will be recirculated back to the PLS surge tank before precious
    metal recovery to ensure full recovery of valuable metals. Neutralization The PLS filtrate from the PGM precipitation system will
    require neutralization to pH 2 prior to copper solvent extraction. Filtered
    PLS will be pumped from the neutralization surge tank to the solution neutralization
    cascade that consists of three tanks with a total retention of 180 minutes.
    Limestone is added to maintain a pH of 2 and prepare the solution for copper
    solvent extraction. The slurry exiting the precipitation tanks will be pumped
    to a thickener. Thickener underflow is filtered using an automatic plate and
    frame pressure filter package. The filter cake solids (saleable grade gypsum)
    will be discharged to a conveyor and stockpiled prior to re-sale.


50

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Copper Solvent Extraction and Electrowinning Copper PLS from the neutralization circuit will be stored
    in the copper SX feed tank providing 4 hours of surge capacity. PLS will be
    filtered to avoid crud formation in the SX circuit. The filtration will use
    multi-media pressure filters and the backwash will be returned to the gypsum
    thickener. Copper will be extracted from the PLS into an organic solution. The extraction circuit consists of three mixer settlers,
    in which the aqueous feed and the barren organic flow counter-current to one
    another. Raffinate leaving the final extractor will report to the copper raffinate
    tank, from which solution will either be recirculated back to pressure oxidation
    for use as cooling liquid, or sent forward to bleed treatment. Copper loaded organic is pumped from the first stage extractor
    to the loaded organic tank where entrained aqueous solution will have the
    chance to settle out. Solution recovered in this way will be collected in
    a sump at the bottom of the tank and periodically returned to the extraction
    circuit. Loaded organic will be contacted, in a two-stage copper
    strip circuit, with lean electrolyte recycled from copper EW. The stripped
    organic will pass through to extraction, while the rich electrolyte will be
    pumped through organic recovery columns, and anthracite based multi-media
    filters to coalesce any residual organic, before discharging into the electrolyte
    recirculation tank. Rich electrolyte will be trim heated to approximately 120°F
    before entering the tankhouse EW cells, using an indirect hot water heating
    system. A 125-cell tankhouse will provide the capacity required to harvest
    33,000 tonnes per year of cathode copper. Cathodes from the EW cells will be harvested on a daily
    basis, after a 7-day growth cycle. The copper sheets will be mechanically
    stripped from the stainless steel blanks using a standard fully automatic
    cathode washing and stripping machine. The stripping machine will also provide
    mechanical stacking, strapping, and weighing of the cathode bundles in preparation
    for shipping to market. Nickel-Cobalt Hydroxide Iron and aluminum must be removed from copper SX raffinate
    bleed solution before the extraction of nickel and cobalt. In the first of three precipitation cascades, iron will
    be removed as goethite. In order for goethite to be formed, the bleed stream
    will be pre-heated to 170°F by direct steam injection into a tank with
    45 minutes retention time. Direct injection will be used to negate the problem
    of gypsum scaling on the solution side of a shell and tube heat exchanger. Hot solution from the pre-heat tank will enter the first
    of five tanks in the iron precipitation cascade. Limestone will be added to
    the first tank to neutralize free acid in the copper raffinate, and will result
    in gypsum precipitation. Air is sparged


51

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into tanks l, 2 and 5 to facilitate ferrous oxidation, allowing
    ferric precipitation as goethite. In the third and fourth tanks ferrous oxidation
    will be enhanced using a mixture of oxygen and sulfur dioxide. More limestone
    will be added to neutralize the acid generated by the goethite precipitation
    and maintain a discharge pH of 3.5. At this pH a significant percentage of
    the aluminum hydrolyses and precipitates while loss of the valuable metals
    (Ni, Co, Zn) is minimized. Overflow from the fifth tank will be pumped to a thickener
    where the solids settle to a density of 40% by weight. A significant portion
    of the thickened underflow will be returned to the precipitation cascade,
    where the solids act as seeds to facilitate the growth of larger particles,
    which in turn improves settling and filtration characteristics. The balance
    of the thickener underflow will be filtered through a plate-type pressure
    filter. After washing to recover entrained nickel and cobalt, the cake will
    discharge into a tank where it is slurried with reclaim water and pumped to
    a new tailings impoundment on the existing tailings dam Overflow from the iron thickener will be neutralized with
    magnesium oxide in two stirred tanks to precipitate a combined nickel/cobalt
    hydroxide. Slurry will discharge from the second tank into a thickener. Thickener
    underflow is filtered in a plate-type pressure filter. The filter cake will
    be collected and steam dried prior to bagging for dispatch to an off site
    nickel/cobalt refinery. Thickener overflow will be treated with lime in two stirred
    tanks to precipitate any remaining valuable metal content. Slurry will discharge
    from the second tank to a thickener. Thickener underflow will be recycled
    back to the leach residue thickener. Thickener overflow will be pumped to
    a new tailings impoundment on the existing tailings dam. The valuable metals (Ni, Co) will be redissolved under the
    strong acid conditions prevailing in the leach residue thickener. Tailings
 The existing tailings facility at Cliffs-Erie will be used
    to contain tailings products from the NorthMet process plant. Flotation plant
    tailings will form the bulk of the tailings products and will be discharged
    to the existing dam using the existing pumping and piping arrangement. There will be three new hydromet tailings produced: leach residue flotation tailings,
iron/aluminum gypsum sludge; and
solution from the hydroxide precipitation circuit. Each of these tailings will be contained in separate lined
    ponds constructed on the existing tailings dam. Each pond will have an initial
    capacity of 3 years storage.


52

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Reagents Included on the equipment list are the proposed reagent systems
    to support the process plant operations. Reagent systems included are: Limestone: Rail receipt and off-load, conveying, crushing and grinding,slurry storage and distribution loop. (An existing mill will be used forgrinding.)
MIBC: Bulk liquid storage and distribution.
PAX: Mixing, storage and distribution.
Flex 31: Bulk liquid storage and distribution.
WW 1752: Bulk liquid storage and distribution.
Flocculent: Mixing, storage and distribution
Sulfuric Acid: Bulk liquid storage and distribution.
NaHS: Bulk liquid storage and distribution.
NaCl: Mixing, storage and distribution.
MgO: Mixing, storage and distribution.
CaO: Mixing, storage and distribution.
Sulphur: Bulk storage, burner, distribution and SO 2scrubbing. Capital and Operating Cost Estimates Estimates of capital and operating costs were generated at
    the Pre-feasibility level in the April 2001 Pre-Feasibility Study led by IMC.
    Since the project was taken over by new management in March 2003, four critical
    elements have been revised as follows:


| | 1. | Smaller higher grade mine plan.                                                                 
| | -- | ------------------------------------------------------------------------------------------------
| | 2. | Elimination of complex nickel cobalt recovery circuits and conversion
      to nickel hydroxide.
| | 3. | Securing the mothballed Cliffs-Erie Mill concentrator.                                          
| | 4. | Use of a contract miner.                                                                        

Based on the above, P. Downey and Associates, with the assistance
    of PASI and IMC, have revised the 2001 capital and operating costs and updated
    to current first quarter 2004 pricing. Capital Costs The revised capital is summarized in Table 20.2.


53

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Table 20.2 - Revised Capital Cost Estimate

|Description                                                         | Totals (US$ Millions)
|------------------------------------------------------------------- | ---------------------
|Mining- using contract miner                                        | 5.76                 
|Crushing/Milling/Flot'n (Existing Cliffs/Erie)                      | 24.91                
|PlatSol Process-                                                   | 31.05                
|Copper SX/EW Plant                                                  | 25.19                
|PGM Recovery Circuit                                                | 20.62                
|Nickel Hydroxide recovery circuits                                  | 6.00                 
|Tailings, Water & Services (Existing Cliffs-Erie)                   | 4.55                 
|Plant Site Utilities & Facilities (Existing
      Cliffs-Erie)      | 12.59                
|Sub Total Direct Costs                                              | 130.67               
|Indirect Costs (Inc. Fees, working capital &
      20% Contingency) | 73.13                
|Other Acquisition-incl. land and infrastructure                     | 31.00                
|Total Project Costs                                                 | 234.80               

The capital cost estimate includes the estimated direct
    cost for equipment, material and labour. In addition, cost estimates were
    developed for the project indirect costs including EPCM, start up, construction
    indirects, first fill, spares and contingency. The estimate was developed
    based on a site visit and inspection of existing equipment and facilities,
    and the following main sources of information: Contract Mining and Associated Services.
Process Design Criteria by PASI.
Process Flow Sheets.
Facility General Arrangement Drawings.
Electrical and Mechanical Equipment List.
Budget Quotations from Equipment Suppliers.
Current Labour and Material Costs for the Area.
The AMEC Simons Mining & Metals 2001 Prefeasibility Report.


54

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Operating Costs The 2001 Pre-Feasibility Study estimate of operating costs
  included an owner operated mining fleet, an all new processing plant, infrastructure
  and G&A costs associated with the on-site production of a PGM concentrate,
  copper cathode, nickel cathode and cobalt sulphide. The current revised project operating costs use the same basic
  project data updated to 2003 but are based on a simplified flowsheet whereby
  only copper cathode is produced on site. The revised operating costs also reflect
  a contract mining operation and use of the Cliffs-Erie crusher/mill/concentrator.
  The Cliffs-Erie facility also received a beneficial electrical power rate for
  the first 25 MW of usage and this rate has been carried in the current operating
  cost estimate. Labour rates are based on data available from Minnesota Iron
  Range mines. The operating cost estimates include a 5% contingency, as detailed
  in Table 20.3. Table 20.3  Revised Operating Cost Estimate


|Cost Area                          | Annual Cost  (US$ Millions) | Cost/Tonne Ore  (US$/Tonne/Ore)
|---------------------------------- | --------------------------- | -------------------------------
|General & Administrative ("G & A") | 4,856,600                   |                                
|Subtotal G & A                     | 4,856,600                   | 0.53                           
|Mine                               |                             |                                
|Contract miner                     |                             |                                
|Sub Total Mine                     | 28,938,000                  | 3.21                           
|Mill & Process                     |                             |                                
|Reagents & consumables             | 22,142,258                  |                                
|Labour Costs                       | 10,977,823                  |                                
|Operating Supplies                 | 400,000                     |                                
|Maintenance Supplies               | 1,915,896                   |                                
|Environmental                      | 300,000                     |                                
|Sub Total Mill & Process           | 35,735,977                  | 3.91                           
|Power                              | 16,746,886                  | 1.84                           
|Total Operating Costs              | 86,277,463                  | 9.49                           
|5% Contingency                     | 4,313,873                   | 0.95                           
|Total Operating Costs              | 90,591,336                  | 10.44                          

The following items are not included in the direct cash operating
  cost estimate: Product delivery to smelters or copper cathode end users
Selling and marketing costs
Corporate overhead
Depreciation, amortization and depletion
Interest charges Manpower requirements were estimated in detail for each area
  of the mine, process plant and administration. Allowances were made to cover
  vacations, sick time and other types of leave such as training.


55

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The following Table 20.4 summarizes the overall manpower requirements for the operation. Salary and overhead costs were based on data from the recently closed Cliffs-Erie operation and from data from other similar sized operations.

Table 20.4 Manpower Requirements

|Administration Staff   | 29 
|---------------------- | ---
|G& A Salaried          | 22 
|Process Plant Staff    | 27 
|Process Plant Salaried | 140
|Total                  | 218

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|21. | Interpretation and Conclusions
      The results of this scoping level study indicate that
        the NorthMet project, as currently defined, shows sufficient potential
        to be carried forward to the next phase which is a feasibility study.
        The purpose of the feasibility study will be to examine all aspects of
        the project development and to establish with greater accuracy its economic
        and technical viability.
      This conclusion is solely based on the resource data and the order of
        magnitude capital and operating costs developed for this study.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|22. | Recommendations
      It is recommended that PolyMet proceed to the next stage
        of development of the NorthMet Project which is the Feasibility Study
        level stage. This will include sufficient drilling to bring the current
        resources to the reserve category. Additional test work will also be required
        to further refine the ore process prior to completion of a bankable Feasibility
        Study.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

58

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|23. | References
|--- | ----------
|    |           
|    | -         
|   
|    | -         
|   
|    | -         
|   
|    | -         

59

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|24. | The date of this report is July 22nd, 2004.
|--- | -------------------------------------------

60

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|25. | Additional Requirements for Technical Reports on Development Properties
        and Production Properties
      There is no information to report for this item in the Pre-feasibility
        stage of exploration.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|26. | Illustrations                                                          
|--- | -----------------------------------------------------------------------
|    |                                                                        
|    | Figure 3.1 - Aerial photograph of the Cliffs-Erie facilities           
|    | Figure 6.1 - Location of NorthMet Project                              
|    | Figure 6.2  Mineral Rights Owners                                     
|    | Figure 6.3  Surface Owners                                            
|    | Figure 9.1  Midcontinent Rift System                                  
|    | Figure 9.2 - Regional Geology                                          
|    | Figure 10.1  Midrift Cross Section                                    
|    | Figure 9.3  West Edge Duluth Complex                                  
|    | Figure 9.4  Generalized Igneous Stratigraphic Column                  
|    | Figure 13.1  Area 1999 - 2000 Drilling                                
|    | Figure 13.2  Location of Metallurgical Samples                        
|    | Figure 13.3  US Steel and PolyMet Drilling                            
|    | Figure 13.4  Cross Section Drill Holes                                
|    | Figure 20.1  Block Flowsheet                                          
|    |                                                                        
|    |                                                                        
|    |                                                                        
|    | Table 6.2  Land Swap                                                  
|    | Table 6.3  Estimated NorthMet Wetlands Mitigation Requirements        
|    | Table 6.4  NorthMet EIS and Permitting Cost and Timing
      Estimates
|    | Table 13.1  Summary of Drilling Programs                              
|    | Table 18.1  Pilot Plant Metal Recoveries                              
|    | Table 19.1  Lower Tonnage Higher Grade                                
|    | Table 20.1  Process Design Criteria Summary                           
|    | Table 20.2  Revised Capital Cost Estimate                             
|    | Table 20.3  Revised Operating Cost Estimate                           
|    | Table 20.4  Manpower Requirements                                     

62

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APPENDIX I

MINING  INDEPENDENT MINING CONSULTANT UPDATE REPORT

MAY 2003

63

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1

MEMO

TO: Terry O'Kane, Bill Murray, Don Gentry 
  FROM: M. Hester, H. Welhener 
  DATE: May 25, 2003 
  SUBJECT: Project Summary

Summary

PolyMet Mining Corporation (PolyMet) requested that Independent Mining Consultants,
  Inc. (IMC) update the April 2001 mine pre-feasibility study with new economics
  and develop a scoping level trial mine production schedules. The project approach
  has shifted from processing the polymetalic ore to final metals on the property
  to generating three concentrates: copper, nickel-cobalt and a PGM. The copper
  concentrate would be further processed on site using SXEW to produce copper
  metal. The other two concentrates would be shipped off site for further processing.

Table 1 shows the new economic input parameters. The metal prices have changed
  from the 2001 study with increases for most of the metals except palladium,
  which dropped significantly. The new prices were incorporated into the cash
  flow of the 2001 study and show a large drop in the project economics (Tables
  3 and 4).

The block model was updated to better reflect the selectivity near the NSR
  cutoff grade for the present economics. The 2001 model ore zones were based
  on a $4.00 NSR ore-waste boundary. The current economics have a $7.42 NSR internal
  cutoff grade. The ore-waste boundaries were re-set in the block model using
  a $6.00 NSR to better reflect selectivity at a higher NSR value.

Floating cones were run and the results are summarized on Table 5. Based on
  the cone geometries, five mining phases were designed, three in the southwest
  pit area and two in the northeast. Unlike the 2001 study, the two pit areas
  do not join. The sum of the five phases (the total pit) contains 176,199 ktons
  of measured, indicated and inferred ore using the $7.42 NSR/t cutoff grade,
  and 720,199 ktons of total material. The inferred class material is included
  in this scoping study to show the best potential of the project.

Preliminary production schedules were developed for 15,000 tpd and 25,000
  tpd ore rates. The 25,000 tpd schedules show a better NPV during the early years
  of the trial schedules. Schedules at 25,000 tpd have an average mine life of
  19 years and the 15,000 tpd schedules extend the mine life to 32 years.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Economic Parameters

Table 1 summarizes the economic parameters used for this study.

|Table 1: Economic and Recovery Parameters              |                        
|------------------------------------------------------ | -----------------------
|Base Mining Cost Per Total Ton                         | $0.534                 
|Lift Cost Per Total Ton Per Bench Below 1580 Elevation | $0.009                 
|Benches Mined Per Year / Annual Discount Rate          | 12/12%                 
|G&A Cost Per Ore Ton                                   | $0.51                  
|Processing Cost Per Ore Ton                            | $6.91                  
|Flotation Recoveries:                                  |                        
|Copper                                                 | 93.7%                  
|Nickel                                                 | 69.0%                  
|Cobalt                                                 | 42.0%                  
|Palladium                                              | 79.6%                  
|Platinum                                               | 76.9%                  
|Gold                                                   | 75.7%                  
|Copper Refining Cost Per Payable Pound                 | Included
      In Price
|Nickel/Cobalt Refining Cost Per Payable Pound         
|PGM Refining Cost Per Payable Ounce                    | $15.00                 
|Process Recoveries (Payables):                         |                        
|Copper                                                 | 97.6%                  
|Nickel                                                 | 96.9%                  
|Cobalt                                                 | 92.0%                  
|Palladium                                              | 94.0%                  
|Platinum                                               | 95.0%                  
|Gold                                                   | 94.0%                  
|Metals Prices:                                         |                        
|Copper Per Pound                                       | $0.80                  
|Nickel Per Pound (70% of $4.00)                        | $2.80                  
|Cobalt Per Pound (70% of $10.00)                       | $7.00                  
|Palladium Per Troy Ounce/Gram                          | $150/4.82              
|Platinum Per Troy Ounce/Gram                           | $600/19.29             
|Gold Per Troy Ounce/Gram                               | $350/11.25             

The recovery, price, and processing cost parameters were provided by NorthMet
  personnel.

The mining cost was estimated by IMC based on the engineered cost estimate
  prepared for the Preliminary Feasibility Study (PFS). First, mining costs estimated
  for each

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mining year of that study were plotted against the average mining elevation
  to obtain the base and lift (elevation related) components of the cost. Second,
  mining costs were examined by cost center (drilling, blasting, loading, hauling,
  auxiliary equipment, general mine, general maintenance, and mine supervision)
  and a fixed and variable component of each were extracted. These were used to
  scale the base mining cost from that of the 70 to 100 million annual tons of
  the preliminary study to the 40 to 50 million annual tons contemplated for this
  revised study. Third, the costs were escalated 2.5% per year for two years to
  obtain 2ndquarter 2003 US dollars. Overall mining cost is anticipated
  to be about $0.60 per ton for this revised study, about the same as the average
  for the PFS. The expected higher cost of the lower mining rate is countered
  by the elimination of the longest truck hauls off the back end of the larger
  project.

The table also shows a time value of money component of the parameters that
  was used with some of the floating cones. For these cones, a mining rate of
  12 benches per year and an annual interest rate of 12% were assumed for a discounting
  factor of 1 % per mining bench. This was used to discount the revenues and costs
  as a function of pit depth. For the PFS the maximum advance rates were about
  10 benches per year from a mining phase.

An NSR value was calculated for each block and used in the floating cones,
  tonnage tabulations, and production scheduling. Table 2 shows the factors applied
  to each metal for the PFS and for this current study. The NSR for each block
  for the current study was calculated as:

|NSR | = | 14.63 x copper (%)     | + | 37.44 x nickel (%)    
|--- | - | ---------------------- | - | ----------------------
|    | + | 0.0054 x cobalt (ppm)  | + | 2.95 x palladium (ppm)
|    | + | 12.47 x platinum (ppm) | + | 6.95 x gold (ppm)     

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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|Table 2: NSR Factors for Prefeasibility and Current
      Study
|---------------------------------------------------------------
|                                                               
|NSR Factor for Copper ($/%)                                    
|NSR Factor for Nickel ($/%)                                    
|NSR Factor for Cobalt ($/ppm)                                  
|NSR Factor for Palladium ($/ppm)                               
|NSR Factor for Platinum ($/ppm)                                
|NSR Factor for Gold ($/ppm)                                    
|Internal NSR Cutoff Grade ($US)                                

It can be seen that the relative value of nickel has increased
  significantly from the PFS. Moderate increases are also noted for copper, platinum,
  and gold. The relative value of the palladium has reduced significantly.

The NSR value represents the value of the ore after paying
  for SXEW, refining, and freight charges. The NSR value needs only to pay for
  mining, G&A, and processing costs that are common to every ore ton (crushing,
  grinding, flotation, pressure oxidation, and tailings, etc). The NSR factors
  shown on Table 2 are calculated from the Table I parameters as follows:

|Copper:   | ($0.80)(0.937)(0.976)(20)(Cu%)                 | 14.63 x Cu%    
|--------- | ---------------------------------------------- | ---------------
|Nickel:   | ($2.80)(0.69)(0.969(20)(Ni%)                   | 37.44 x Ni%    
|Cobalt:   | ($7.00)(0.42)(0.920)(20)(Co
      ppm)/10000   | 0.0054 x Co ppm
|Palladium | ($150 - $15)(0.796)(0.94)(Pd
      ppm)/34.285 | 2.95 x Pd ppm  
|Platinum: | ($600 - $15)(0.769)(0.95)(Pt
      ppm)/34.285 | 12.47 x Pt ppm 
|Gold:     | ($350 - $15)(0.757)(0.94)(Au
      ppm)/34.285 | 6.95 x Au ppm  

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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It can be seen that the metal recoveries, prices, and refining costs are accounted
  for in the NSR calculation.

Prefeasibility Study Economic Model With Current Prices

The metal prices proposed for this updated study were incorporated into the
  detailed cash flow model of the PFS. The prices used are as shown on Table 1
  with $4.00 for nickel and $10.00 for cobalt.

Table 3 shows the financial results for the before-tax case.




Table 4 shows the financial results for the after-tax case.




It can be seen that the changes in metal prices have a significant negative
  impact on the PFS case.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Block Model Update

The block model for the PFS was developed by manually selecting drillhole
  composites inside the ore zone based on a $4.00 NSR cutoff grade. These composites
  were then used to select the ore zone blocks using an indicator kriging approach.
  The model was optimized to be accurate at about a $4.00 NSR cutoff grade.

Table 1 shows that with the revised economics the internal NSR cutoff grade
  is about $7.42 per ore ton (processing plus G&A). It is likely that the
  PFS model will be slightly over-smoothed (slightly high on ore tonnage and slightly
  low on metal grades) at the cutoff grades of current interest.

For this study, the block model was updated based on a $6.00 NSR cutoff grade.
  Drillhole composites were re-examined and those inside a $6.00 NSR ore zone
  were selected. A revised ore zone boundary was developed and grades of the various
  metals re-estimated based on the same methods used for the PFS. Resource classifications
  were also re-assigned using the same methods as the PFS model.

The section of this memo titled "Changes in Reserves - Preliminary Feasibility
  Study Case to Current" documents the change in reserves attributed to this revised
  model.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Floating Cone Evaluation

Table 5 summarizes the results of floating cone runs on the NorthMet deposit
  at various metal prices and other conditions.

Cases 1 through 5 are floating cones at various metal prices without time
  value of money discounting and with an hangingwall slope angle of 50 degrees.
  Mechanically, the various metal prices were handled by applying a recovery factor
  to the block NSR value, i.e. 100% of NSR is the base case prices, 80% of NSR
  is 80% of base case prices, etc. Only measured and indicated resources were
  allowed to contribute to economics to develop floating cone geometries. However,
  inferred resource within the developed geometries is included on the Table x
  tabulations. The inferred resource generally amounts to slightly over 10% of
  the total resource. It can be seen that ore tonnes range from 194.5 million
  tons to 55.8 million tons for these cases with the largest break occurring between
  Cases 4 and 5. Total tons range from 760 million to 145 million. The base case
  cone for the PFS contained 498.3 million ore tons within a geometry with 1.8
  billion total tons. It is evident that the revised economics significantly reduce
  the size of the project.

Cases 6 and 7 include time value of money discounting of 1% and Y2% per bench.
  In both cases the results fall in between the results for Cases 2 and 3. Case
  8 examines a reduced slope angle on the hangingwall to account for more road
  on that wall than originally contemplated. It does not have a large impact on
  results.

In general, as effective metal prices are decreased in Cases 1 through 5,
  the cone targets more profitable material. It is important to note that metal
  grades do not change significantly in these cases. Higher profitability comes
  from reduction in strip ratio. The implication is the general lack of significant
  higher grade ore zones in the NorthMet deposit resource model. This could be
  a reflection of the true geologic character of the deposit, or alternatively
  it could be partially due to insufficient density of drilling data and over-smearing
  of the available data.

| | INDEPENDENT MINING
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| | ------------------------------------------

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Another aspect of the NorthMet deposit that is not evident from Table 5, but
  is evident from examining measured, indicated, and inferred resources by category
  is that the grade of measured resources is less than the grade of indicated
  resources and the grade of indicated resources is less than the grade of indicated
  resources. This implies that grade increases with depth, which is not the desirable
  case for a mining project. For example, for the Case 1 cone the copper grade
  of measured, indicated, and inferred resource is 0.360%, 0.383%, and 0.398%
  respectively. This is also evident for nickel, palladium, platinum, and gold;
  only cobalt reverses this trend and exhibits decreasing grade at less confident
  resource classes.

| | INDEPENDENT MINING
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| | ------------------------------------------

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Table 5

Table x
  Floating Cone Resources at Various Metal Prices (Based on Percent Recovery of
  Available NSR Value) 
  Measured and Indicated Resource Only Used to Develop Cone Geometry 
  Tabulation Includes Inferred Material in the Geometry 
  Resources Tabulated at $US 7.42 NSR Cutoff Grade

|Case | % of NSR | Discount  Rate | HVV Slope Angle | Ore  Ktons | NSR ($US) | Copper  (%) | Nickel  (%) | Cobalt (ppm) | Palladium  (ppm) | Platinum (ppm) | Gold (ppm) | Cu Eq  (%) | Total     Ktons | Strip  Ratio
|---- | -------- | -------------- | --------------- | ---------- | --------- | ----------- | ----------- | ------------ | ---------------- | -------------- | ---------- | ---------- | --------------- | ------------
|1    | 100%     | none           | 50              | 194,500    | 12.16     | 0.370       | 0.097       | 66.14        | 0:372            | 0.105          | 0.052      | 0.901      | 759,857         | 2.91        
|2    | 95%      | none           | 60              | 186,019    | 12.25     | 0.374       | 0.097       | 68.07        | 0.374            | 0.105          | 0 .053     | 0.908      | 720,358         | 2.87        
|3    | 90%      | none           | 50              | 141,030    | 12.37     | 0.378       | 0.098       | 68.51        | 0.374            | 0.107          | 0.054      | 0.915      | 497,612         | 2.53        
|4    | 85%      | none           | 50              | 119,361    | 12.47     | 0.382       | 0.098       | 68.12        | 0.379            | 0.108          | 0.055      | 0.926      | 403,264         | 2.38        
|5    | 80%      | none           | 50              | 55,808     | 12.40     | 0.375       | 0.099       | 69.00        | 0.379            | 0.108          | 0.053      | 0.914      | 144,763         | 1.59        
|6    | 100%     | 1 %/ben        | 50              | 159,873    | 12.18     | 0.371       | 0.097       | 68.64        | 0.370            | 0.104          | 0.053      | 0.898      | 576,836         | 2.61        
|7    | 100%     | 0.5%/ben       | 50              | 181,405    | 12.17     | 0.371       | 0.097       | 68.52        | 0.370            | 0.104          | 0.052      | 0.900      | 690,709         | 2.81        
|8    | 100%     | 0.5%/ben       | 42              | 164,166    | 12.20     | 0.372       | 0.097       | 68.42        | 0.371            | 0.105          | 0.053      | 0.901      | 639,643         | 2.90        

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Mine Phase Designs

Five mining phases were designed. Table 6 summarizes the tonnage and grade
  results for each phase at the internal NSR cutoff grade ($7.42/t) . The floating
  cones indicated that the most profitable material was in the south of the orebody;
  the first three mining phases are located in the south. The final two mining
  phases are in the north. The final geometry includes a north and a south final
  pit that are not connected. Note that starting of mining in the south is different
  than the PFS case, which started in the north. This change is due to the revised
  economics and change in relative importance of the various metals.

The final pit contains 176,199 ktons of measured, indicated and inferred ore
  using a $7.42 NSR/t cutoff grade and 720,199 ktons of total material. In terms
  of ore tonnage it approximates floating cone Cases 2 and 7. It is also close
  to Case 2 in terms of total tons. The final pit strip ratio is a bit higher
  than the cones. The 50 degree hangingwall slope angle used in the cones was
  steeper than could be achieved during pit design due to haulage roads.

Table 7 shows the phase tonnages at higher NSR cutoff grades. Increasing the
  NSR cutoff grade from $7.42/t to $12.00/t reduces the contained measured, indicated
  and inferred ore from 176.2 million tonnes to 83.2 million tonnes. Raising the
  NSR cutoff to $15.00/t drops the contained ore tonnage to 25.6 million tonnes.

Table 8 shows the measured and indicated only ore tonnage within the mining
  phases at various NSR cutoff grades. Removing the inferred ore grade material
  has the largest impact on phases 1-South and 3-South.

The net value of each mining phase was calculated to rank the phases and determine
  the best mining sequence for mine production schedules. The net value was calculated
  at the internal NSR cutoff grade of $7.42/t. The floating cone input costs of
  $0.60/t mining and

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$7.42/t for processing and property G&A were used to calculate the costs.
  Table 9 shows the results on a net value and a value per ton of ore (at internal
  cutoff grade) calculation. The net value per ton of ore shows that the mining
  sequence should be south pit and then north pit.

Figure 1 shows the final geometry of the South pit (combination of south phases
  1, 2, and 3. Figure 2 shows the final North Pit (north phases 1 and 2). Figure
  3 shows the relationship of the 5 mining phases on the 1500 bench.

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Table 6 
  Mining Phase Resources 
  Includes Measured, Indicated, and Inferred Resources 
  Tabulated at $US 7.42 NSR Cutoff Grade

|Phase | Name      | Ore Ktons | NSR ($US) | Copper (%) | Nickel (%) | Cobalt (ppm) | Palladium  (ppm) | Platinum (ppm) | Gold (ppm) | Cu Eq (%) | Total Ktons | Strip Ratio
|----- | --------- | --------- | --------- | ---------- | ---------- | ------------ | ---------------- | -------------- | ---------- | --------- | ----------- | -----------
|1     | ph1sthtr4 | 23,283    | 13.50     | 0.407      | 0.091      | 58.59        | 0.447            | 0.162          | 0.070      | 1.065     | 109,070     | 3.68       
|2     | ph2sthtrl | 20,911    | 11.20     | 0.346      | 0.096      | 73.25        | 0.287            | 0.081          | 0.042      | 0.783     | 47,937      | 1.29       
|3     | ph3sthtr2 | 62,883    | 12.66     | 0.398      | 0.096      | 66.91        | 0.372            | 0.111          | 0.057      | 0.941     | 277,004     | 3.41       
|4     | phlnthtrl | 26,684    | 11.71     | 0.350      | 0.103      | 71.55        | 0.337            | 0.084          | 0.047      | 0.845     | 110,208     | 3.13       
|5     | ph2nthtrl | 42,438    | 11.48     | 0.342      | 0.098      | 70.88        | 0.366            | 0.086          | 0.043      | 0.842     | 175,980     | 3.15       
|TOTAL |           | 176,199   | 12.17     | 0.372      | 0.097      | 68.22        | 0.365            | 0.104          | 0.052      | 0.900     | 720,199     | 3.09       

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| | ------------------------------------------

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Table 7

Polymet Mining - MorthMet Project, May 2003 Update
  Summary of Mining Phases by NSR Cutoff Values

MEASURED, INDICATED & INFERRED



Table 8

Polymet Mining - MorthMet Project, May 2003 Update
  Summary of Mining Phases by NSR Cutoff Values

MEASURED AND INDICATED ONLY



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Table 9

Net Value of Mining Phases

|Mining Phase | Bottom Bench | ORE (=+ $7.42 NSR) | Waste  | Total | Phase Net Value | Phase, Net  Value per  ton of Ore
|------------ | ------------ | ------------------ | ------ | ----- | --------------- | ---------------------------------
|             |              | Ore ktons          | NSR, $ | Cu, % | CuEq, %         | ktons                            
|PH 1 South   | 880          | 35,151             | $13.52 | 0.412 | 1.061           | 130,944                          
|PH 2 South   | 1200         | 30,911             | $11.20 | 0.346 | 0.783           | 27,026                           
|PH3South     | 700          | 51,015             | $12.44 | 0.393 | 0.915           | 168,962                          
|PH 1 North   | 1040         | 26,684             | $11.71 | 0.350 | 0.845           | 83,524                           
|H 2 North    | 840          | 42,438             | $11.48 | 0.342 | 0.842           | 133,542                          

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Mine Production Schedules

Preliminary mine production schedules were developed using the tonnage tabulations
  of the five mining phases for ore production rates of 15,000 tons per day (tpd)
  and 25,000 tpd. It is assumed that the plant will operate 365 days per year,
  thus the annual ore rate is 5,475,000 tons per year (tpy) for the 15,000 tpd
  case and 9,125,000 tpy for the 25,000 tpd schedules. The year 1 ore rate is
  at 85% of the nominal throughput rate and includes any ore mined during pre-production.

The mining sequence is phases 1, 2 and 3 in the south, then phases 1 and 2
  in the north pit. Phases 1 and 2 in the south are independent phases and either
  one of them could be mined ahead of the other. Schedules were tried for both
  alternatives and starting with Phase 1 give a much higher net value during the
  earlier years at both production rates. Starting with Phase 1 requires a higher
  pre-production tonnage but this is more than offset by the higher head grades
  that are achieved.

The preliminary schedules developed for the two mill throughput rates have
  not been optimized and are intended to give an initial impression of the response
  to different cutoff grade sequences. Five cutoff grade schedules were run for
  each mill rate and the present value of the schedule at the end of years 5,
  10 and end of mining was tabulated. This net value includes an allowance for
  the mine fleet capital (assuming new equipment) using a cost of $1.05 per ton
  of mining capacity. A discount rate of 8% was used to calculate the present
  value of the future revenues.

The NSR cutoff sequence used for the five production schedules summarized
  in Tables 10, 11 and 12 are: Schedule 1: All years at internal cutoff grade
  of $7.42 Schedule 2: Pre-production through Year 2 at $10.00, Years 3 to 7 at
  $9.00, Years 8 through 10 at $8.00, and all years after Year 10 at $7.42 Schedule
  3: Pre-production through Year 5 at $10.00, Years 6 to 8 at $9.00, Years 9 and
  10 at $8.00, and all years after Year 10 at $7.42

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Schedule 4: Pre-production through Year 5 at $9.00, Years 6 through 10 at $8.00,
  and all years after Year 10 at $7.42

Schedule 5: Pre-production through Year 10 at $8.00, and all years after Year
  10 at $7.42

Higher cutoffs than $10.00 NSR were not evaluated because of the rapid decline
  of ore tonnage as the cutoff is increased, as seen on Table 7. For the sum of
  the South and North pits, the ore tonnage decreases by 37 million tons when
  the cutoff is raised from $7.42 to $10.00; this is a 21% decrease. When the
  cutoff is raised to $12.00, an additional 56 million tons is lost, or 40% of
  the ore tonnage at the $10.00 cutoff. The corresponding increase in NSR value
  per ton of ore is $0.80 (7%) when the cutoff is raised from $7.42 to $10.00,
  and an increase of $1.34 (10%) for the cutoff change from $10.00 to $12.00.
  The tonnage decrease is faster than the increase in net value as the cutoff
  is raised.

Table 10 is a summary of the preliminary schedules at 15,000 tpd ore and shows
  that there is some increase in the net value of the project with a modest increase
  in the cutoff grade in the early years. A smaller Phase 1 south was developed
  for the 15,000 tpd ore schedules to see if a smaller pre-production tonnage
  would improve the economics. Schedules with this sequence of phase designs are
  shown on Table 11. The smaller preproduction does improve the Year 5 NPV, but
  by Year 10 it and the schedules shown on Table 10 are similar. The smaller Phase
  1 south was not used for the 25,000 tpd schedules because mining would occur
  too quickly through the benches in the phase.

The 25,000 tpd schedules are shown in Table 12 and show that a less aggressive
  cutoff grade strategy might be better at the higher throughput rate. The higher
  rate moves faster through the relative higher grade ore in Phase 1 South, thus
  bringing lower grade ore forward in time at a faster rate as the cutoff grade
  is raised. In all cutoff grade cases tested to date, the net values are similar
  for the preliminary nature of the input data. A 25,000 tpd rate was run with
  the smaller Phase 1 South and the NPV at Year 5 was about

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half of that shown on Table 12 for the sequence of cutoff grade trials. This
  is because of reduced amount of higher grade ore in the smaller phase 1.

Table 13 shows a 25,000 tpd ore schedule that has been refined from the preliminary
  schedules on Table 11. The total mining rate has been smoothed, but at this
  time is does not match the assignment of integer loading units per mining area.
  Additional refinements can be made to this schedule.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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Table 13

Mine Production Schedule at 25,000 TPD Ore Rate

|      | ORE    | WASTE   | TOTAL  
|----- | ------ | ------- | -------
|Year  | Cutoff | ktons   | NSR,$US
|      |        |         |        
|PP    | 9.00   | 2,093   | 13.94  
|1     | 9.00   | 5,663   | 12.92  
|2     | 9.00   | 9,125   | 12.86  
|3     | 9.00   | 9,125   | 12.94  
|4     | 9.00   | 9,125   | 12.63  
|5     | 8.00   | 9,125   | 11.75  
|6     | 8.00   | 9,125   | 12.49  
|7     | 8.00   | 9,125   | 11.87  
|8     | 8.00   | 9,125   | 11.90  
|9     | 8.00   | 9,125   | 12.30  
|10    | 8.00   | 9,125   | 12.18  
|11    | 8.00   | 9,125   | 12.83  
|12    | 8.00   | 9,125   | 12.83  
|13    | 8.00   | 9,125   | 13.09  
|14    | 8.00   | 9,125   | 11.98  
|15    | 7.42   | 9,125   | 11.52  
|16    | 7.42   | 9,125   | 11.45  
|17    | 7.42   | 9,125   | 11.13  
|18    | 7.42   | 9,125   | 11.24  
|19    | 7.42   | 9,125   | 12.58  
|20    | 4.42   | 724     | 13.37  
|Total |        | 172,730 | 12.25  

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      CONSULTANTS, INC.
| | ------------------------------------------

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Changes in Reserves - Preliminary Feasibility Study Case to Current

The purpose of this section is to document the changes in the stated potential
  minable resources from the Preliminary Feasibility Study published in April
  2001 versus the current potential minable resource and to show the sources of
  the changes. Table 13 shows the resource change due to several different items.

Item 1 shows the potential minable resource at a $4.31 NSR cutoff grade as
  published in the PFS document. It shows 486.8 million ore tons in a total pit
  of 1.9 billion tons.

Item 2 shows the impact of excluding inferred resources as per the rules written
  in Canadian National Instrument 43-101 that became law about the time the PFS
  was completed. It can be seen that this amounted to 82.3 million tons of ore
  and the material was at higher average grades than the measured and indicated
  resources for all metals except cobalt.

Item 3 shows results due to a model developed in March 2001 with 13 additional
  holes. This model was documented in appendices to the original PFS, but was
  not the base case model used for that study. It can be seen that the impact
  was small as 4.7 million tons of low grade ore were added.

Item 4 shows the impact of the revised metal prices, recoveries, and process
  costs introduced during this May 2003 update. Note that the NSR cutoff grade
  increased from $4.31 to $7.42 with the revised economics. This resulted in the
  reduction of 99.7 million ore tons that were at quite low metal grades. Note
  that compared to Case 3 the metal grades increased significantly, but the NSR
  value did not increase. There were actually two components in Item 4. The first
  was the change to prices and recoveries. This caused a large change in NSR values
  but did not have much impact on ore tons. The second was the change to the process
  cost which caused the change to NSR cutoff grade. Almost all of the ore decrease
  is due to this second factor. The "N.A.'s" on the table mean that the calculation
  is nonsensical due to changes in base parameters between cases.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

---

26

Item 5 shows the impact of the May 2003 revision to the model, due to designing
  ore zones at the higher cutoff grades, as discussed previously. This resulted
  in a 52.9 million ton decrease in ore tons, but an increase in grade since the
  ore lost was at marginal values.

Note that Items 1 through 5 were all tabulated inside the PFS final pit design.
  Note also that the strip ratio increased from 2.95 to 6.49 with the various
  changes. Item 6 shows the results of a re-design of the final pit to be more
  appropriate for the current economic conditions. It can be sent that the pit
  size was decreased by 1.2 billion total tons and that 102.7 million ore tons
  were lost in the change. The strip ratio is back down to 3.68.

Item 7 shows the effect of adding back inferred material in the pit design.
  This adds 22.3 million ore tons. The final ore tons and grade shown, as well
  as total tons, are the same as on Table 6. The strip ratio is similar to the
  original Item 1 results.

| | INDEPENDENT MINING
      CONSULTANTS, INC.
| | ------------------------------------------

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27




---

PolyMet Mining Corporation



NorthMet Project
  Processing Facilities Scoping Study



---



---

PolyMet Mining Corporation

NorthMet Project
  Processing Facilities Scoping Study

Table of Contents

|Section                      | Page                                  
|---------------------------- | --------------------------------------
|                             |                                       
|1.0 Introduction             |                                       
|                             | 1.1 Background and Scope of Work      
|                             | 1.2 Basis of Design                   
|                             |                                       
|2.0 Summary                  | 2-1                                   
|                             | 2.1 Introduction                      
|                             | 2.2 Project Location and Access       
|                             | 2.3 Process Plant                     
|                             | 2.4 Capital Cost                      
|                             | 2.5 Operating Cost                    
|                             |                                       
|3.0 Process Plant            |                                       
|                             | 3.1 Existing Facilities at Cliffs Erie
|                             | 3.2 Metallurgical Testwork and Design 
|                             | 3.3 Process Design Criteria           
|                             | 3.4 Process Description               
|                             | 3.5 Equipment List                    
|                             |                                       
|4.0 Operating Cost Estimates |                                       
|                             | 4.1 Summary                           
|                             | 4.2 Basis of Estimate                 
|                             |                                       
|5.0 Capital Cost Estimates   |                                       
|                             | 5.1 Summary                           
|                             | 5.2 Basis of Estimate                 
|                             |                                       
|                             |                                       
|                             |                                       
|Appendices                   |                                       
|                             | Appendix 1- Process Design Criteria   
|                             | Appendix 2- Drawings                  
|                             | Appendix 3- Equipment List            
|                             | Appendix 4- Operating Costs           
|                             | Appendix 5- Capital Costs             

---

|1.0 Introduction
|----------------

---

|NorthMet Project Processing Facilities
      Scoping Study
|----------------------------------------------------------



1.0 Introduction

1.1 Background and Scope of Work

PolyMet Mining Corporation (PolyMet) intends to develop the
  NorthMet deposit located in the Mesabi Iron Range in Northeastern Minnesota.
  The project is located approximately 70 miles north of Duluth. The NorthMet
  Project is a polymetallic magmatic sulfide deposit containing platinum, palladium,
  gold, copper, nickel, cobalt, and silver. The deposit is hosted near the base
  of the Duluth Mafic Complex and is one of the largest undeveloped non-ferrous
  metal project in the U.S.

In 2001, (AMEC) (formerly AGRA Simons Inc.) completed a pre-feasibility
  level study for the NorthMet project. In 2003, a new management team review
  of the pre-feasibility work concluded that a technically simpler, lower tonnage
  project would be more appropriate to advance the project to feasibility level.
  As part of the strategy of the new management team, Polymet has secured an option
  to purchase and utilize the processing facilities available at the Cliffs Erie
  site in Hoyt Lakes, Minnesota. These assets were formerly owned by LTV Steel
  Mining Company, which permanently closed its iron ore mining and palletizing
  operations in January 2001. The Cliffs Erie site historically processed 100,000
  st/day of iron ore through crushing, grinding and flotation. The Cliffs Erie
  plant acquisition therefore provides the "front end" of the proposed Polymet
  plant for treatment of NorthMet ore as well as land, buildings (for concentrate
  processing and metal recovery). Rail access and tailings dam facilities. As
  part of this revised approach, Polymet intend to utilize part of the existing
  processing facilities at the Cliffs Erie site in Hoyt Lakes, Minnesota. These
  assets were formerly owned by LTV Steel Mining Company, which permanently closed
  its iron ore mining and pelletizing operations in January 2001.

Penguin Automated System Inc. (Penguin ASI) was contracted
  in January 2004 to prepare a scoping level study for the NorthMet process plant
  facilities based on the revised concept as a prelude to proceeding to a feasibility
  study.

|Penguin Automated Systems Inc. | 1-1
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

The Scope of Work was defined in the proposal issued January
  21st 2004 and is summarized as follows:

Develop scoping level capital and operating cost estimates for a stand
      aloneconcentrator capable of treating 9,125,000 tonnes per annum and utilizing
      parts of theexisting Cliffs Erie processing facilities.Prepare preliminary flowsheets, material balances, process design criteria,
      equipmentsizing and process plant layouts to support the development of
      the capital andoperating costs.


This study is based on the AMEC pre-feasibility report, testwork
  reports from SGS Lakefield, metallurgical data supplied by Polymet and site
  visits and discussions with key personnel at the Cliffs Erie site.

1.2 Basis of Design

The basis of design was to develop capital and operating costs
  to a scoping level estimate of +/- 30 %.

The capital cost estimates are based on flowsheets and layouts. Process equipment
  costs are based on preliminary budget quotes or factored from the previous study.

Operating cost estimates are based upon the estimated manpower requirements and reagent and consumable quantities developed jointly between Polymet and Penguin ASI and updated to reflect current cost data. Power costs are based on data gathered from
site.

All currency amounts are stated in first quarter 2004 US dollars. All units
  of measurement are in metric units unless otherwise noted.

|Penguin Automated
      Systems Inc. | 1-2
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|2.0 Summary
|-----------

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

2.0 Summary

2.1 Introduction

The NorthMet Project is a large disseminated polymetallic
  deposit located North of Duluth Minnesota. It is proposed that the project be
  developed to exploit the mineral resources to produce the following three primary
  products:

- copper cathode,
- a nickel/cobalt hydroxide and
- a concentrate containing platinum group metals (PGM's).

The project will utilize crushing, grinding and flotation
  processes followed by a standard autoclave circuit based on the patented PlatSol
  process. The copper metal will be recovered utilizing a conventional SX/EW circuit.

The nickel/cobalt and PGM concentrates will be refined offsite.
  The process will also produce significant quantities of gypsum and carbon dioxide
  gas as potentially saleable by-products. This is something that will be examined
  more completely during feasibility.

The average daily milling rate will be 25,000 tonnes per day
  based on a 91% overall plant availability equivalent to 9,125,000 tonnes per
  annum. Grades, recoveries and metal production are summarised in Table 2.1.

Table 2.1 NorthMet Production


|                                                                                                                                                                           | Cu                                                    | Ni                                                    | Co                                                    | Au                                                   | Pt                                                       | Pd                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ---------------------------------------------------- | -------------------------------------------------------- | ---------------------------------------------------------
|Head grade  Recovery to concentrate Concentrate
      grade Pressure Leach Extraction Recovery from Leach Solution
      Overall Recovery Metal Production tonnes per year | 0.4%  93.7%  14.6%  99.6%
       99.0%  92.4%  33,723 | 0.11%  69.0%  2.94%  98.9%
       99.0%  67.6%  6,755 | 0.0088%  42.0%  0.14% 
      96.0%  99.0%  39.9%  319 | 0.0g/t 75.7%  1.6g/t 96.0%
       99.0%  72.0%  0.36 | 0.11g/t  76.9%  3.32g/t 
      96.0%  99.0%  73.1%  0.74 | 0.38g/t  79.6%  11.82g/t 
      96.0%  99.0%  75.7%  2.63



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      Systems Inc. | 2-1
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

2.2 Project Location and Access

The NorthMet deposit is located in northeastern Minnesota,
  St. Louis County, 100 miles north of Duluth and 4 miles south of Babbitt (see
  Figures 2.1 and 2.2) . The famous large-scale open-pit Mesabi Range iron mining
  operations are within two miles of the project. The Polymet process plant will
  be constructed on the site of the existing Cliffs Erie iron ore facilities located
  some 5 miles away by railroad from the deposit. The assets were formerly owned
  by LTV Steel Mining Company, which permanently closed its iron ore mining and
  pelletizing operations in January 2001. Founded as Erie Mining Company, LTV
  Steel Mining Company was one of the first taconite production facilities in
  Minnesota and in the iron mining industry. The construction of the Hoyt Lakes
  mine, plant, loading dock and the power plant facilities at Taconite Harbor
  was completed in 1957 at a cost of $300 million. Polymet has already acquired
  ownership of certain land, crushing and concentrating facilities, as well as
  shops, warehouses and other assets at the Cliffs Erie location and also has
  access to already established roads, tailings disposal facilities, water, electricity,
  offices and rail service. Rail lines connect to ports on nearby Lake Superior,
  all of USA and Canada.

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      Systems Inc. | 2-2
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Figure 2.1 NorthMet Deposit Location






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      Systems Inc. | 2-3
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Figure 2.2 NorthMet Deposit Location




Accommodations and full services are located nearby in both
  Hoyt Lakes and Babbitt. Experienced general construction and operations labour
  can be obtained from the local area population.

2.3 Process Plant

The NorthMet Project will utilize parts of the existing processing
  facilities at the Cliffs Erie site for crushing and grinding of the ore. A new
  flotation plant will be installed in the existing concentrator building with
  new facilities and equipment installed for the downstream hydrometallurgical
  processes. The existing infrastructure and plant services will be utilized for
  the project.

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      Systems Inc. | 2-4
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      Project Processing Facilities Scoping Study
|----------------------------------------------------------

2.4 Capital Cost

A scoping level capital cost estimate for the process facilities
  was prepared. The capital cost of the processing facilities was estimated to
  be $199,426,621. This estimate is summarized in the following table 2.4.1.

Table 2.4.1 NorthMet Project Initial Capital Cost


|Item                                      | Cost ($000)
|----------------------------------------- | -----------
|                                          |            
|Crushing                                  | 3,082      
|Grinding                                  | 4,282      
|Flotation
      & Regrind                 | 17,546     
|Pressure
      Leaching                   | 31,052     
|Solid
      / Liquid Separation           | 6,667      
|PGM
      Recovery                        | 5,082      
|Neutralization                            | 8,867      
|Solvent
      Extraction                  | 6,439      
|Electrowinning                            | 18,749     
|Fe
      & Hydroxide Precipitation        | 6,003      
|Infrastructure
      & Auxiliary Services | 12,587     
|Tailings                                  | 4,549      
|Mining                                    | 5,760      
|Subtotal
      Direct Costs               | 130,665    
|EPCM                                      | 19,600     
|Construction
      Indirects              | 2,872      
|Capital
      Spares                      | 4,323      
|First
      Fills                         | 4,000      
|Vendor
      Representatives              | 1,319      
|Freight                                   | 2,499      
|Start
      Up and Commissioning          | 910        
|Contingency                               | 33,238     
|Total
      Project Cost                  | $199,426   



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      Systems Inc. | 2-5
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|NorthMet
      Project Processing Facilities Scoping Study
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The capital cost estimate includes the estimated direct cost
  for equipment, material and labour and cost estimates for the project indirect
  costs including EPCM, start up, construction indirects, first fill, spares and
  contingency.

2.5 Operating cost

The annual operating costs for the processing facilities were
  estimated to be $60.2 million including a 5% contingency or $6.59 per ton milled.
  The processing operating cost estimate is summarized in the following table
  2.5.1.

Table 2.5.1 Operating Cost Summary


|Description              | Total Cost US$ | US$/tonne
|------------------------ | -------------- | ---------
|Consumables              | 22,142,258     | 2.43     
|Labour                   | 10,977,823     | 1.20     
|Power                    | 16,746,886     | 1.84     
|Plant Operating Supplies | 400,000        | 0.04     
|Maintenance Supplies     | 1,915,896      | 0.21     
|Environmental Monitoring | 300,000        | 0.03     
|G&A                      | 4,856,600      | 0.53     
|Sub total                | 57,339,463     | 6.28     
|Contingency 5 %          | 2,866,973      | 0.31     
|Total                    | 60,206,436     | 6.59     



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      Systems Inc. | 2-6
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|3.0 Process Plant
|-----------------

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

3.0 Process Plant

3.1 Existing Facilities at Cliffs Erie

The polymet process will incorporate standard crushing, grinding
  and flotation to produce a concentrate for hydromettalurgical processing to
  produce copper cathodes, nickel cobalt hydroxide and a PGM concentrate.

The NorthMet project process facility will be located within
  the existing Cliffs Erie plantsite making use of the following:

- one circuit of the rail dump pocket and the 60" gyrosphere crusher;
- the withdrawal feeder and the transfer conveyors to the coarse ore bins;
- 2-7' standard cone crushers and associated feeders;
- 4-7' short head cone crushers and associated feeders and screens;
- belt conveyors and tripper to the fine ore bins;
- 8 sets of rod/ball mill circuits;
- three regrind mills (two for concentrate regrind and one for limestone);
- ancillary facilities and offices;
- infrastructure including power supply and distribution;
- tailing storage and reclaim water facility.

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      Systems Inc. | 3-1
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      Project Processing Facilities Scoping Study
|----------------------------------------------------------



Photograph 3.1.1 Overall Facilities at Cliffs Erie





Photograph 3.1.2 Concentrator Building







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      Project Processing Facilities Scoping Study
|----------------------------------------------------------

In early January 2004, the facilities were visually inspected
  by Equipment Specialist Dave Phelps (FFE Minerals) and Mickey Trader (Penguin
  ASI) and found to be in good standing. The plant is generously designed with
  good maintenance and service crane access to all major equipment.

It was noted that the previous operators kept excellent records
  of all equipment maintenance and spare parts.

3.2 Metallurgical Testwork and Design

Polymet conducted benchscale and pilot plant work at SGS Lakefield
  in preparation for the AMEC feasibility study. This work was reviewed and evaluated
  by T.O'Kane of Polymet and was reported separately at the same time as the AMEC
  study. The metallurgical testwork results, recommendations and flowsheet design
  as provided by Mr O'Kane were incorporated into the AMEC process facility design
  and equipment list without audit by AMEC. In compiling this scoping study, Penguin
  ASI has relied on process design criteria data in the AMEC report and in the
  hydrometallurgical mass balance provided by Polymet and has not audited or confirmed
  this data except for the following:

- Penguin ASI reviewed the filtration data from the pilot
      plant work and used theappropriate filtration rates for sizing the leach
      residue and gypsum filters
- Penguin ASI reviewed the calculation accuracy and completeness
      of thehydrometallurgical mass balance but did not conduct a metallurgical
      audit

In the next phase of the project a full review of all testwork
  completed to date will be required. Based upon the limited review that has been
  completed, Penguin ASI recommends the following additional testwork:

Grinding testwork to confirm work indices of the ore and concentrate,
      and
    Filtration testwork on PGM concentrates to determine filtration rates.


There may be other areas that require additional or confirmatory
  work. This can only be assessed after a full review of all testwork completed
  to date.

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      Systems Inc. | 3-3
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|NorthMet
      Project Processing Facilities Scoping Study
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Penguin ASI developed an overall mass balance for the NorthMet
  process based on the hydrometallurgical mass balance provided by Polymet, which
  set the feed headgrades and recoveries for copper, nickel, cobalt and PGM's
  at and a throughput of 9,125,000 tonnes per annum.

The development of the flowsheet and equipment sizing for
  the crushing, grinding and flotation process facilities was based on flowrates
  derived from this mass balance, plus process design criteria developed from
  the AMEC study and information by SGS Lakefield who were responsible for the
  pilot plant flotation trials. The flowsheet for the hydrometallugical facilities
   pressure oxidation, solid-liquid separation, PGM recovery, copper SX/EW
  and nickel/cobalt hydroxide recovery  was derived primarily from the AMEC
  study with equipment resized accordingly for the new plant throughput, plus
  input from T.O'Kane of Polymet for the autoclave circuit. Testwork data from
  SGS Lakefield was reviewed for sizing of thickeners and filters.

Work indices used for crushing and grinding circuit calculations
  are estimates provided by SGS Lakefield based on limited grinding testwork.
  These numbers will require confirmation in the next phase.

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      Systems Inc. | 3-4
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      Project Processing Facilities Scoping Study
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3.3 Process Design Criteria

The detailed process design criteria is presented in Appendix
  1 and the key criteria is summarized in Table 3.1.1.

Table 3.1.1 Process Design Criteria Summary

|Parameter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Design Criteria                                                                                                                                                                                                                                               
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Annual mill throughput Average daily mill throughput
      Plant Availability Operating Hours per day Hourly Throughput
      Concentrate produced Rod mill work index Ball mill work index
      Regrind work index Feed size to flotation Feed size to pressure
      leach Pressure leach residence time Autoclave operating temperature
      Autoclave operating pressure H2 SO4 concentration Cl concentration
      Cu SX plant Organic / Acid ratio PLS Cu Raffinate Cu SX
      Cu recovery E/W current density Cathodes per cell Total cells
      required | 9,125,000 tonnes 25,000 tpd dry 91.34%
      24 1140 tph dry 703 tpd dry 14 kWh/t 17 kWh/t 7.5 kWh/t
      200 micron 15 micron 2 hours 225C 475 psig 50-60 g/l
      10g/l 2 extraction; 1 wash; 2 strip 1.5:1 18.4g/l 0.99g/l
      94.62% 260 amp/m2 54 125

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|NorthMet
      Project Processing Facilities Scoping Study
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3.4 Process Description

The overall process flow is described in the block flow diagram
  presented overleaf.Process flowsheets, general arrangements and site plan are
  provided in Appendix 2.

3.4.1 Crushing

Run of mine ore will be delivered by rail to the Cliffs Erie
  process plant and dumped into the primary crusher surge pocket. From the surge
  pocket, the ore will flow to a single existing 60" by 89" gyratory crusher set
  to produce a nominal coarse ore product with a P80 sizing of 6 inches.
  The existing secondary gyratory crushers will be removed and a surge pocket
  will be constructed allowing the crushed ore to discharge onto an existing apron
  feeder. The apron feeder will in turn discharge onto the exiting coarse ore
  surge bin feed conveyor. Ore from the coarse ore surge bin will discharge via
  the existing vibrating feeders onto existing belt feeders feeding two existing
  7' standard cone crushers. Each 7' cone will discharge onto two existing vibrating
  feeders, each feeding an existing 6' x 10' vibrating screen. Screen oversize
  discharges into one of four existing 7' shorthead cone crushers. The minus 1⁄4"
  discharge from the tertiary shorthead crushers will combine with the screen
  undersize onto the existing feed conveyor to the existing fine ore bin.

3.4.2 Grinding

Ore from the fine ore bin will discharge via existing vibrating
  and belt feeders to the existing rod and ball mill circuits. For the design
  throughput of 25,000 tpd, 8 of the existing 12 circuits will be utilized. Each
  rod mill will operate in open circuit, with the rod mill discharge feeding a
  ball mall in closed circuit with new hydrocylones. The grinding circuit will
  produce a flotation feed of 30% solids at a P80 sizing of 200 micron.

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      Systems Inc. | 3-6
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3.4.3 Flotation and Regrind

Cyclone overflow from the grinding circuits combine to feed
  a conditioning tank with a 5-minute retention time. The conditioner will feed
  a single bank of 4-160m3 rougher tank cells providing a total residence
  time of approximately 8 minutes. Rougher discharge will feed 2 parallel banks
  of 5-160m3 tank cells providing a residence time of 20 minutes.

Rougher concentrate combines with re-cleaner tail to feed
  the first cleaner flotation circuit. The cleaner flotation circuit will consist
  of a single bank of four 20m3conventional cells providing 16 minute
  retention time. Scavenger concentrate, mixed with cleaner tail, will be reground
  in an existing regrind ball mill to a target P80 of 30 micron prior
  to recirculation back to the conditioning tank. Cleaner concentrate will be
  fed to a single re-cleaner column cell, providing 16-minute retention time,
  for final concentrate cleaning. Cleaner concentrate will report to the concentrate
  regrind mill where the concentrate will be reground to the target P80
  sizing of 15 micron, prior to pressure oxidation. A second existing regrind
  mill (using ceramic balls as grinding media to reduce iron contamination) will
  be used for this purpose.

Reground concentrate thickened to 50% solids and stored in
  a concentrate storage tank, which provides 12 hours of surge capacity between
  the flotation circuit and downstream hydrometallurgical processing.

Flotation tailings will be pumped to the existing Cliffs Erie
  tailings impoundment.

The flotation circuit reagents (MIBC, PAX, Flex 31, and WW1
  752) are based on the AMEC study and was developed for effective base metal
  recoveries with associated high PGM recovery.

Flotation circuit metallurgical accounting will be accomplished
  using the sample data from an on-stream analyzer, and automated shift sample
  collection that will be obtained from sample multiplexers on the on-stream analyzer
  system.

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      Project Processing Facilities Scoping Study
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3.4.4 Pressure Leaching

Pressure Leaching is based on standard Autoclave technology
  and utilizes the patented PlatSol process. Concentrate will be blended in the
  autoclave feed tank with sodim chloride prior to pumping into the autoclave
  at 50% solids. Recycled copper SX/EW raffinate will be pumped into the autoclave
  to maintain temperature control.

The two autoclaves will provide the required 2-hour residence
  time for the feed slurry. Each autoclave will have 6 compartments, and will
  be designed to operate at 225°C and approximately 475 psig. These pressures
  and temperatures are standard for autoclave dsign in the refractory gold ore/concentrate
  oxidation process. The NorthMet autoclave design will comprise a mild steel
  pressure vessel with a polymer-thermoplastic membrane corrosion barrier and
  two layers of acid resistant brick for thermal and abrasion resistance. This
  design follows the the reported design of the Phelps Dodge copper concentrate
  autoclave at Bagdad, Arizona. The Phelps Dodge autoclave has been designed for
  temperatures up to 235C and pressures of up to 4000 kPa.

Autoclave utilities and ancillary equipment include a packaged
  steam boiler for start-up heating, agitator seal water systems, compressed air,
  water treatment units, and oxygen blowout vessels. Oxygen supplied, at 98% purity,
  to the pressure oxidation circuit will be delivered via an "over the fence"
  type contract.

The slurry is cooled to below 63° C via a single stage
  let down and slurry coolers prior to downstream metal extraction processes.

3.4.5 Leach Residue

Prior to metal recovery, the leach residue will be separated
  from the pregnant leach solution (PLS) to provide a high recovery of solute
  via filtration and washing of the leach residue. To accomplish this, the circuit
  will include a primary thickener followed by a pressure plate filter unit. A
  wash ratio of 4:1 will be used to maintain high solute recoveries. Autoclave
  residue filter cake will be re-pulped and fed to a scavenger flotation circuit
  to recover residual PGM's. The PGM

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concentrate will be re-circulated back to the feed end of
  the autoclave and the flotation tailing will be pumped to a new hydromet tailings
  impoundment constructed inside the existing tailings impoundment.

3.4.6 PGM Recovery

PLS will be mixed with S02 to ensure total reduction
  of oxidize iron species in solution (Fe (III) is reduced by Fe (II) in solution
  by SO2). The SO2 will be produced by a packaged sulphur
  burner system. After ferric iron reduction, the solution will be processed through
  a two-stage pipe reactor system, with the addition of NaHS, to precipitate the
  platinum and precious metals. After filtration, the PGM precipitate will be
  releached in a sulfuric acid solution in a batch autoclave to leach any co-precipitated
  base metals (Cu, Ni, Co) and sulfur/sulfides to produce a high grade PGM precipitate
  for toll refining. Batch autoclave leach solution will be recirculated back
  to the PLS surge tank before precious metal recovery to ensure full recovery
  of valuable metals.

3.4.7 Neutralization

The PLS filtrate from the PGM precipitation system will require
  neutralization to pH 2 prior to copper solvent extraction. Filtered PLS will
  be pumped from the neutralization surge tank to the solution neutralization
  cascade that consists of three tanks with a total retention of 180 minutes.
  Limestone is added to maintain a pH of 2 and prepare the solution for copper
  solvent extraction.

The slurry exiting the precipitation tanks will be pumped
  to a thickener. Thickener underflow is filtered using an automatic plate and
  frame pressure filter package. The filter cake solids (saleable grade gypsum)
  will be discharged to a conveyor and stockpiled prior to re-sale.

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

3.4.8 Copper Solvent Extraction and Electrowinning

Copper PLS from the neutralization circuit will be stored
  in the copper SX feed tank providing 4 hours of surge capacity. PLS will be
  filtered to avoid crud formation in the SX circuit. The filtration will use
  multi-media pressure filters and the backwash will be returned to the gypsum
  thickener. Copper will be extracted from the PLS into an organic solution containing
  30% by volume of Cognis LIX-984.

The extraction circuit consists of three mixer settlers, in
  which the aqueous feed and the barren organic flow counter-current to one another.
  Raffinate leaving the final extractor will report to the copper raffinate tank,
  from which solution will either be recirculated back to pressure oxidation for
  use as cooling liquid, or sent forward to bleed treatment.

Copper loaded organic is pumped from the first stage extractor
  to the loaded organic tank where entrained aqueous solution will have the chance
  to settle out. Solution recovered in this way will be collected in a sump at
  the bottom of the tank and is periodically returned to the extraction circuit.

Loaded organic will be contacted, in a two-stage copper strip
  circuit, with lean electrolyte recycled from copper EW. The stripped organic
  will pass through to extraction, while the rich electrolyte will be pumped through
  organic recovery columns, and anthracite based multi-media filters to coalesce
  any residual organic, before discharging into the electrolyte recirculation
  tank.

The copper EW circuit reflects ISA stainless steel cathode
  tankhouse technology. Rich electrolyte will be trim heated to approximately
  120°F before entering the tankhouse EW cells, using an indirect hot water
  heating system. A 125-cell tankhouse will provide the capacity required to harvest
  33,000 tonnes per year of cathode copper.

|Penguin Automated
      Systems Inc. | 3-11
|------------------------------------ | ----

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Cathodes from the EW cells will be harvested on a daily basis,
  after a 7-day growth cycle. The copper sheets will be mechanically stripped
  from the stainless steel blanks using a standard fully automatic cathode washing
  and stripping machine. The stripping machine will also provide mechanical stacking,
  strapping, and weighing of the cathode bundles in preparation for shipping to
  market.

3.4.9 Nickel-Cobalt Hydroxide

Iron and aluminum must be removed from copper SX raffinate
  bleed solution before the extraction of nickel and cobalt.

In the first of three precipitation cascades, iron will be
  removed as goethite. In order for goethite to be formed, the bleed stream will
  be pre-heated to 170° F by direct steam injection into a tank with 45 minutes
  retention time. Direct injection will be used to negate the problem of gypsum
  scaling on the solution side of a shell and tube heat exchanger.

Hot solution overflows the pre-heat tank and will enter the
  first of five tanks in the iron precipitation cascade. Limestone will be added
  to the first tank to neutralize free acid in the copper raffinate, and will
  result in gypsum precipitation. Air is sparged into tanks l, 2 and 5 to facilitate
  ferrous oxidation, allowing ferric precipitation as goethite. In the third and
  fourth tanks ferrous oxidation will be enhanced using a mixture of oxygen and
  sulfur dioxide. More limestone will be added to neutralize the acid generated
  by the goethite precipitation and maintain a discharge pH of 3.5. At this pH
  a significant percentage of the aluminum hydrolyses and precipitates while loss
  of the valuable metals (Ni, Co, Zn) is minimized.

Overflow from the fifth tank will be pumped to a thickener
  where the solids settle to a density of 40 wt%. A significant portion of the
  thickened underflow will be returned to the precipitation cascade, where the
  solids act as seeds to facilitate the growth of larger particles, which in turn
  improves settling and filtration characteristics. The balance of the thickener
  underflow will be filtered through a plate-type pressure filter. After

|Penguin Automated
      Systems Inc. | 3-12
|------------------------------------ | ----

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

washing to recover entrained nickel and cobalt, the cake will
  discharge into a tank where it is slurried with reclaim water and pumped to
  a new tailings impoundment on the existing tailings dam

Overflow from the iron thickener will be neutralized with
  magnesium oxide in two stirred tanks to precipitate a combined nickel/cobalt
  hydroxide. Slurry will discharge from the second tank into a thickener. Thickener
  underflow is filtered in a plate-type pressure filter. The filter cake will
  be collected and steam dried prior to bagging for dispatch to an off site nickel/cobalt
  refinery.

Thickener overflow will be treated with lime in two stirred
  tanks to precipitate any remaining valuable metal content. Slurry will discharge
  from the second tank to a thickener. Thickener underflow will be recycled back
  to the leach residue thickener. Thickener overflow will be pumped to a new tailings
  impoundment on the existing tailings dam.

The valuable metals (Ni, Co) will be redissolved under the
  strong acid conditions prevailing in the leach residue thickener.

3.4.10 Tailings

The existing tailings facility at Cliffs Erie will be used
  to contain tailings products from the NorthMet process plant. Flotation plant
  tailings will form the bulk of the tailings products and will be discharged
  to the existing dam using the existing pumping and piping arrangement.

There will be three new hydromet tailings produced:

- leach residue flotation tailings,
- iron/aluminum gypsum sludge
- solution from the hydroxide precipitation circuit.

|Penguin Automated
      Systems Inc. | 3-13
|------------------------------------ | ----

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Each of these tailings will be contained in separate lined
  ponds constructed on the existing tailings dam. Each pond will have an initial
  capacity of 3 years storage.

3.4.11 Reagents

Included on the equipment list are the proposed reagent systems
  to support the process plant operations. Reagent systems included are:

- Limestone: Rail receipt and off-load, conveying, crushing and grinding,
    slurry storage and distribution loop. (An existing mill will be used for grinding.)
- MIBC: Bulk liquid storage and distribution.
- PAX: Mixing, storage and distribution.
- Flex 31: Bulk liquid storage and distribution.
- WW 1752: Bulk liquid storage and distribution.
- Flocculent: Mixing, storage and distribution
- Sulfuric Acid: Bulk liquid storage and distribution.
- NaHS: Bulk liquid storage and distribution.
- NaCl: Mixing, storage and distribution.
- MgO: Mixing, storage and distribution.
- CaO: Mixing, storage and distribution
- Sulphur: Bulk storage, burner, distribution and SO2 scrubbing

3.4.12 Infrastructure and Ancillary Services

Reclaim water, utilities and services, compressed air supply,
  power supply and distribution, offices, warehousing and laboratories will all
  be provided for by existing facilities at the Cliffs Erie plant site. New assay
  laboratory equipment will be purchased for the NorthMet project.

3.5 Equipment List

A mechanical equipment list was developed and is presented
  in Appendix 3.0.

|Penguin Automated
      Systems Inc. | 3-14
|------------------------------------ | ----

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|4.0 Operating Cost
|------------------

---

|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

4.0 Operating Costs

4.1 Summary

The operating cost estimate for the study is based on the
  following six major cost centers:

Reagents and consumables
    Manpower
    Electrical power
    Plant operating supplies
    Maintenance supplies
    General and administration (G&A)


The development of the project mine operating costs is beyond
  the scope of this study and have not included.

A contingency of 5% has been applied and all costs are estimated in first
  quarter 2004 US dollars.

Average operating expenditures for the process plant facilities
  are estimated to be $60.2 million dollars per year or $6.59 per tonne milled
  based on an annual plant throughput of 9,125,000 tonnes. A breakdown of the
  costs is summarized in Table 4.1 and details are provided in Appendix 4.

Table 4.1 Operating Cost Estimates


|Description              | Total Cost US$ | US$/tonne
|------------------------ | -------------- | ---------
|Consumables              | 22,142,258     | 2.43     
|Labour                   | 10,977,823     | 1.20     
|Power                    | 16,746,886     | 1.84     
|Plant Operating Supplies | 400,000        | 0.04     
|Maintenance Supplies     | 1,915,896      | 0.21     
|Environmental Monitoring | 300,000        | 0.03     
|G&A                      | 4,856,600      | 0.53     
|Sub total                | 57,339,463     | 6.28     
|Contingency 5 %          | 2,866,973      | 0.31     
|Total                    | 60,206,436     | 6.59     



|Penguin Automated
      Systems Inc. | 4-1
|------------------------------------ | ---

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

4.2 Basis of Estimate

4.2.1 Consumable Unit costs

All costs are expressed in terms of US$ and metric tonnes
  and are based largely on unit rates FOB mine site provided by Polymet and reviewed
  by Penguin. In some cases, Penguin has sourced unit rates directly from vendors.
  For some items, unit rates from the AMEC study have been used. In all cases,
  the unit cost source is listed in the detailed operating cost breakdown in Appendix
  4.

4.2.2 Consumable Consumption Rates

Crusher, mill liners and grinding media

Estimated liner and steel media consumption rates are based
  on Penguins in-house experience. Consumption of ceramic grinding media used
  in the final concentrate regrind mill is based on vendor experience.

Reagents and chemicals

Unit consumption rates for flotation reagents have been taken
  from the AMEC study. Unit rates for the hydrometallurgical plant consumables
  are based on the Polymet mass balance.

4.2.3 Manpower

The total workforce for the process plant facilities is estimated
  to be 170 supervisory, operating and maintenance personnel. The staffing plan
  by component is in Table 4.2.

|Penguin Automated
      Systems Inc. | 4-2
|------------------------------------ | ---

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Table 4.2 Staffing Plan

|STAFF                | No. | MAINTENANCE                 | No. | OPERATIONS                        | No.
|-------------------- | --- | --------------------------- | --- | --------------------------------- | ---
|Mill Superintendant  | 1   | Maintenance Superintendent  | 1   | General Foreman Operations        | 1  
|Chief Metallurgist   | 1   | General Foreman Maintenance | 1   | Operations Shift Foreman          | 8  
|Metallurgist         | 4   | Maintenance Planner         | 2   | Mill Clerk                        | 2  
|                     |     | Maintenance Clerk           | 2   | Crusher Operator                  | 4  
|MILL WAREHOUSE       | No. | Millwright/Mechanic         | 12  | Grinding Operator                 | 8  
|Warehouse Supervisor | 1   | Millwright Apprentice       | 6   | Flotation/ Regrind/Tails Operator | 8  
|Warehouseman         | 4   | Welder                      | 4   | Operator                          | 4  
|Warehouse Clerk      | 1   | Machinist                   | 3   | POX Operator                      | 4  
|                     |     | Chief Electrician           | 1   | PGM Operator                      | 8  
|LABORATORY           | No. | Electrician                 | 3   | Neutralization Operator           | 4  
|Chief Chemist        | 1   | Instrumentation Tech        | 5   | Cu SX/TF Operator                 | 3  
|Chief Assayer        | 1   |                             |     | Cu EX Operator                    | 6  
|Assayer              | 6   |                             |     | Cu Cathode Stripping Operator     | 3  
|Sample Prep          | 6   |                             |     | Hydroxide Operator                | 6  
|Lab Clerk            | 1   |                             |     | Limestone Plant Operator          | 4  
|                     |     |                             |     | Reagents Operator                 | 8  
|                     |     |                             |     | Labourer                          | 14 
|                     |     |                             |     | Railhead Operator                 | 4  
|                     |     |                             |     | Janitor                           | 1  



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      Systems Inc. | 4-3
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

The process plant facility labor plan utilizes two different
  shift schedules:

Type I Day shift only. One shift per day, eight hours per
  shift, five days per week, for a total of 2,080 hours per year per employee.

Type II Shift work - 24-hour operations coverage. Three shifts
  per day, eight hours per shift, shift rotation for a total of 2,080 hours per
  year per employee.

All supervisory, technical, and warehouse personnel are on
  a Type I schedule, as well as most maintenance personnel except for service
  mechanics who are on a Type II rotation.

It is assumed that non-union labour will be employed at the
  NorthMet plant. Wages and salaries are based on the current ranges in the region
  for similar operations levels. Employees on a Type II shift rotation are paid
  overtime. For overtime, employees are paid at 1.5 times the base hourly rate
  plus any applicable shift differential. An allowance of 20% has been included
  in the labor operating costs for Type II employees for overtime.

Fringe benefits are estimated at 30% of the base annual cost
  for salaried and wage personnel, in accordance with fringe benefit costs experience
  by local mines.

These include allowances for the following:

- Payroll taxes
- 401 k contributions
- Group medical and life insurance
- Accidental death and dismemberment insurance and long term disability insurance
- Medical stop loss
- Worker's compensation premiums of 5%.

Fringe benefits are included in the labour cost calculation

|Penguin Automated
      Systems Inc. | 4-4
|------------------------------------ | ---

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

4.2.4 Electrical Power

The load list developed for the AMEC study was factored accordingly
  to reflect the current process plant design and the total load estimate required
  for the process plant will be 48 MW. The local utility provider, Minnesota Power,
  will supply power at a unit power rate of $0.033 per kWh for the first 25 MW
  and $0.036 thereafter.

4.2.5 Supplies

Operating and maintenance supplies are estimated on the basis
  of industry averages. The maintenance supplies allowance is approximately 3%
  of the mechanical equipment capital cost for the process plant. Operating supplies
  allow for general plant supplies and plant mobile equipment operations and maintenance.
  The operating supply annual cost for plant assay supplies and general mill supplies
  is estimated at $200,000. The annual expenditure for operating and maintaining
  the mill mobile equipment fleet is estimated at $200,000.

4.2.6 Freight

Operating consumables are to be purchased FOB at the mine
  site. A freight estimate of $30 per ton has been assumed for purchases of grinding
  media and liner steel, as well as general allowances for reagents, chemicals
  and other consumables.

4.2.7 Inflation

The operating cost estimates include no allowance for inflation

4.2.8 Taxes

As per the AMEC study, the only consumable subject to Minnesota
  State sales tax is crushing and grinding media (liners and balls). A sales tax
  of 6.5% has been included in the costs for these items.

|Penguin Automated
      Systems Inc. | 4-5
|------------------------------------ | ---

---

|5.0 Capital Cost
|----------------



---

|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

5.0 Capital Costs

5.1 Summary

The preproduction capital cost estimate for the design, procurement
  and construction of the NorthMet Project facilities was developed based upon
  the process and ancillary facilities previously defined.

The initial capital for the processing facilities and infrastructure
  was estimated to be $199.4 million. Table 5.1 -1 summarizes the preproduction
  capital costs for development of the project including direct and indirect costs
  associated with the construction of the facilities. Sustaining capital costs
  are not included. The capital cost estimate was largely based on factored estimates
  and is considered accurate to within +/- 30% at the summary level. All costs
  are in 1st quarter, 2004 U.S. dollars. The detailed cost estimate
  is included in Appendix 5.

|Penguin Automated
      Systems Inc. | 5-1
|------------------------------------ | ---

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------



Table 5.1 -1: Capital Costs Breakdown


|Item                                      | Cost ($000)
|----------------------------------------- | -----------
|                                          |            
|Crushing                                  | 3,082      
|Grinding                                  | 4,282      
|Flotation
      & Regrind                 | 17,546     
|Pressure
      Leaching                   | 31,052     
|Solid
      / Liquid Separation           | 6,667      
|PGM
      Recovery                        | 5,082      
|Neutralization                            | 8,867      
|Solvent
      Extraction                  | 6,439      
|Electrowinning                            | 18,749     
|Fe
      & Hydroxide Precipitation        | 6,003      
|Infrastructure
      & Auxiliary Services | 12,587     
|Tailings                                  | 4,549      
|Mining                                    | 5,760      
|                                          |            
|Subtotal
      Direct Costs               | 130,665    
|                                          |            
|EPCM                                      | 19,600     
|Construction
      Indirects              | 2,872      
|Capital
      Spares                      | 4,323      
|First
      Fills                         | 4,000      
|Vendor
      Representatives              | 1,319      
|Freight                                   | 2,499      
|Start
      Up and Commissioning          | 910        
|Contingency                               | 33,238     
|                                          |            
|Total
      Project Cost                  | $199,427   



|Penguin Automated
      Systems Inc. | 5-2
|------------------------------------ | ---

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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

5.2 Basis of Estimate

The Capital Cost Estimate for the NorthMet Project was completed
  for the design previously specified in this report. The estimate assumes a conventional
  EPCM project delivery methodology. The capital cost estimate includes the estimated
  direct cost for equipment, material and labour. In addition, cost estimates
  were developed for the project indirect costs including EPCM, start up, construction
  indirects, first fill, spares and contingency. The estimate was developed based
  on a site visit and inspection of existing equipment and facilities, and the
  following main sources of information:

Process Design Criteria.
    Process Flow Sheets.
    Facility General Arrangement Drawings.
    Electrical and Mechanical Equipment List.
    Budget Quotations from Equipment Suppliers.
    Current Labour and Material Costs.
    The AMEC Simons Mining & Metals 2001 Prefeasibility Report.


5.2.1 Direct Costs

The Direct Costs include the estimated costs of the equipment,
  material and labour required to construct the facility.

Equipment

All process equipment is considered purchased new for the
  project with the exception of the crushing, screening and grinding equipment,
  which will be reused from the existing plant. The equipment costs were based
  upon budget quotations where ever possible. Equipment pricing that was not based
  upon budget quotations were based on current data from other projects or factored
  from the AMEC Simons Prefeasibility Study.

|Penguin Automated
      Systems Inc. | 5-3
|------------------------------------ | ---

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      Project Processing Facilities Scoping Study
|----------------------------------------------------------

The SX and EW plant equipment was factored from the AMEC study
  based on the revised equipment sizing for this study using commonly applied
  size factors. The AMEC SX and EW plant estimates include all piping, civil,
  structural, mechanical, piping, electrical and instrumentation requirements.

The equipment being reused for the crushing and grinding circuits
  will be utilized in place. An allowance for the material and labour requirements
  to re-start the existing crushing and grinding equipment and facilities has
  been included in the estimate. The allowance includes the supply and installation
  of new materials to cover the replacement of wear items such as liners, idlers,
  conveyor bets and drive components for the existing equipment as well as repairs
  and upgrades recommended by the previous operations personnel. The allowances
  were developed based on an inspection of the equipment and facility condition
  conducted during a visit to the facility in April 2004. The site visit included
  a detailed estimate review with the former plant operations personnel on a site
  where repair/refurbishment material costs and labour manhours were confirmed.
  There is a significant opportunity for cost savings by utilizing spare parts
  available from the previous operation. This inventory of spare parts available
  will require an investigation during the feasibility study.

It has been assumed that no mobile equipment is available
  on site. The estimate includes the purchase of new equipment for the plant operations
  and maintenance.

Materials

The material cost estimates were based either on quantity
  take-offs for areas that could be derived from the drawings or upon factored
  quantities from similar projects where drawing information was not available.

Concrete quantities are derived from layouts, historical factors
  or factored from the AMEC study adapted to the requirements of this study. Quantities
  are estimated as in-place, unit prices include formwork, reinforcing steel,
  imbedded metals, concrete supply,

|Penguin Automated
      Systems Inc. | 5-4
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      Project Processing Facilities Scoping Study
|----------------------------------------------------------

transport, placing, finishing, curing and the suppliers' quality
  control testing. Costs for independent quality control and testing are included
  in the indirects.

Platework quantities were estimated from the equipment list
  and flowsheets and historical experience from similar projects. Structural steel
  quantities are factored based on square footage obtained from general arrangement
  drawings. The unit prices include supply, detailing, fabrication, painting and
  delivery.

Cost for process piping, electrical, lighting and instrumentation
  distribution within the facilities is factored from similar installations or
  the AMEC study.

Buildings

The crushing, grinding and flotation circuits will utilize
  portions of the existing buildings. The existing warehouse will be utilized
  for the solid/liquid separation, PGM recovery, neutralization, solvent extraction,
  electrowinning and Fe & hydroxide precipitation. The pressure leaching circuit
  will be constructed in a new pre-engineered insulated metal building adjacent
  to the existing warehouse. Where existing facilities are utilized an allowance
  has been made for repairs and modifications, including replacement of doors/windows,
  repairs to the building envelope and new openings for HVAC piping and electrical.
  An architectural allowance has been provided for the warehouse for installation
  of offices, compressor rooms and electrical rooms.

The estimate assumes the reuse of the existing administration
  building, truckshop, mine administration and operations office and laboratory.
  An allowance has been provided in the estimate for minor repairs, painting and
  furnishings for these existing buildings.

Labour

The labour component of the cost estimate was estimated using
  installation man-hours, based on historical data applied to a blended all
  in' labour rate. The blended construction hourly labour rate was estimated at
  $68/hour from current rates for crew configurations for this type of industrial
  construction. The labour rate component

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      Systems Inc. | 5-5
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

includes for the base pay and the payroll burden, including
  payroll taxes and workman's compensation. The hourly rate also includes supervision,
  small tools and consumables, contractor's site and home office overhead and
  profit. The labour rate is based on a 40 hour work week including an allowance
  for casual overtime; no allowance has been made for scheduled overtime. The
  workforce will be housed locally and no construction camp has been provided
  for in the estimate.

5.2.2 Indirect Costs

Indirect costs for the project were calculated for EPCM, project
  start up, contractor's indirects, and contingency. The indirect costs were developed
  from industry standard percentages and are considered reasonable for a project
  of this scope.

EPCM

Engineering, Procurement and Construction Management (EPCM)
  costs were estimated based on currently accepted percentages for these services
  applied to the total direct costs. The EPCM costs include allowances for subconsultant
  costs including geotechnical, survey and site quality control for soils and
  concrete testing.

Contractor's Indirects

Contractor's indirect costs for overhead are included in the
  calculated blended labour

rate. An equipment allowance was calculated at $6.00 per construction
  man-hour.

Startup and Vendors Representatives

Startup costs including commissioning were calculated as an
  allowance and include retaining contractor forces during the commissioning phase
  to assist with start up. An allowance has been included for vendor assistance
  during commissioning for pre-operational testing of equipment and operations
  and maintenance training.



|Penguin Automated Systems Inc. | 5-6
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|NorthMet
      Project Processing Facilities Scoping Study
|----------------------------------------------------------

Freight, Spare Parts

Indirect costs for freight, spare parts and initial fills were included in the project indirects. Freight costs were estimated as 3% of the direct cost for the equipment and materials. Spare parts were estimated at 5% of the process equipment.
There is a significant opportunity for cost savings if spare parts are available from the previous operation for use by the project. This inventory of spare parts available is to be further investigated during the feasibility study.

Contingency

A blended contingency of 20% was applied to the Project Direct and Indirect
  Costs. The contingency is to cover items not adequately defined based upon the
  current level of engineering. This allowance is included to cover these unknowns
  but is not intended to cover changes in the project scope.



|Penguin Automated Systems Inc. | 5-7
|------------------------------ | ---

---

|Appendix 1- Process Design Criteria
|-----------------------------------

---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Key                       
      Source                       |                |          |               |              |  
|------------------------------------------------------------- | -------------- | -------- | ------------- | ------------ | -
|1                          
      Polymet                     |                |          |               |              |  
|2                          
      Assumption                  |                |          |               |              |  
|3                          
      Calculation                 |                |          |               |              |  
|4                          
      AMEC pre-feasibility report |                |          |               |              |  
|5                          
      Lakefield                   |                |          |               |              |  
|6                          
      Vendor                      |                |          |               |              |  
|                                                              |                |          |               |              |  
|Ore Characteristics                                           |                |          |               |              |  
|Ore Specific Gravity                                          |                |          |               | 3.0          | 1
|Moisture Content                                              |                |          | %             | 6.4          | 1
|Bond Work Index                                               |                | Ball     | kWh/mt        | 17           | 5
|                                                              |                | Rod      | kWh/mt        | 14           | 5
|Production                                                    |                |          |               |              |  
|Average daily thru'put                                        |                | dry      | mt/d          | 25,000       | 1
|Operating days                                                |                |          | days per year | 365          | 2
|Ore Treated                                                   | per annum      | dry      | mt/y          | 9,125,000    | 1
|Availability                                                  |                |          | %             | 91.34        | 3
|Daily Thu'put                                                 | @ 91.34% avail | dry      | mt/d          | 27,370       | 3
|Daily Thu'put                                                 | @ 91.34% avail | wet      | mt/d          | 29,242       | 3
|                                                              |                |          |               |              |  
|Primary Crushing                                              |                |          |               |              |  
|Crusher                                                       |                |          |               |              |  
|Type                                                          |                | Existing |               | Gyratory     |  
|Size                                                          |                |          | inches        | 60"x 89"     |  
|Number                                                        |                |          |               | one          | 3
|Open side setting                                             |                |          | inches        | 6"           |  
|Motor                                                         |                |          | HP            | 900          |  
|Apron Feeder                                                  |                |          |               |              |  
|Type                                                          |                | Existing |               |              |  
|Size                                                          |                |          | mm            | 1500 x 4800  |  
|Number                                                        |                |          |               | one          | 3
|Motor                                                         |                |          | HP            | 115          |  
|                                                              |                |          |               |              |  
|Secondary Crushing                                            |                |          |               |              |  
|Type                                                          |                | Existing |               | Cone         |  
|Size                                                          |                |          |               | 7' standard  |  
|Number                                                        |                |          |               | two          | 3
|Closed side setting                                           |                |          |               | 3"           |  
|Motor                                                         |                |          | HP            | 350          |  
|                                                              |                |          |               |              |  
|Tertiary Crushing                                             |                |          |               |              |  
|Type                                                          |                | Existing |               | Cone         |  
|Size                                                          |                |          |               | 7' shorthead |  
|Number                                                        |                |          |               | four         | 3
|Closed side setting                                           |                |          |               | 3/4"         |  
|Motor                                                         |                |          | HP            | 350          |  



---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Primary Milling          |  |          |             |            |   | 
|------------------------ |  | -------- | ----------- | ---------- | - | 
|Feed size                |  |          |             | 3/4"       |   | 
|Type                     |  | Existing |             | Rod        |   | 
|Size                     |  |          | feet        | 10'x 14'   |   | 
|Number                   |  |          |             | 8          | 3 | 
|Motor                    |  |          | HP          | 800        |   | 
|Grind size               |  | p80      | micron      | 1000       |   | 
|Rod size                 |  |          |             | 3"         |   | 
|                         |  |          |             |            |   | 
|Secondary Milling        |  |          |             |            |   | 
|Mills                    |  |          |             |            |   | 
|Type                     |  | Existing |             | Ball       |   | 
|Size                     |  |          | feet        | 10'x 14'   |   | 
|Number                   |  |          |             | 8          |   | 
|Motor                    |  |          | HP          | 1250       |   | 
|Grind Size               |  | p80      | micron      | 1000       |   | 
|Ball Size                |  |          | inch        | 3"         |   | 
|                         |  |          |             |            |   | 
|Cyclones                 |  | New      |             |            |   | 
|Size                     |  |          | mm          | 840        | 3 | 
|Number                   |  | per mill |             | 1op/1sb    | 3 | 
|Circulating load         |  |          | %           | 250        | 2 | 
|                         |  |          |             |            |   | 
|                         |  |          |             |            |   | 
|Flotation                |  |          |             |            |   | 
|Reagents                 |  |          |             |            |   | 
|Flex 31        collector |  |          | g/t         | 18.2       | 4 | 
|PAX           collector  |  |          | g/t         | 45.5       | 4 | 
|MIBC          frother    |  |          | g/t         | 40.9       | 4 | 
|WW1752                   |  |          | g/t         | 90.9       | 4 | 
|                         |  |          |             |            |   | 
|Rougher conditioning     |  |          |             |            |   | 
|Residence Time           |  |          | mins        | 5          | 4 | 
|Tank size                |  |          | m           | 7.5D x 8.0 | 3 | 
|                         |  |          |             |            |   | 
|Roughers                 |  |          |             |            |   | 
|Residence Time           |  |          | mins        | 8          | 4 | 
|Cell Volume required     |  |          | m 3         | 640        | 3 | 
|Cell size                |  |          | m 3         | 160        | 2 | 
|Number of cells          |  |          |             | 4          | 3 | 
|Cell type                |  |          |             | Tank       | 4 | 
|Rougher conc prod.       |  | Average  | % mill feed | ~ 7.0      | 4 | 
|                         |  |          |             |            |   | 
|Scavengers               |  |          |             |            |   | 
|Residence Time           |  |          | mins        | 20         | 4 | 
|Cell Volume required     |  |          | m 3         | 1,600      | 3 | 
|Cell size                |  |          | m 3         | 160        | 2 | 
|Number of cells          |  |          |             | 10         | 3 | 
|Cell type                |  |          |             | Tank       | 4 | 
|Scavenger conc prod.     |  | Average  | % mill feed | ~ 3.2      | 4 | 



---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Cleaners                                   |  |          |             |              |     | 
|------------------------------------------ |  | -------- | ----------- | ------------ | --- | 
|Residence Time                             |  |          | mins        | 20           | 4   | 
|Cell Volume required                       |  |          | m 3         | 168          | 3   | 
|Cell size                                  |  |          | m 3         | 21           | 2   | 
|Number of cells                            |  |          |             | 8            | 3   | 
|Cell type                                  |  |          |             | Conventional | 2   | 
|Cleaner conc prod.                         |  | Average  | % mill feed | ~7.0         | 4   | 
|                                           |  |          |             |              |     | 
|                                           |  |          |             |              |     | 
|Re-cleaner                                 |  |          |             |              |     | 
|Residence Time                             |  |          | mins        | 16           | 4   | 
|Cell Volume required                       |  |          | m 3         | 118          | 3   | 
|Cell size                                  |  |          | m           | 3.7 D x 12.2 | 3   | 
|Number of cells                            |  |          |             | 1            | 3   | 
|Cell type                                  |  |          |             | Column       | 2   | 
|Cleaner conc prod.                         |  | Average  | % mill feed | 2.57         | 1   | 
|                                           |  |          |             |              |     | 
|                                           |  |          |             |              |     | 
|Regrind mill - Scavenger conc/cleaner tail |  |          |             |              |     | 
|Work Index                                 |  |          |             | 7.5          | 5   | 
|Type                                       |  | Existing |             | Regrind ball |     | 
|Size                                       |  |          |             | 12'2" x 24'  |     | 
|Motor                                      |  |          | HP          | 1500         |     | 
|Ball size                                  |  |          |             | 1" steel     |     | 
|Feed size                                  |  | f80      | micron      | 81           | 5   | 
|Regrind size                               |  | p80      | micron      | 31           | 5   | 
|                                           |  |          |             |              |     | 
|Regrind mill - Feed to Pressure Oxidation  |  |          |             |              |     | 
|Work Index                                 |  |          |             | 7.5          | 5   | 
|Type                                       |  | Existing |             | Regrind ball |     | 
|Size                                       |  |          |             | 12'2" x 24'  |     | 
|Motor                                      |  |          | HP          | 1500         |     | 
|Ball size                                  |  |          |             | 1" ceramic   | 4   | 
|Feed size                                  |  | f80      | micron      | 81           | 5   | 
|Regrind size                               |  | p80      | micron      | 15           | 4,5 | 
|                                           |  |          |             |              |     | 
|Concentrate production                     |  |          | t/d         | 703          | 3   | 
|Thickener unit
      area                  |  |          | m2/tpd      | 0.2          | 4   | 
|Thickener diameter                         |  |          | m           | 13.4         | 3   | 
|                                           |  |          |             |              |     | 
|Concentrate storage                        |  |          |             |              |     | 
|Residence Time                             |  |          | hrs         | 12           | 4   | 
|Tank size                                  |  |          | m           | 8.0D x 9.0   | 3   | 



---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Pressure Oxidation                    |               |        |        |            |   | 
|------------------------------------- | ------------- | ------ | ------ | ---------- | - | 
|Autoclave feed tank                   |               |        |        |            |   | 
|Residence Time                        |               |        | hrs    | 1          | 4 | 
|Tank size                             |               |        | m      | 3.0D x 3.5 | 3 | 
|                                      |               |        |        |            |   | 
|Autoclaves                            |               |        |        |            |   | 
|Slurry                                | solids        |        | %      | 11.5       | 1 | 
|Number required                       |               |        |        | 2          | 1 | 
|Flowrate                              | per autoclave |        | m 3/hr | 96         | 1 | 
|Availability                          |               |        | %      | 90         | 1 | 
|Flowrate                              | per autoclave |        | m 3/hr | 107        | 1 | 
|Residence time total                  |               |        | hr     | 2          | 1 | 
|Capacity                              | per autoclave |        | %      | 75         | 1 | 
|Factor                                | per autoclave |        |        | 1.15       | 1 | 
|Volume required                       | per autoclave |        | m 3    | 327        | 3 | 
|Size                                  | per autoclave | ID     | m      | 4.1        | 1 | 
|                                      |               | length | m      | 24.6       | 1 | 
|Volume installed                      | per autoclave |        | m 3    | 325        | 1 | 
|Compartments                          | per autoclave |        |        | 5          | 1 | 
|Agitators                             | per autoclave |        |        | 6          | 1 | 
|Power per agitator                    |               |        | kW     | 90         | 1 | 
|Operating conditions                  |               |        |        |            |   | 
|Temperature                           |               |        | o C    | 225        | 1 | 
|Pressure                              |               |        | psi O  | 100        | 1 | 
|                                      |               |        | 2      |            |   | 
|Pressure                              |               |        | psig   | ~475       | 1 | 
|Pulp density                          |               |        | g/l    | 1050       | 1 | 
|H SO                                  |               |        | g/l    | 50-60      | 1 | 
|2 4                                   |               |        |        |            |   | 
|Chloride                              |               |        | g/l    | 10         | 1 | 
|Cu                                    |               |        | g/l    | ~20        | 1 | 
|Ni                                    |               |        | g/l    | ~20        | 1 | 
|                                      |               |        |        |            |   | 
|Slurry Cooling                        |               |        |        |            |   | 
|Flash tanks                           |               |        |        |            |   | 
|Solution loss to steam                |               |        | %      | 19         | 1 | 
|                                      |               |        |        |            |   | 
|Leach Residue Liquid-Solid Separation |               |        |        |            |   | 
|Thickener                             |               |        |        |            |   | 
|Feedrate                              |               |        | t/d    | 612        | 3 | 
|Thickener unit area                   |               |        | m2/tpd | 0.4        | 4 | 
|Thickener diameter                    |               |        | m      | 17.7       | 3 | 



---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Filter                  |  |  |           |              |     |       
|----------------------- |  |  | --------- | ------------ | --- | ------
|Feedrate                |  |  | tph dry   | 25.9         | 3   |       
|Cake density            |  |  |           | 1.4          | 5   |       
|capacity                |  |  | m3/hr     | 18.50        | 3   |       
|cycle time              |  |  | mins      | 14.94        | 5   |       
|cycles per hour         |  |  |           | 4.02         | 3   |       
|Volume                  |  |  | litres    | 4607         | 3   |       
|scale up factor         |  |  |           | 1.25         | 2   |       
|Volume required         |  |  | litres    | 5758         | 3   |       
|Filter type             |  |  |           | Pressure     |     |       
|Model                   |  |  |           | VPA 2050     | 6   |       
|volume                  |  |  | l/chamber | 205          | 5,6 |       
|chambers req            |  |  |           | 28.09        | 3   |       
|chambers installed      |  |  |           | 30           |     |       
|                        |  |  |           |              |     |       
|Leach Residue Flotation |  |  |           |              |     |       
|Roughers                |  |  |           |              |     |       
|Residence Time          |  |  | mins      | 20           | 4   |       
|Cell Volume             |  |  | m 3       | 15           | 3   |       
|Cell size               |  |  | m 3       | 3            | 3   |       
|Number of cells         |  |  |           | 5            | 3   |       
|Cell type               |  |  |           | conventional | 2   |       
|                        |  |  |           |              |     |       
|Cleaners                |  |  |           |              |     |       
|Residence Time          |  |  | mins      | 10           | 4   |       
|Cell Volume             |  |  | m 3       | 0.24         | 3   |       
|Cell size               |  |  | m 3       | 0.08         | 3   |       
|Number of cells         |  |  |           | 3            | 3   |       
|Cell type               |  |  |           | conventional | 2   |       
|                        |  |  |           |              |     |       
|PGM Recovery            |  |  |           |              |     |       
|Reactors                |  |  |           |              |     |       
|Reactor type            |  |  |           | pipe         | 4   |       
|number                  |  |  |           | 2            | 4   |       
|residence time          |  |  | secs      | 30           | 4   |       
|size                    |  |  |           | 315mm x 55m  | 3   |       
|                        |  |  |           |              |     |       
|Clarifier               |  |  |           |              |     |       
|number                  |  |  |           | 2            | 4   |       
|diameter                |  |  | m         | 5            | 4   | scaled
|angle                   |  |  | degree    | 60           | 4   |       
|sidewall ht             |  |  | m         | 2.0          | 4   |       



---

|PENGUINASI            | DESIGN CRITERIA | April-04
|--------------------- | --------------- | --------
|NorthMet Project      |                 | Rev. C  
|Hoyt Lakes, Minnesota |                 |         

| | Unit | Design | Source | Note
| | ---- | ------ | ------ | ----

|Neutralisation            |  |  |           |             |     |              
|------------------------- |  |  | --------- | ----------- | --- | -------------
|pH required               |  |  |           | 2           | 4   |              
|Retention time            |  |  | hr        | 3           | 4   |              
|                          |  |  |           |             |     |              
|Feedrate                  |  |  | t/d       | 612         | 3   |              
|Thickener unit area       |  |  | m2/tpd    | 1.45        | 5   |              
|Thickener diameter        |  |  | m         | 33.6        | 3   |              
|                          |  |  |           |             |     |              
|Gypsum Filter             |  |  |           |             |     |              
|Feedrate                  |  |  | tph dry   | 14.9        | 3   |              
|Cake density              |  |  |           | 0.704       | 5   |              
|capacity                  |  |  | m3/hr     | 21.16       | 3   |              
|cycle time                |  |  | mins      | 12.28       | 5   |              
|cycles per hour           |  |  |           | 4.89        | 3   |              
|Volume                    |  |  | litres    | 4332        | 3   |              
|scale up factor           |  |  |           | 1.25        | 2   |              
|Volume                    |  |  | litres    | 5415        | 3   |              
|Filter type               |  |  |           | Pressure    | 5,6 |              
|Model                     |  |  |           | VPA 2050    | 6   |              
|Volume                    |  |  | l/chamber | 205         | 6   |              
|chambers req              |  |  |           | 26.41       | 3   |              
|chambers installed        |  |  |           | 30          |     |              
|                          |  |  |           |             |     |              
|Copper Solvent Extraction |  |  |           |             |     |              
|Mixer tank                |  |  |           |             |     |              
|Residence time            |  |  | mins      | 3           | 2   | Typical      
|Size                      |  |  | m         | 3.5 D x 4.0 | 3   |              
|PLS surge tank            |  |  |           |             |     |              
|Residence time            |  |  | hrs       | 4           | 4   |              
|Size                      |  |  | m         | 3.5 D x 4.0 | 3   |              
|PLS flow                  |  |  | m3/hr     | 225         | 3   |              
|scale factor              |  |  |           | 1.2         | 2   |              
|PLS flow                  |  |  | m3/hr     | 270         | 3   |              
|No of SX trains           |  |  |           | 1           | 2   | Lakefield p/p
|Extraction stages         |  |  |           | 3           | 2   | 2ex, 1w, 2 s 
|Wash stages               |  |  |           | 0           | 2   |              
|Strip stages              |  |  |           | 2           | 2   |              
|O/A ratio                 |  |  |           | 1.5         | 2   |              
|Total flow                |  |  | m3/hr     | 675         | 3   |              
|Settling Rate             |  |  | m3/hr/m2  | 4.4         | 2   |              
|Organic depth             |  |  | mm        | 300         | 2   |              
|Av aqueous depth          |  |  | mm        | 450         | 2   |              
|Settler area              |  |  | m2        | 153         | 3   |              
|Av sol velocity           |  |  | cm/sec    | 3           | 2   |              
|Settler width             |  |  | m         | 8.3         | 3   |              
|Settler length            |  |  | m         | 18.4        | 3   |              
|Add for weirs             |  |  | m         | 1           | 2   |              
|Add for distr. fence      |  |  | m         | 2.5         | 2   |              
|Total length              |  |  | m         | 21.9        | 3   |              

---

|Appendix 2- Drawings
|--------------------

---

POLYMET MINING CORPORATION 
  NORTHMET PROJECTSCOPING STUDY 
  DRAWING LIST

|DRAWING NO.    | DESCRIPTION                                                   
|-------------- | --------------------------------------------------------------
|               |                                                               
|METALLURGY    
|               |                                                               
|100-03-F00     | SIMPLIFIED FLOWDIAGRAM                                        
|100-03-F01     | CRUSHING AND SCREENING-FLOWSHEET # 1                          
|100-03-F02     | GRINDING CIRCUIT-FLOWSHEEET # 2                               
|100-03-F03     | FLOTATION AND REGRIND-FLOWSHEET # 3                           
|100-03-F04     | PRESSURE LEACHING-FLOWSHEET # 4                               
|100-03-F05     | SOLID/LIQUID SEPARATION-FLOWSHEET # 5                         
|100-03-F06     | PRECIOUS METAL RECOVERY-FLOWSHEET # 6                         
|100-03-F07     | Cu SOLVENT EXTRACTION-EXTRACTION CIRCUIT-FLOWSHEET #
      7  
|100-03-F08     | Cu SOLVENT EXTRACTION-STRIPPING CIRCUIT-FLOWSHEET #
      8   
|100-03-F09     | COPPER ORGANIC SYSTEM-FLOWSHEET # 9                           
|100-03-F10     | Cu ELECTROLYTE CLEANING AND RECIRCULATION-FLOWSHEET
      # 10
|100-03-F11     | Cu ELECTROWINNING AND CATHODE HANDLING-FLOWSHEET # 11         
|100-03-F12     | Fe & HYDROXIDE PRECIPITATION-FLOWSHEET # 12                   
|100-03-F13     | LIMESTONE HANDLING-FLOWSHEET # 13                             
|              
|GENERAL LAYOUT
|              
|100-10-001     | OVERALL PLANT SITE-PLAN                                       
|100-10-002     | CONCENTRATOR-GA-PLAN                                          
|100-10-F03     | CONCENTRATOR-GA-SECTION                                       
|100-10-F04     | REGRIND MILLS-GA-PLAN                                         
|100-10-F05     | HYDROMET PLANT-GA-PLAN                                        
|100-10-F06     | FLOTATION CIRCUIT-GA-PLAN AND SECTIONS                        
|100-10-F07     | PRESSURE LEACHING-GA-PLAN AND SECTION                         
|100-10-F08     | SETTLING TANKS-GA-PLAN AND SECTION                            
|100-10-F09     | Cu ELECTROWINNING CIRCUIT-GA-PLAN AND SECTIONS                
|100-10-F10     | RECOVERY & PRECIPITATION-GA-PLAN AND SECTIONS                 

---

The drawings and illustrations discussed above have been excluded from this filing due to file size issues.

---

|Appendix 3- Equipment List
|--------------------------

---

|PENGUINASI            | MECHANICAL EQUIPMENT LIST | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           |         
|Hoyt Lakes, Minnesota |                           |         

|Equip. #               | Qty. | Description                      | Size                | Material  Specification | HP
      Each | HP Total | Remarks           | New / Existing
|---------------------- | ---- | -------------------------------- | ------------------- | ----------------------- | ------------- | -------- | ----------------- | --------------
|                       |      |                                  |                     |                         |               |          |                   |               
|CRUSHING AND SCREENING |      |                                  |                     |                         |               |         
|                       | 1    | PRIMARY CRUSHER SURGE POCKET     |                     |                         |               |          |                   | EXISTING      
|                       | 1    | PRIMARY CRUSHER                  | 60 x 89 GYRATORY    |                         | 900           | 900      |                   | EXISTING      
|                       | 1    | CRUSHED ORE SURGE POCKET         |                     |                         |               |          |                   | NEW           
|                       | 1    | APRON FEEDER                     | 1500 x 4800         |                         | 115           | 115      |                   | EXISTING      
|                       | 1    | CONVEYOR 1A                      | 60"                 |                         | 900           | 900      |                   | EXISTING      
|                       | 1    | CONVEYOR 2A                      | 60"                 |                         | 900           | 900      |                   | EXISTING      
|                       | 1    | CONVEYOR 2A-TRIPPER              | 60"                 |                         | 15            | 15       |                   | EXISTING      
|                       | 1    | COARSE ORE SURGE BIN             | 2000T               |                         |               |          |                   | EXISTING      
|                       | 12   | COARSE ORE RECLAIM FEEDERS       | 4'x 6' VIBRATING    |                         | 4             | 48       |                   | EXISTING      
|                       | 4    | COARSE ORE RECLAIM CONVEYORS     | 48"                 |                         | 5             | 20       |                   | EXISTING      
|                       | 2    | RETRACTABLE CONVEYORS            | 48"                 |                         | 5             | 10       |                   | EXISTING      
|                       | 2    | SECONDARY CRUSHER (PRIME)        | 7' STD. CONE        |                         | 350           | 700      |                   | EXISTING      
|                       | 2    | SECONDARY CRUSHER SURGE BIN      |                     |                         |               |          |                   | EXISTING      
|                       | 4    | CRUSHER RECLAIM FEEDER           | 4'x 5' VIBRATING    |                         | 4             | 16       |                   | EXISTING      
|                       | 4    | SIZING SCREENS                   | 6'x 10' VIBRATING   |                         | 15            | 60       |                   | EXISTING      
|                       | 4    | TERTIARY CRUSHER                 | 7' SH. HD. CONE     |                         | 350           | 1400     |                   | EXISTING      
|                       | 1    | CONVEYOR 3A                      | 60"                 |                         | 75            | 75       |                   | EXISTING      
|                       | 1    | CONVEYOR 4A                      | 60"                 |                         | 750           | 750      |                   | EXISTING      
|                       | 1    | CONVEYOR 5S                      | 60"                 |                         | 450           | 450      |                   | EXISTING      
|                       | 1    | CONVEYOR 5S-TRIPPER              | 60"                 |                         | 15            | 15       |                   | EXISTING      
|                       |      | SUMP PUMPS                       |                     |                         |               |          |                   | EXISTING      
|                       |      |                                  |                     |                         |               |          |                   |               
|GRINDING CIRCUIT       |      |                                  |                     |                         |               |         
|                       | 1    | FINE ORE SURGE BIN               | 650 T LIVE CAPACITY |                         |               |          |                   | EXISTING      
|                       | 8    | FINE ORE RECLAIM BELT FEEDERS    |                     |                         | 3             | 24       |                   | EXISTING      
|                       | 8    | FINE ORE RECLAIM CONVEYORS       | 24                  |                         | 3             | 24       |                   | EXISTING      
|                       | 8    | ROD MILL                         | 10'x 14'            |                         | 800           | 6400     |                   | EXISTING      
|                       | 8    | BALL MILL                        | 10'x 14'            |                         | 1250          | 10000    |                   | EXISTING      
|                       | 8    | CYCLOPAC 1 OP 1 STDBY            | 2 x 33" dia         |                         |               |          |                   | NEW           
|                       | 8    | CYCLONE FEED PUMPBOX             |                     |                         |               |          |                   | NEW           
|                       | 8    | CYCLONE FEED PUMPS               |                     |                         |               |          |                   | NEW           
|                       | 1    | OVERHEAD CRANE                   | 200T                |                         | 100           | 100      |                   | EXISTING      
|                       |      | SUMP PUMPS                       |                     |                         |               |          |                   | EXISTING      
|                       |      |                                  |                     |                         |               |          |                   |               
|FLOTATION & REGRIND    |      |                                  |                     |                         |               |         
|                       | 1    | CONDITIONING TANK                | 7.5 m dia x 8 m     |                         |               |          |                   | NEW           
|                       | 1    | CONDITIONING TANK AGITATOR       |                     |                         |               |          |                   | NEW           
|                       | 4    | ROUGHER CELLS                    | 160m3               |                         | 260           | 1040     | Tank cell         | NEW           
|                       | 10   | SCAVENGER CELLS WITH DISTRIBUTER | 160m3               |                         | 260           | 2600     | Tank cell         | NEW           
|                       | 8    | CLEANER CELLS WITH DISTRIBUTER   | 21m3                |                         | 45            | 360      | Conventional cell | NEW           
|                       | 1    | FLOTATION TAILS PUMPBOX          |                     |                         |               | 0        |                   | NEW           
|                       | 1    | FLOTATION TAILS PUMPS            |                     |                         |               | 0        |                   | NEW           
|                       | 1    | RECLEANER FEED PUMPBOX           |                     |                         |               |          |                   | NEW           
|                       | 1    | RECLEANER FEED PUMPS             |                     |                         |               |          |                   | NEW           
|                       | 1    | RE CLEANER COLUMN CELLS          | 3.7m x 12.2 m       |                         |               |          | Column            | NEW           
|                       | 1    | RECLEANER TAILS PUMP             |                     |                         |               |          |                   | NEW           
|                       | 1    | RECLEANER BLOWER                 |                     |                         |               |          |                   | NEW           
|                       |      | FLOTATION BLOWERS                |                     |                         |               |          |                   | NEW           
|                       | 3    | SAMPLERS                         |                     |                         |               |          |                   | NEW           
|                       | 1    | ANALYSER                         |                     |                         |               |          |                   | NEW           
|                       | 1    | FLOTATION AREA OVERHEAD CRANE    |                     |                         |               |          |                   | EXISTING      
|                       | 1    | SCAVENGER REGRIND CYCLONE FEED   | PUMPBOX             |                         |               |          |                   | NEW           
|                       | 1    | SCAVENGER REGRIND CYCLONE FEED   | PUMPS               |                         |               |          |                   | NEW           
|                       | 1    | SCAVENGER REGRIND CYCLOPAC       |                     |                         |               |          |                   | NEW           
|                       | 1    | SCAVENGER REGRIND MILL           | 12'-2" x 24'        |                         | 1500          | 1500     |                   | EXISTING      
|                       | 1    | FINAL CONC. REGRIND CYCLONE FEED | PUMPBOX             |                         |               |          |                   | NEW           
|                       | 1    | FINAL CONC. REGRIND CYCLONE FEED | PUMPS               |                         |               |          |                   | NEW           
|                       | 1    | FINAL CONC. REGRIND CYCLOPAC     |                     |                         |               |          |                   | NEW           
|                       | 1    | FINAL CONC REGRIND MILL          | 12'-2" x 24'        |                         | 1500          | 1500     |                   | EXISTING      
|                       | 2    | SUMP PUMPS                       |                     |                         |               |          |                   | NEW           

---

|PENGUINASI            | MECHANICAL EQUIPMENT LIST | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           |         
|Hoyt Lakes, Minnesota |                           |         

|Equip. #                | Qty. | Description                         | Size             | Material  Specification | HP
      Each | HP Total | Remarks       | New / Existing
|----------------------- | ---- | ----------------------------------- | ---------------- | ----------------------- | ------------- | -------- | ------------- | --------------
|                        |      |                                     |                  |                         |               |          |               |               
|PRESSURE LEACHING       |      |                                     |                  |                         |               |         
|                        | 1    | CONCENTRATE THICKENER               | 13.4 m dia.      |                         |               |          |               | NEW           
|                        | 1    | THICKENER O/F PUMP                  |                  |                         |               |          |               | NEW           
|                        | 1    | THICKENER U/F PUMP                  |                  |                         |               |          |               | NEW           
|                        | 1    | CONCENTRATE STORAGE TANK            | 8 m dia. X 9 m   |                         |               |          |               | NEW           
|                        | 1    | CONCENTRATE STORAGE TANK AGITATOR   |                  |                         |               |          |               | NEW           
|                        | 2    | CONCENTRATE FEED PUMPS              |                  |                         |               |          |               | NEW           
|                        | 2    | AUTOCLAVE FEED TANK                 | 3 m dia. X 3.5 m |                         |               |          |               | NEW           
|                        | 2    | AOTOCLAVE FEED PUMPS                |                  |                         |               |          |               | NEW           
|                        | 2    | AUTOCLAVES                          | 4.1m x 24.6m     |                         |               |          |               | NEW           
|                        | 2    | FLASH TANKS                         |                  |                         |               |          |               | NEW           
|                        | 2    | SLURRY COOLER FEED PUMPS            |                  |                         |               |          |               | NEW           
|                        | 2    | SLURRY COOLERS                      |                  |                         |               |          |               | NEW           
|                        | 1    | COOLING TOWER                       |                  |                         |               |          |               | NEW           
|                        | 1    | VENT GAS SCRUBBER                   |                  |                         |               |          |               | NEW           
|                        | 1    | VENT GAS SCRUBBER DISHARGE PUMP     |                  |                         |               |          |               | NEW           
|                        | 2    | RAFFINATE INJECTION PUMPS           |                  |                         |               |          |               | NEW           
|                        | 1    | BOILER PACKAGE                      |                  |                         |               |          |               | NEW           
|                        | 2    | BOILER BLOWOUT VESSELS              |                  |                         |               |          |               | NEW           
|                        | 1    | HP AIR COMPRESSOR                   |                  |                         |               |          |               | NEW           
|                        | 1    | LP AIR COMPRESSOR                   |                  |                         |               |          |               | NEW           
|                        | 1    | SEAL WATER COOLER                   |                  |                         |               |          |               | NEW           
|                        | 1    | SEAL/RINSE WATER PACKAGE            |                  |                         |               |          |               | NEW           
|                        | 2    | OXYGEN BLOWOUT VESSEL               |                  |                         |               |          |               | NEW           
|                        | 3    | SEAL WATER PUMPS                    |                  |                         |               |          |               | NEW           
|                        | 1    | WATER TREATMENT PACKAGE             |                  |                         |               |          |               | NEW           
|                        | 3    | SUMP PUMPS                          |                  |                         |               |          |               | NEW           
|                        | 1    | NaCL STORAGE SYLO                   |                  |                         |               |          |               | NEW           
|                        | 1    | NaCL FEED SCREW                     |                  |                         |               |          |               | NEW           
|                        | 1    | NaCL WEIGH BELT                     |                  |                         |               |          |               | NEW           
|                        | 2    | AUTOCLAVE AREA OVERHEAD CRANE       |                  |                         |               |          |               | NEW           
|                        |      |                                     |                  |                         |               |          |               |               
|SOLID LIQUID SEPARATION |      |                                     |                  |                         |               |         
|                        | 1    | LEACH THICKENER                     | 17.7 m dia.      |                         |               |          |               | NEW           
|                        | 1    | LEACH THICKENER U/F PUMP            |                  |                         |               |          |               | NEW           
|                        | 1    | FILTER FEED TANK                    | 3 m dia. X 3.5 m |                         |               |          |               | NEW           
|                        | 1    | FILTER FEED TANK AGITATOR           |                  |                         |               |          |               | NEW           
|                        | 1    | FILTER FEED PUMP                    |                  |                         |               |          |               | NEW           
|                        | 1    | LEACH RESIDUE FILTER                | 2050 x 12 Plates |                         |               |          | Plate & Frame | NEW           
|                        | 1    | TAILINGS REPULP TANK                | 3 m dia. X 3.5 m |                         |               |          |               | NEW           
|                        | 1    | TAILINGS REPULP TANK AGITATOR       |                  |                         |               |          |               | NEW           
|                        | 1    | TAILINGS REPULP PUMP                |                  |                         |               |          |               | NEW           
|                        | 1    | THICKENER O/F SURGE TANK            | 5 m dia. X 5.5 m |                         |               |          |               | NEW           
|                        | 2    | POLISH FILTER                       | 3.5 m dia.       |                         |               |          |               | NEW           
|                        | 2    | POLISH FILTER BLOWER                |                  |                         |               |          |               | NEW           
|                        | 5    | ROUGHER/SCAVENGER FLOTATION CELL    | 2.8m3            |                         |               |          |               | NEW           
|                        | 3    | CLEANER FLOTATION CELLS             | 0.08m3           |                         |               |          |               | NEW           
|                        | 1    | ROUGHER/SCAV FLOT CELLS RETURN PUMP |                  |                         |               |          |               | NEW           
|                        | 1    | CONCENTRATE STORAGE TANK FEED PUMP  |                  |                         |               |          |               | NEW           
|                        | 1    | LEACH RESIDUE TAILINGS PUMPBOX      |                  |                         |               |          |               | NEW           
|                        | 2    | LEACH RESIDUE TAILINGS PUMP         |                  |                         |               |          |               | NEW           
|                        | 2    | SUMP PUMPS                          |                  |                         |               |          |               | NEW           

---

|PENGUINASI            | MECHANICAL EQUIPMENT LIST | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           |         
|Hoyt Lakes, Minnesota |                           |         

|Equip. #       | Qty. | Description                        | Size               | Material  Specification | HP
      Each | HP Total | Remarks | New / Existing
|-------------- | ---- | ---------------------------------- | ------------------ | ----------------------- | ------------- | -------- | ------- | --------------
|               |      |                                    |                    |                         |               |          |         |               
|PGM RECOVERY   |      |                                    |                    |                         |               |         
|               | 1    | SULPHUR MELT PIT                   |                    |                         |               |          |         | NEW           
|               | 1    | SULPHUR FEED PUMP                  |                    |                         |               |          |         | NEW           
|               | 1    | SULPHUR FILTER                     |                    |                         |               |          |         | NEW           
|               | 1    | SULPHUR BURNER PACKAGE             |                    |                         |               |          |         | NEW           
|               | 1    | SULPHUR BURNER BLOWER              |                    |                         |               |          |         | NEW           
|               | 1    | IN LINE MIXER                      |                    |                         |               |          |         | NEW           
|               | 1    | Fe REDUCTION TANK                  | 6.5 m dia x 7 m    |                         |               |          |         | NEW           
|               | 1    | Fe REDUCTION TANK AGITATOR         |                    |                         |               |          |         | NEW           
|               | 2    | PIPE REACTOR FEED PUMP             |                    |                         |               |          |         | NEW           
|               | 2    | PIPE REACTOR                       | 315mm D x 55m      |                         |               |          |         | NEW           
|               | 2    | CLARIFIER                          |                    |                         |               |          |         | NEW           
|               | 3    | PGM FILTER                         |                    |                         |               |          |         | NEW           
|               | 2    | CLARIFIER O/F STANDPIPE            |                    |                         |               |          |         | NEW           
|               | 1    | POLISH FILTER FEED PUMP            |                    |                         |               |          |         | NEW           
|               | 2    | CLARIFIER U/F DIAPHRAM PUMP        |                    |                         |               |          |         | NEW           
|               | 1    | REPULP TANK                        | 1m dia x 1.2m      |                         |               |          |         | NEW           
|               | 1    | REPULP PUMP                        |                    |                         |               |          |         | NEW           
|               | 1    | AUTOCLAVE HOLDING TANK             | 2m dia x 2.5m      |                         |               |          |         | NEW           
|               | 1    | AUTOCLAVE CHARGE PUMP              |                    |                         |               |          |         | NEW           
|               | 1    | BATCH LEACH AUTOCLAVE              | 1m dia x 1.5m      |                         |               |          |         | NEW           
|               | 1    | FILTER FEED TANK                   | 2m dia x 2.5m      |                         |               |          |         | NEW           
|               | 1    | FILTER FEED TANK AGITATOR          |                    |                         |               |          |         | NEW           
|               | 1    | FILTER FEED PUMP                   |                    |                         |               |          |         | NEW           
|               | 1    | TRAY DRYER                         |                    |                         |               |          |         | NEW           
|               | 1    | SUMP PUMP                          |                    |                         |               |          |         |               
|               | 1    | PGM PRODUCT BIN                    |                    |                         |               |          |         | NEW           
|               |      |                                    |                    |                         |               |          |         |               
|NEUTRALIZATION |      |                                    |                    |                         |               |         
|               | 1    | NEUTRALLIZATION SURGE TANK         | 8m dia x 8.5m      |                         |               |          |         | NEW           
|               | 1    | NEUTRALIZATION SURGE TANK AGITATOR |                    |                         |               |          |         | NEW           
|               | 1    | NEUTRALIZATION FEED PUMP           |                    |                         |               |          |         | NEW           
|               | 3    | NEUTRALISATION TANKS               | 6.5m dia x 7m      |                         |               |          |         | NEW           
|               | 3    | NEUTRALIZATION TANK AGITATORS      |                    |                         |               |          |         | NEW           
|               | 1    | THICKENER FEED PUMPBOX             |                    |                         |               |          |         | NEW           
|               | 3    | THICKENER FEED PUMP                |                    |                         |               |          |         | NEW           
|               | 1    | NEUTRALISATION THICKENER           | 33.6m dia          |                         |               |          |         | NEW           
|               | 2    | NEUTRALISATION THICKENER O/F PUMP  |                    |                         |               |          |         | NEW           
|               | 2    | NEUTRALISATION THICKENER U/F PUMP  |                    |                         |               |          |         | NEW           
|               | 1    | FILTER FEED TANK                   | 2.5m dia x 3m      |                         |               |          |         | NEW           
|               | 1    | FILTER FEED PUMP                   |                    |                         |               |          |         | NEW           
|               | 1    | GYPSUM FILTER                      | 2050mm x 8 chamber |                         |               |          |         | NEW           
|               | 1    | GYPSUM STOCKPILE CONVEYOR          |                    |                         |               |          |         | NEW           
|               | 2    | SUMP PUMPS                         |                    |                         |               |          |         | NEW           

---

|PENGUINASI            | MECHANICAL EQUIPMENT LIST | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           |         
|Hoyt Lakes, Minnesota |                           |         

|Equip. #                         | Qty. | Description                                | Size        | Material  Specification | HP
      Each | HP Total | Remarks | New / Existing
|-------------------------------- | ---- | ------------------------------------------ | ----------- | ----------------------- | ------------- | -------- | ------- | --------------
|                                 |      |                                            |             |                         |               |          |         |               
|SOLVENT EXTRACTION AND STRIPPING |      |                                            |             |                         |               |         
|                                 | 1    | SX FEED TANK                               |             |                         |               |          |         | NEW           
|                                 | 1    | SX FEED PUMP                               |             |                         |               |          |         | NEW           
|                                 | 1    | SX FEED FILTER WATER PUMP                  |             |                         |               |          |         | NEW           
|                                 | 1    | Cu SX FEED FILTERS                         |             |                         |               |          |         | NEW           
|                                 | 1    | SX BLOWER                                  |             |                         |               |          |         | NEW           
|                                 | 5    | MIXER TANKS                                |             |                         |               |          |         | NEW           
|                                 | 10   | MIXER TANK AGITATORS                       |             |                         |               |          |         | NEW           
|                                 | 1    | LOADED ORGANIC ADVANCE PUMP                |             |                         |               |          |         | NEW           
|                                 | 1    | RICH ELECTROLYTE PUMP                      |             |                         |               |          |         | NEW           
|                                 | 1    | ORGANIC BLEED PUMP                         |             |                         |               |          |         | NEW           
|                                 | 1    | LOADED ORGAINIC TANK                       |             |                         |               |          |         | NEW           
|                                 | 2    | LOADED ORGANIC PUMP                        |             |                         |               |          |         | NEW           
|                                 | 1    | AQUEOUS REMOVAL PUMP                       |             |                         |               |          |         | NEW           
|                                 | 1    | RAFFINATE TANK                             |             |                         |               |          |         | NEW           
|                                 | 1    | RAFFINATE FEED PUMP                        |             |                         |               |          |         | NEW           
|                                 | 1    | EXTRACTANT ISOTAINER PACKAGE               |             |                         |               |          |         | NEW           
|                                 | 1    | GUNK REMOVAL FRAME                         |             |                         |               |          |         | NEW           
|                                 | 1    | GUNK REMOVAL PUMP                          |             |                         |               |          |         | NEW           
|                                 | 1    | GUNK TANK                                  |             |                         |               |          |         | NEW           
|                                 | 1    | GUNK TANK AGITATOR                         |             |                         |               |          |         | NEW           
|                                 | 1    | GUNK TANK PUMP                             |             |                         |               |          |         | NEW           
|                                 | 1    | RECOVERED SOLUTION TANK                    |             |                         |               |          |         | NEW           
|                                 | 1    | CLAY FILTER PRESS FEED PUMP                |             |                         |               |          |         | NEW           
|                                 | 1    | CLAY TREATMENT FILTER PRESS                |             |                         |               |          |         | NEW           
|                                 | 1    | RECOVERED SOLUTION PUMP                    |             |                         |               |          |         | NEW           
|                                 | 1    | DILUENT STORAGE TANK                       |             |                         |               |          |         | NEW           
|                                 | 1    | DILUENT TRANSFER PUMP                      |             |                         |               |          |         | NEW           
|                                 |      |                                            |             |                         |               |          |         |               
|ELECTROLYTE CLEANING             |      |                                            |             |                         |               |         
|                                 | 1    | ELECTROLYTE COLUMN CELL                    |             |                         |               |          |         | NEW           
|                                 | 1    | FILTER FEED TANK                           |             |                         |               |          |         | NEW           
|                                 | 1    | FILTER FEED PUMP                           |             |                         |               |          |         | NEW           
|                                 | 1    | FILTER BACKWASH PUMP                       |             |                         |               |          |         | NEW           
|                                 | 2    | ELECTROLYTE FILTERS                        |             |                         |               |          |         | NEW           
|                                 | 1    | ELECTROLYTE FILTER BLOWER                  |             |                         |               |          |         | NEW           
|                                 | 2    | ELECTROLYTE HEAT EXCHANGER                 |             |                         |               |          |         | NEW           
|                                 | 1    | ELECTROLYTE RECIRCULATION TANK             |             |                         |               |          |         | NEW           
|                                 | 1    | LEAN ELECTROLYTE PUMP                      |             |                         |               |          |         | NEW           
|                                 | 2    | ELECTROWINNING FEED PUMPS                  |             |                         |               |          |         | NEW           
|                                 | 1    | SUMP PUMP                                  |             |                         |               |          |         | NEW           
|                                 |      |                                            |             |                         |               |          |         |               
|ELECTROWINNING                   |      |                                            |             |                         |               |         
|                                 | 1    | WASH WATER HEAT EXCHANGER                  |             |                         |               |          |         | NEW           
|                                 | 1    | LOADING CONVEYOR                           |             |                         |               |          |         | NEW           
|                                 | 1    | DEMISTER                                   |             |                         |               |          |         | NEW           
|                                 | 1    | DEMISTER EVACUATION FAN                    |             |                         |               |          |         | NEW           
|                                 | 1    | DEMISTER WASH CHAMBER                      |             |                         |               |          |         | NEW           
|                                 | 1    | DEMISTER RECIRCULATION PUMPS               |             |                         |               |          |         | NEW           
|                                 | 1    | FLEXING STATION                            |             |                         |               |          |         | NEW           
|                                 | 1    | STRIPPING STATION                          |             |                         |               |          |         | NEW           
|                                 | 1    | BUFFING STATION                            |             |                         |               |          |         | NEW           
|                                 | 1    | CORRUGATING PRESS                          |             |                         |               |          |         | NEW           
|                                 | 1    | DISCHARGE CONVEYOR                         |             |                         |               |          |         | NEW           
|                                 | 1    | WEIGH SCALE                                |             |                         |               |          |         | NEW           
|                                 | 1    | STAND ALONE BUFFING UNIT                   |             |                         |               |          |         | NEW           
|                                 | 1    | REJECT MOTHERBLANK RACK                    |             |                         |               |          |         | NEW           
|                                 | 1    | EDGE STRIP INSTALLATION AND REPAIR STATION |             |                         |               |          |         | NEW           
|                                 | 1    | ANODE STORAGE RACKS                        |             |                         |               |          |         | NEW           
|                                 | 1    | CATHODE STORAGE RACKS                      |             |                         |               |          |         | NEW           
|                                 | 130  | ELECTROWINNING CELLS                       | 54 CATHODES |                         |               |          |         | NEW           
|                                 | 1    | ELECTROWINNING AREA O/H CRANE              |             |                         |               |          |         | NEW           
|                                 | 1    | TANKHOUSE CRANES                           |             |                         |               |          |         | NEW           
|                                 | 2    | SUMP PUMPS                                 |             |                         |               |          |         | NEW           
|                                 |      | CATHODE MOTHER BLANKS                      |             |                         |               |          |         | NEW           

---

|PENGUINASI            | MECHANICAL EQUIPMENT LIST | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           |         
|Hoyt Lakes, Minnesota |                           |         

|Equip. #                     | Qty. | Description                              | Size        | Material  Specification | HP
      Each | HP Total | Remarks | New / Existing
|---------------------------- | ---- | ---------------------------------------- | ----------- | ----------------------- | ------------- | -------- | ------- | --------------
|                             |      |                                          |             |                         |               |          |         |               
|Fe & HYDROXIDE PRECIPITATION |      |                                          |             |                         |               |         
|                             | 1    | Fe THICKENER                             | 6.35 M DIA. |                         |               |          |         | NEW           
|                             | 1    | Fe THICKENER U/F PUMP                    |             |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER FEED TANK                      | 3.5 x 4     |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER FEED TANK AGITATOR             |             |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER FEED PUMP                      |             |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER                                |             |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER FILTRATE TANK                  | 2m x 2.5    |                         |               |          |         | NEW           
|                             | 1    | Fe FILTRATION PUMP                       |             |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER REPULP TANK                    | 2m x 2.5    |                         |               |          |         | NEW           
|                             | 1    | Fe FILTER REPULP TANK AGITATOR           |             |                         |               |          |         | NEW           
|                             | 1    | Fe SLUDGE TAILINGS PUMP                  |             |                         |               |          |         | NEW           
|                             | 2    | 1st STAGE HYDROXIDE PRECIPITATION T      | 4 x 4.5     |                         |               |          |         | NEW           
|                             | 2    | 1st STAGE HYDROXIDE PRECIP TANK AGITATOR |             |                         |               |          |         | NEW           
|                             | 1    | HYDROXIDE THICKENER                      | 9m          |                         |               |          |         | NEW           
|                             | 1    | HYDROXIDE O/F PUMP                       |             |                         |               |          |         | NEW           
|                             | 2    | 2nd STAGE HYDROXIDE PRECIPITATION T      | 4 x 4.5     |                         |               |          |         | NEW           
|                             | 2    | 2nd STAGE HYDROXIDE PRECIP TANK AGITATOR |             |                         |               |          |         | NEW           
|                             | 1    | TAILINGS THICKENER                       | 9m          |                         |               |          |         | NEW           
|                             | 1    | TAILINGS THICKENER U/F PUMP              |             |                         |               |          |         | NEW           
|                             | 1    | HYDROXIDE PRECIPITATION U/F PUMP         |             |                         |               |          |         | NEW           
|                             | 1    | FILTER FEED TANK                         | 2 x 2.5     |                         |               |          |         | NEW           
|                             | 1    | FILTER FEED TANK AGITATOR                |             |                         |               |          |         | NEW           
|                             | 1    | FILTER FEED PUMP                         |             |                         |               |          |         | NEW           
|                             | 1    | HYDROXIDE FILTER                         |             |                         |               |          |         | NEW           
|                             | 1    | FILTRATE TANK                            |             |                         |               |          |         | NEW           
|                             | 1    | FILTRATION PUMP                          |             |                         |               |          |         | NEW           
|                             | 1    | TRAY DRYER                               |             |                         |               |          |         | NEW           
|                             | 6    | Fe PRECIPITATE TANKS                     | 4m x 4.5    |                         |               |          |         | NEW           
|                             | 6    | Fe PRECIPITATE TANKS AGITATORS           |             |                         |               |          |         | NEW           
|                             | 1    | Fe THICKENER FEED PUMPBOX                |             |                         |               |          |         | NEW           
|                             | 1    | Fe THICKENER FEED PUMP                   |             |                         |               |          |         | NEW           
|                             | 1    | Fe PRECIPITATION BLOWER                  |             |                         |               |          |         | NEW           

---

|Appendix 4- Operating Costs
|---------------------------

---

|PENGUINASI            |                             | PLANT REAGENTS AND CONSUMABLES
      COST |  | April-04
|--------------------- | --------------------------- | ----------------------------------------- |  | --------
|NorthMet Project      |                             |                                           |  | Rev. A  
|Hoyt Lakes, Minnesota |                             |                                           |  |         
|                      | Tonnes ore milled per annum | 9,125,000                                 |  |         

|AREA                                                                                | SUPPLY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Unit/tonne Source                                                                                                                                                                                                                                                                                                                                                                                            | UNIT                                                                                      | UNITS/TONNE MILLED                                                                                                                                                               | UNITS PER      ANNUM                                                                                                                                                                                      | UNIT COST                                                                                                                                                            | Unit price Source                                                                                                                                                                                                      | TOTAL COST                                                                                                                                                                                                                                                                                                                       | ESCALATION FACTOR                                                                                                                                   | TOTAL COST 2004                                                                                                                                                                                                                                                                                                                  | COST PER TONNE ORE                                                                                                                                          
|----------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Crush/GrindFlotation 
      POX  S/L Separation  PGM Recovery 
      Neutralization | Primary Crusher Liners Secondary Crusher
      Liners Tertiary Crusher Liners Rod Mill Liners Ball Mill Liners
      Regrind Mill Liners Rods Ball Mill Balls (2" & 3") Regrind
      Mill Balls (1") steel Regrind Mill Balls (1") ceramic 6.5% Tax on
      liners and media Conveyor Belting (allowance) Flex 31 PAX
      MIBC WW1752 Flocculant (Percol 155) NaCl Water Treatment
      (allowance) Oxygen (over the fence) Flocculent (Percol 355)
      Filter Aid (allowance) Limestone (to leach residue tails) Sulfur
      for SO2 NaHS Flocculant Filter Aid (allowance) H2SO1(allowance) Oxygen (incl in POX) Limestone Flocculant
      Filter Aid (allowance) | AMEC
        Penguin 
        Penguin
        Penguin
        Penguin
        Penguin
        Penguin
        AMEC
        AMEC
        Penguin
        calc
        Penguin
      AMEC 
        AMEC 
        AMEC 
        AMEC 
        Polymet 
        Mass Balance
        Mass Balance 
        AMEC 
        Mass Balance
        Mass Balance 
        Mass Balance AMEC 
        Mass Balance AMEC | kg kg kg kg kg
      kg kg kg kg kg kg kg kg kg
      kg kg mt kg mt kg
      kg kg mt kg | 0.0073 0.0045 0.0045 0.0386
      0.0291 0.0082 0.4545 0.3636 0.2273 0.1136 0.0182 0.0455 0.0409 0.0909 0.0004 0.4776 0.016 0.0005 0.006 0.1240 0.0474
      0.0002 0.009 0.0005 | 66,364 41,477 41,477 352,557
      265,455 74,659 4,147,727 3,318,182 2,073,864 1,036,932 165,909 414,773 373,295 829,545 3,733 4,358,338 148,107 4,148 56,285 1,131,160 432,502 1,659 82,854
      4,563 | $2.82 $4.46 $4.46 $4.80
      $4.80 $3.54 $0.44 $0.44 $0.61 $1.80
      $2.75 $1.54 $1.43 $2.20 $3.85 $0.04
      $19.72 $3.85 $10.00 $0.06 $0.64 $3.85 $10.00 $3.85 | AMEC AMEC Penguin AMEC
      Penguin AMEC Penguin AMEC AMEC Penguin AMEC AMEC AMEC AMEC Polymet Polymet
      Polymet AMEC Polymet Polymet Polymet
      Polymet Polymet Polymet Polymet Polymet Polymet
      Polymet | $186,880 $185,146 $185,146
      $1,691,638 $1,273,704 $263,950 $1,825,000 $1,460,000
      $1,254,688 $1,866,477 $662,521 $400,000 $456,250
      $638,750 $533,813 $1,825,000 $14,372 $153,414
      $41,500 $2,920,670 $15,969 $100,000 $562,852
      $64,702 $278,791 $6,388 $46,500 $18,600 $828,542
      $17,566 $93,000 | 1.0 1.0 1.0 1.0 1.0
      1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
      1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
      1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
      1.0 | $186,880 $185,146 $185,146
      $1,691,638 $1,273,704 $263,950 $1,825,000 $1,460,000
      $1,254,688 $1,866,477 $662,521 $400,000 $456,250
      $638,750 $533,813 $1,825,000 $14,372 $153,414
      $41,500 $2,920,670 $15,969 $100,000 $562,852
      $64,702 $278,791 $6,388 $46,500 $18,600 $828,542
      $17,566 $93,000 | 0.0200.0200.0200.1850.1400.0290.2000.1600.1380.2050.0730.0440.0500.0700.0590.2000.0020.0170.0050.3200.0020.0110.0620.0070.0310.0010.0050.002 0.0910.0020.010

---

|PENGUINASI            |                             | PLANT REAGENTS AND CONSUMABLES
      COST |  | April-04
|--------------------- | --------------------------- | ----------------------------------------- |  | --------
|NorthMet Project      |                             |                                           |  | Rev. A  
|Hoyt Lakes, Minnesota |                             |                                           |  |         
|                      | Tonnes ore milled per annum | 9,125,000                                 |  |         

|AREA                                         | SUPPLY                                                                                                                                                                                                                                                                                                                                                                                                                    | Unit/tonne Source                                                                                                                                             | UNIT                                                                                                                   | UNITS/TONNE MILLED                                                                                                                  | UNITS PER      ANNUM                                                                                                                                | UNIT COST                                                                                                                                                  | Unit price Source                                                                                                                                                                                                                                                   | TOTAL COST                                                                                                                                                                                                                                             | ESCALATION FACTOR                                                                                                                                                             | TOTAL COST 2004                                                                                                                                                                                                                                                          | COST PER TONNE ORE                                                                                                                                                                                                           
|-------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cu SX/EWFe PrecipitationHydroxide ppt'nTOTAL | Extractant (M5640)
      Diluent (SX 11)
      H2 SO
      Cobalt Sulphate
      Clay (allowance)
      Cathodes (10yrlife)
      Anodes (7 yr life)
      Cathode Bundling Supplies
      FC1100 (allowance)
      Guar (allowance)
      Limestone
      Sulfur for SO2
      Flocculant
      Filter Aid (allowance)
      Oxygen (ind in POX) 
      MgO
      CaO
      Hydroxide Bundling Supplies
      Flocculent | AMEC
      AMEC
      AMEC
      AMEC
      Calc
      Calc
      Mass Balance
      Mass Balance
      AMEC
      Mass Balance
      Mass Balance
      AMEC | litres 
      litres 
      mt
      kg
      plate 
      plate
      mt
      kg
      kg
      kg
      kg
      kg | 0.0061 
      0.0140 
      0.0011 
      0.0006 
      0.002 
      0.0335 
      0.0002 
      0.5868 
      0.0914 
      0.0002 | 55,267
      127,805
      10,038
      5,392
      675
      965
      19,286
      305,296
      1,659
      5,354,716 
      833,693
      1,659 | $9.12 
      $0.71 
      $60.00 
      $5.50 
      $250.00 
      $165.00 
      $10.00 
      $0.06 
      $3.85 
      $0.10 
      $0.06 
      $3.85 | Polymet
      Polymet
      Penguin 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet 
      Polymet | $503,992
      $91,159
      $602,250
      $29,656
      $30,000
      $30,000
      $30,000
      $30,000
      $40,000
      $20,000
      $192,863
      $17,463
      $6,388
      $58,000
      $535,472
      $53,190
      $8,400
      $6,388 | 1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0
      1.0 | $503,992
      $91,159
      $602,250
      $29,656
      $30,000
      $30,000
      $30,000
      $30,000
      $40,000
      $20,000
      $192,863
      $17,463
      $6,388
      $58,000
      $535,472
      $53,190
      $8,400
      $6,388
      $22,142,258 | 0.055
      0.010
      0.066
      0.003
      0.003
      0.003
      0.003
      0.003
      0.004
      0.002
      0.021
      0.002
      0.001
      0.006
      0.059
      0.006
      0.001
      0.001
      $2.43

---

|Appendix 5- Capital Costs
|-------------------------

---

|PENGUINASI            | CAPITAL COST ESTIMATE | April-04
|--------------------- | --------------------- | --------
|NorthMet Project      | SUMMARY               | Rev. C  
|Hoyt Lakes, Minnesota |                       |         

|Item | Item Description                    | Total    |  |   | Labor      |  |   | Material   |  |   | Subcontract |  |   | Total      
|---- | ----------------------------------- | -------- |  | - | ---------- |  | - | ---------- |  | - | ----------- |  | - | -----------
|     | SUMMARY - OVERALL                   | Mhrs     |  |   |            |  |   |            |  |   | Costs       |  |   | Costs      
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|100  | CRUSHING                            | 15,842   |  | $ | 1,075,130  |  | $ | 2,007,038  |  |   | $ -         |  | $ | 3,082,168  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|210  | GRINDING                            | 15,640   |  | $ | 1,049,723  |  | $ | 3,174,011  |  | $ | 58,501      |  | $ | 4,282,235  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|220  | FLOTATION & REGRIND                 | 65,827   |  | $ | 4,476,264  |  | $ | 13,004,243 |  | $ | 65,900      |  | $ | 17,546,408 
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|300  | PRESSURE LEACHING                   | 118,638  |  | $ | 8,067,369  |  | $ | 22,981,576 |  | $ | 3,000       |  | $ | 31,051,945 
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|410  | SOLID / LIQUID SEPARATION           | 26,903   |  | $ | 1,830,793  |  | $ | 4,822,330  |  | $ | 13,381      |  | $ | 6,666,504  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|420  | PGM RECOVERY                        | 19,927   |  | $ | 1,356,385  |  | $ | 3,712,286  |  | $ | 13,381      |  | $ | 5,082,053  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|510  | NEUTRALIZATION                      | 38,661   |  | $ | 2,633,222  |  | $ | 6,220,210  |  | $ | 13,381      |  | $ | 8,866,813  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|520  | SOLVENT EXTRACTION                  | 35,242.9 |  | $ | 2,397,018  |  | $ | 4,011,187  |  | $ | 30,767      |  | $ | 6,438,971  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|530  | ELECTROWINNING                      | 55,855   |  | $ | 3,800,408  |  | $ | 14,930,476 |  | $ | 18,678      |  | $ | 18,749,562 
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|540  | Fe & HYDROXIDE PRECIPITATION        | 30,868   |  | $ | 2,100,460  |  | $ | 3,889,689  |  | $ | 13,381      |  | $ | 6,003,530  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|600  | INFRASTRUCTURE & AUXILIARY SERVICES | 46,404   |  | $ | 3,168,312  |  | $ | 8,912,206  |  | $ | 506,193     |  | $ | 12,586,710 
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|700  | TAILINGS                            | 2,740    |  | $ | 186,320    |  | $ | 385,000    |  | $ | 3,977,524   |  | $ | 4,548,844  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|800  | MINING                              | 6,185    |  | $ | 439,810    |  | $ | 411,700    |  | $ | 4,908,239   |  | $ | 5,759,749  
|     |                                     |          |  |   |            |  |   |            |  |   |             |  |   |            
|     | TOTAL DIRECT COSTS                  | 478,732  |  | $ | 32,581,212 |  | $ | 88,461,953 |  | $ | 9,622,327   |  | $ | 130,665,492

---

|PENGUINASI            | CAPITAL COST ESTIMATE | April-04
|--------------------- | --------------------- | --------
|NorthMet Project      | SUMMARY               | Rev. C  
|Hoyt Lakes, Minnesota |                       |         

|Item | Item Description           |  | Total |  | Labor                                                                  |  | Material |            |   | Subcontract |            |   | Total      
|---- | -------------------------- |  | ----- |  | ---------------------------------------------------------------------- |  | -------- | ---------- | - | ----------- | ---------- | - | -----------
|     | SUMMARY - OVERALL          |  | Mhrs  |  |                                                                        |  |          |            |   | Costs       |            |   | Costs      
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|920  | EPCM                       |  | 15%   |  | On Direct Costs                                                        |  | $        | 19,599,824 |   | $           | 19,599,824
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|930  | CONSTRUCTION INDIRECTS     |  | $6    |  | On Manhours for Construction Equipment                                 |  | $        | 2,872,394  |   | $           | 2,872,394 
|     |                            |  |       |  | Site Costs and Contractor O/H
      and Profit included in labour rate |  |          |            |   |            
|941  | CAPITAL SPARES             |  | 5%    |  | On Process Materials Excluding Crushing                                |  | $        | 4,322,746  |   | $           | 4,322,746 
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|942  | FIRST FILLS                |  | LS    |  | 3 Months Consumables                                                   |  | $        | 4,000,000  |   | $           | 4,000,000 
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|950  | VENDOR REPRESENTATIVES     |  | LS    |  |                                                                        |  |          |            | $ | 1,319,508   |            | $ | 1,319,508  
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|960  | FREIGHT                    |  | 3%    |  | On Materials                                                           |  |          |            | $ | 2,498,427   |            | $ | 2,498,427  
|     |                            |  |       |  |                                                                        |  |          |            |   |             |            |   |            
|970  | START UP AND COMMISSIONING |  | LS    |  |                                                                        |  |          |            | $ | 910,460     |            | $ | 910,460    
|     |                            |  |       |  |                                                                        |  |          |            |   |             |           
|     | CONTINGENCY                |  | 20%   |  | On Direct and Indirect Costs                                           |  |          |            |   | $           | 33,237,770
|     |                            |  |       |  | Excluding Owners Costs                                                 |  |          |            |   |             |           
|     | PROJECT TOTAL              |  |       |  |                                                                        |  |          |            |   |             |            | $ | 199,426,621

---

|PENGUINASI            | CRUSHING AND SCREENING | April-04
|--------------------- | ---------------------- | --------
|NorthMet Project      |                        | Rev. C  
|Hoyt Lakes, Minnesota |                        |         

|Area 100 | Item
      Description CRUSHING
      AND SCREENING                                                                                                                          | Qty                                                                | Unit                 | Unit Mhrs | Total Mhrs | MH Rate | Labor | Unit Matl  | Material    | SubcontractSpecl Costs | Total Costs
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------- | --------- | ---------- | ------- | ----- | ---------- | ----------- | ---------------------- | -----------
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|         | Existing equipment refurbishment costs include
      an allowance for labour and an allowance for materials based on 10% of new
      equipment cost for liners, idlers etc. |                                                                    |                      |          
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|110      | PRIMARY CRUSHING                                                                                                                                                             |                                                                    |                      |           |            |         |       |            |             |                        |            
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|         |                                                                                                                                                                              | REMOVE EXISTING 36'' GYRATORY Removed at no
      cost for salvage | 1                    | EA        | -          | -       | $ 68  | $        - | $         - | $         -            |            
|         |                                                                                                                                                                              | CRUSHER SURGE POCKET DEMOLITION                                    |                      | 1         | LS         | 500     | 500   | $ 68       | $34,000     | $         -            | $         -
|         |                                                                                                                                                                              | CRUSHER SURGE POCKET MODIFICATIONS                                 |                      | 20        | TN         | 30      | 600   | $ 68       | $40,800     | $ 3,000                | $60,000    
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER Discharge Skirt Repairs                            | 60x89 GYR, 900 HP    | 1         | EA         | 300     | 300   | $ 68       | $20,400     | $250,000               | $250,000   
|         |                                                                                                                                                                              | and New Lube Uni t                                                 |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | APRON FEEDER                                                       | 1500 x 4800, 115HP   | 1         | EA         | 299     | 299   | $ 68       | $20,323     | $29,887                | $29,887    
|         | EXISTING                                                                                                                                                                     | CONVEYOR 1A Change Troughing Idler Sets at                         | 60", 900 HP          | 1         | EA         | 250     | 250   | $ 68       | $17,000     | $25,000                | $25,000    
|         |                                                                                                                                                                              | Feed End                                                           |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | BELT WEIGHSCALE                                                    |                      | 1         | EA         | 12      | 12    | $ 68       | $     816   | $ 2,000                | $ 2,000    
|         | EXISTING                                                                                                                                                                     | CONVEYOR 2A Change Troughing Idlers at                             | 60", 900 HP          | 1         | EA         | 250     | 250   | $ 68       | $17,000     | $25,000                | $25,000    
|         |                                                                                                                                                                              | Feed En d                                                          |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONVEYOR 2A-TRIPPER Modify Tripper Drive                           | 60", 15 HP           | 1         | EA         | 700     | 700   | $ 68       | $47,600     | $70,000                | $70,000    
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONV. 2A TRIPPER SUPPORT REPAIR                                    |                      | 20        | TN         | 60      | 1,224 | $ 69       | $84,456     | $ 3,000                | $61,200    
|         | NEW                                                                                                                                                                          | RE & RE PRIMARY CRUSHER CHUTEWORK LINERS                           |                      | 15        | TN         | 30      | 450   | $ 68       | $30,600     | $ 3,500                | $52,500    
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER PIPING 20% of new for inspection/repair            | 1                    | LS        | 158        | 158     | $ 68  | $10,744    | $15,800     | $15,800                |            
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER ELECTRICAL/LIGHTING 10% of
      new for repair    | 1                    | LS        | 274        | 274     | $ 68  | $18,627    | $27,393     | $27,393                |            
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER INSTRUMENTATION 20% of new
      for repair        | 1                    | LS        | 40         | 40      | $ 68  | $ 2,720    | $10,400     | $10,400                |            
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER HVAC/SERVICES Allowance                            |                      | 1         | LS         | 80      | 80    | $ 68       | $ 5,440     | $ 5,000                | $ 5,000    
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER FIRE PROTECTION Allowance                          |                      | 1         | LS         | 80      | 80    | $ 68       | $ 5,440     | $ 5,000                | $ 5,000    
|         | EXISTING                                                                                                                                                                     | PRIMARY CRUSHER BUILDING Allowance for Repairs/Modifications       | 1                    | LS        | 250        | 250     | $ 68  | $17,000    | $25,000     | $25,000                |            
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|120      | SECONDARY AND TERTIARY CRUSHING AND SCREENING                                                                                                                                |                                                                    |                      |           |            |         |       |            |             |                        |            
|         |                                                                                                                                                                              |                                                                    |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | RE & RE COARSE ORE SURGE BIN LINERS                                | 2000 T BIN           | 24        | TN         | 100     | 2,400 | $ 68       | $163,200    | $350                   | $ 8,400    
|         |                                                                                                                                                                              | Liners in Stock                                                    |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | COARSE ORE RECLAIM FEEDERS                                         | 4'x 6' VIB, 4 HP     | 12        | EA         | 177     | 2,119 | $ 68       | $144,109    | $14,717                | $176,604   
|         | EXISTING                                                                                                                                                                     | COARSE ORE RECLAIM CONVEYORS                                       | 48", 5 HP            | 4         | EA         | 39      | 156   | $ 68       | $10,608     | $325                   | $ 1,300    
|         |                                                                                                                                                                              | Recently Replace d                                                 |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | RETRACTABLE CONVEYORS                                              | 48", 5 HP            | 2         | EA         | 39      | 78    | $ 68       | $5,304      | $3,250                 | $ 6,500    
|         | EXISTING                                                                                                                                                                     | SECONDARY CRUSHER Replace Lube Unit                                | 7' STD. CONE, 350 HP | 2         | EA         | 150     | 300   | $ 68       | $20,400     | $150,000               | $300,000   
|         | EXISTING                                                                                                                                                                     | CRUSHER RECLAIM FEEDER                                             | 4'x 5' VIB, 4 HP     | 4         | EA         | 175     | 700   | $ 68       | $47,600     | $14,717                | $58,868    
|         | EXISTING                                                                                                                                                                     | SIZING SCREENS Spare Parts in Stock                                | 6'x 10' VIB, 15 HP   | 4         | EA         | 50      | 200   | $ 68       | $13,600     | $17,000                | $68,000    
|         | EXISTING                                                                                                                                                                     | TERTIARY CRUSHER Replace Lube Unit                                 | 7' CONE, 350 HP      | 4         | EA         | 150     | 600   | $ 68       | $40,800     | $100,000               | $400,000   
|         | EXISTING                                                                                                                                                                     | RELACE BOTTOM SECTION OF DISCHARGE                                 |                      | 10        | TN         | 30      | 300   | $ 68       | $20,400     | $3,000                 | $30,000    
|         |                                                                                                                                                                              | CHUTES                                                             |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONVEYOR 3A Change Troughing Idlers at                             | 60", 75 HP           | 1         | EA         | 250     | 250   | $ 68       | $17,000     | $25,000                | $25,000    
|         |                                                                                                                                                                              | Feed En d                                                          |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONVEYOR 4A Change Troughing Idlers at                             | 60", 750 HP          | 1         | EA         | 250     | 250   | $ 68       | $17,000     | $25,000                | $25,000    
|         |                                                                                                                                                                              | Feed En d                                                          |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONVEYOR 5S Change Troughing Idlers at                             | 60", 450 HP          | 1         | EA         | 250     | 250   | $ 68       | $17,000     | $25,000                | $25,000    
|         |                                                                                                                                                                              | Feed En d                                                          |                      |           |            |         |       |            |             |                        |            
|         | EXISTING                                                                                                                                                                     | CONVEYOR 5S-TRIPPER                                                | 60", 15 HP           | 1         | EA         | 200     | 200   | $ 68       | $13,600     | $20,000                | $20,000    
|         | EXISTING                                                                                                                                                                     | SUMP PUMPS                                                         |                      | 2         | EA         | 100     | 200   | $ 68       | $13,600     | $1,500                 | $ 3,000    
|         | NEW                                                                                                                                                                          | RE & RE SEC AND TER CHUTEWORK LINERS                               |                      | 4         | TN         | 50      | 200   | $ 68       | $13,600     | $3,500                 | $14,000    
|         | NEW                                                                                                                                                                          | REPLACE DUST COLLECTION COLLECTOR DUCTING Material
      on Site   | 1                    | sum       | 400        | 400     | $ 60  | $23,856    | $4,000      | $ 4,000                |            

---

|PENGUINASI            | CRUSHING AND SCREENING | April-04
|--------------------- | ---------------------- | --------
|NorthMet Project      |                        | Rev. C  
|Hoyt Lakes, Minnesota |                        |         

|Area 100 | Item
      Description CRUSHING
      AND SCREENING | Qty                                                            | Unit | Unit Mhrs | Total Mhrs | MH Rate | Labor  | Unit Matl | Material   | SubcontractSpecl Costs | Total Costs
|-------- | --------------------------------------------------- | -------------------------------------------------------------- | ---- | --------- | ---------- | ------- | ------ | --------- | ---------- | ---------------------- | -----------
|         |                                                     |                                                                |      |           |            |         |        |           |            |                        |            
|         | EXISTING                                            | SECONDARY CRUSHER PIPING                                       |      | 1         | LS         | 316     | 316    | $ 68      | $21,488    | $31,600                | $31,600    
|         | EXISTING                                            | SECONDARY CRUSHER ELEC/LIGHTING                                |      | 1         | LS         | 548     | 548    | $ 68      | $37,254    | $54,786                | $54,786    
|         | EXISTING                                            | SECONDARY CRUSHER INSTRUMENTATION                              |      | 1         | LS         | 208     | 208    | $ 68      | $14,144    | $20,800                | $20,800    
|         | EXISTING                                            | SECONDARY CRUSHER HVAC                                         |      | 1         | LS         | 100     | 100    | $ 68      | $6,800     | $10,000                | $10,000    
|         | EXISTING                                            | SECONDARY CRUSHER FIRE PROTECTION                              |      | 1         | LS         | 100     | 100    | $ 68      | $6,800     | $10,000                | $10,000    
|         | EXISTING                                            | SECONDARY CRUSHER BUILDING Allowance for Repairs/Modifications | 1    | LS        | 500        | 500     | $ 68   | $34,000   | $50,000    | $50,000                |            
|         |                                                     |                                                                |      |           |            |         |        |           |            |                        |            
|110      |                                                     | SUB TOTAL CRUSHING AND SCREENING                               |      |           |            |         | 15,842 |           | $1,075,130 |                        | $2,007,038 

---

|PENGUINASI            | 200 - GRINDING | April-04
|--------------------- | -------------- | --------
|NorthMet Project      |                | Rev. C  
|Hoyt Lakes, Minnesota |                |         

|Area**210** | Item Description
      GRINDING | Qty                                                                                                                                                                          | Unit                | Unit
      Mhrs | Total
      Mhrs | Labor | Unit
      Matl | Material       | Subcontract
      Specl Costs | Total
      Costs
|----------- | ------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | --------------- | ---------------- | ----- | --------------- | -------------- | ----------------------------- | -----------------
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|            |                                 | Existing equipment refurbishment costs include
      an allowance for labour and an allowance for materials based on 10% of new
      equipment cost for liners, idlers etc. |                     |                 |                 
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|            |                                 | EQUIPMENT AND STEEL DEMOLITION Removed at no
      cost for salvage                                                                                                          | 1                   | LS              | -                | -     | $           -   | $           -  | $           -                 | $           -    
|            |                                 | GRINDING CIRCUIT DEMOLITION                                                                                                                                                  |                     | 1               | LS               | 500   | 500             | $34,000        | $3,500                        | $3,500           
|            |                                 | BACKFILL                                                                                                                                                                     |                     | 1               | LS               | 200   | 200             | $13,600        | $2,000                        | $2,000           
|            |                                 | NEW CONCRETE FOOTINGS AND PIERS                                                                                                                                              |                     | 1               | LS               | 400   | 400             | $27,200        | $300                          | $300             
|            |                                 | NEW STRUCTURAL STEEL AND PLATFORMS                                                                                                                                           |                     | 8               | TN               | 30    | 240             | $16,320        | $3,200                        | $25,600          
|            |                                 | FINE ORE SURGE BIN BULKHEADS Not Required                                                                                                                                    |                     | 0               | TN               | 30    | -               | $            - | $3,200                        | $         -      
|            | EXISTING                        | RE & RE FINE ORE SURGE BIN LINERS                                                                                                                                            | 650 T LIVE CAPACITY | 16              | TN               | 25    | 400             | $27,200        | $3,500                        | $56,000          
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|            | EXISTING                        | FINE ORE RECLAIM CONVEYORS                                                                                                                                                   | 24', 3 HP           | 8               | ea               | 147   | 1,176           | $79,968        | $14,717                       | $117,736         
|            | EXISTING                        | ROD MILL                                                                                                                                                                     | 10'x 14', 800 HP    | 8               | ea               | 300   | 2,400           | $163,200       | $100,000                      | $800,000         
|            | EXISTING                        | BALL MILL                                                                                                                                                                    | 10'x 14', 1250 HP   | 8               | ea               | 300   | 2,400           | $163,200       | $100,000                      | $800,000         
|            | NEW                             | CYCLOPAC 1 OP 1 STDBY                                                                                                                                                        | 2 x 33" dia         | 8               | ea               | 100   | 800             | $54,400        | $40,000                       | $320,000         
|            | NEW                             | CYCLONE FEED PUMPBOX                                                                                                                                                         |                     | 8               | ea               | 80    | 640             | $43,52         | $10,000                       | $80,000          
|            | NEW                             | CYCLONE FEED PUMPS                                                                                                                                                           |                     | 8               | ea               | 100   | 800             | $54,40         | $50,000                       | $400,000         
|            | EXISTING                        | REPLACE 42" PROCESS WATER HEADER                                                                                                                                             |                     | 1               | EA               | 210   | 210             | $         -    | $21,000                       | $21,000          
|            | EXISTING                        | OVERHEAD CRANE                                                                                                                                                               |                     | 1               | ea               | 40    | 40              | $2,720         | $25,000                       | $25,000          
|            | EXISTING                        | SUMP PUMPS                                                                                                                                                                   | 6"                  | 2               | ea               | 100   | 200             | $13,600        | $750                          | $1,500           
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|            |                                 | RE & RE GRINDING CHUTEWORK / LINERS                                                                                                                                          |                     | 20              | TN               | 30    | 600             | $40,800        | $3,500                        | $70,000          
|            |                                 | GRINDING PIPING                                                                                                                                                              |                     | 1               | LS               | 1,695 | 1,695           | $115,260       | $169,500                      | $169,500         
|            |                                 | GRINDING ELECTRICAL/LIGHTING                                                                                                                                                 |                     | 1               | LS               | 1,271 | 1,271           | $86,445        | $127,125                      | $127,125         
|            |                                 | GRINDING INSTRUMENTATION                                                                                                                                                     |                     | 1               | LS               | 848   | 848             | $57,630        | $84,750                       | $84,750          
|            |                                 | GRINDING HVAC/SERVICES Allowance                                                                                                                                             |                     | 1               | LS               | 160   | 160             | $10,880        | $10,000                       | $10,000          
|            |                                 | GRINDING FIRE PROTECTION Allowance                                                                                                                                           |                     | 1               | LS               | 160   | 160             | $10,880        | $10,000                       | $10,000          
|            |                                 | GRINDING BUILDING Allowance for Repairs/Modifications                                                                                                                        |                     | 1               | LS               | 500   | 500             | $34,500        | $50,000                       | $50,000          
|            |                                 | SEPARATION WALL ALLOWANCE                                                                                                                                                    |                     | 1               | LS               |       |                 |                |                               |                  
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|            |                                 |                                                                                                                                                                              |                     |                 |                  |       |                 |                |                               |                  
|210         |                                 | SUB TOTAL GRINDING                                                                                                                                                           |                     |                 |                  |       | 15,640          | $1,049,723     |                               | $3,174,011       

---

|PENGUINASI            | FLOTATION AND REGRIND | April-04
|--------------------- | --------------------- | --------
|NorthMet Project      |                       | Rev. C  
|Hoyt Lakes, Minnesota |                       |         

|Area 220 | Item
      Description FLOTATION
      & REGRIND | Qty                                                                 | Unit                  | Unit Mhrs | Total Mhrs | Labor  | Unit Matl  | Material   | Subcontract Specl  Costs | Total Costs
|-------- | ------------------------------------------------ | ------------------------------------------------------------------- | --------------------- | --------- | ---------- | ------ | ---------- | ---------- | ------------------------ | -----------
|         |                                                  |                                                                     |                       |           |            |        |            |            |                          |            
|         |                                                  | EQUIPMENT AND STEEL DEMOLITION Removed
      at no cost for salvage | 1                     | LS        | 0          | 0      | $        - | $       -  | $ -                      | $-         
|         |                                                  | GRINDING CIRCUIT DEMOLITION                                         |                       | 1,100     | CY         | 1      | 1100       | $$74,800   | $       -                | $ -        
|         |                                                  | BACKFILL                                                            |                       | 700       | CY         | 0.1    | 70         | $4,760     | $      8                 | 5,600      
|         |                                                  | NEW CONCRETE FOOTINGS/PIERS/SLABS                                   |                       | 400       | CY         | 8      | 3200       | $217,600   | $300                     | 120,000    
|         |                                                  | STRUCTURAL STEEL AND PLATFORMS                                      |                       | 70        | TN         | 22     | 1540       | $104,720   | $2,800                   | 196,000    
|         |                                                  | GENERAL BUILDING MODIFICATIONS                                      |                       | 1         | LS         | 500    | 500        | $34,000    | $50,000                  | 50,000     
|         | EXISTING                                         | FLOTATION AREA CRANE                                                | 25T/5T 20/5 HP        | 1         | EA         | 40     | 40         | $2,720     | $8,000                   | 8,000      
|         | NEW                                              | CONDITIONING TANK                                                   | 7.5 m dia x 8 m       | 31,700    | LB         | 0.03   | 951        | $64,668    | $      1                 | 31,700     
|         | NEW                                              | CONDITIONING TANK AGITATOR                                          |                       | 1         | EA         | 100    | 100        | $6,800     | $48,000                  | 48,000     
|         | NEW                                              | ROUGHER CELLS Quoted                                                | 160 m3 TANK CELL      | 4         | EA         | 60     | 240        | $16,320    | $307,500                 | 1,230,00 0 
|         | NEW                                              | SCAVENGER CELLS Quoted                                              | 160 m3 TANK CELL      | 10        | EA         | 60     | 600        | $40,800    | $338,250                 | 3,382,50 0 
|         | NEW                                              | CLEANER CELLS WITH DISTRIBUTOR Quoted                               | 21 m3 CONV. CELL      | 8         | EA         | 120    | 960        | $65,280    | $99,000                  | 792,00 0   
|         | NEW                                              | FLOTATION TAILS PUMPBOX                                             |                       | 1         | EA         | 250    | 250        | $17,000    | $15,000                  | 15,000     
|         | NEW                                              | FLOTATION TAILS PUMPS                                               |                       | 2         | EA         | 400    | 800        | $54,400    | $200,000                 | 400,000    
|         | NEW                                              | RECLEANER FEED PUMPBOX                                              |                       | 1         | EA         | 40     | 40         | $2,720     | $10,000                  | 10,000     
|         | NEW                                              | RECLEANER FEED PUMPS                                                |                       | 2         | EA         | 60     | 120        | $8,160     | $30,000                  | 60,000     
|         | NEW                                              | RE CLEANER COLUMN CELLS                                             | 3.7mx12.2 m COL CELL  | 1         | EA         | 120    | 120        | $8,160     | $99,000                  | 99,000     
|         | NEW                                              | RECLEANER TAILS PUMP                                                |                       | 2         | EA         | 60     | 120        | $8,160     | $30,000                  | 60,000     
|         | NEW                                              | RECLEANER BLOWER                                                    |                       | 1         | EA         | 60     | 60         | $4,080     | $15,000                  | 15,000     
|         | NEW                                              | FLOTATION BLOWERS                                                   |                       | 2         | EA         | 61     | 122        | $8,296     | $15,001                  | 30,002     
|         | NEW                                              | SAMPLERS                                                            |                       | 3         | EA         | 50     | 150        | $10,200    | $10,000                  | 30,000     
|         | NEW                                              | ANALYSER                                                            |                       | 1         | EA         | 900    | 900        | $61,200    | $500,000                 | 500,000    
|         | NEW                                              | SUMP PUMPS                                                          |                       | 4         | EA         | 60     | 240        | $16,320    | $15,000                  | 60,000     
|         | NEW                                              | SCAVENGER REGRIND CYCLONE FEED PUMPBOX                              |                       | 1         | EA         | 100    | 100        | $6,800     | $10,000                  | 10,000     
|         | NEW                                              | SCAVENGER REGRIND CYCLONE FEED PUMPS                                |                       | 2         | EA         | 125    | 250        | $17,000    | $50,000                  | 100,000    
|         | NEW                                              | SCAVENGER REGRIND CYCLOPAC                                          |                       | 1         | EA         | 80     | 80         | $5,440     | $50,000                  | 50,000     
|         | EXISTING                                         | SCAVENGER REGRIND MILL                                              | 12'-2" x 24', 1500 HP | 1         | EA         | 250    | 250        | $17,000    | $150,000                 | 150,000    
|         | NEW                                              | FINAL CONC. REGRIND CYCLONE FEED PUMPBOX                            |                       | 1         | EA         | 100    | 100        | $6,800     | $10,000                  | 10,000     
|         | NEW                                              | FINAL CONC. REGRIND CYCLONE FEED PUMPS                              |                       | 2         | EA         | 60     | 120        | $8,160     | $50,000                  | 100,000    
|         | NEW                                              | FINAL CONC. REGRIND CYCLOPAC                                        |                       | 1         | EA         | 80     | 80         | $5,440     | $50,000                  | 50,000     
|         | EXISTING                                         | FINAL CONC REGRIND MILL                                             | 12'-2" x 24', 1500 HP | 1         | EA         | 250    | 250        | $17,000    | $150,000                 | 150,000    
|         |                                                  |                                                                     |                       |           |            |        |            |            |                          |            
|         |                                                  | FLOTATION PIPING                                                    |                       | 1         | LS         | 14,766 | 14,766     | $1,004,115 | $1,476,640               | 1,476,640  
|         |                                                  | OUTSIDE LINES To Pressure Leaching and Reagent
      Supply         |                       | 1         | LS         | 18,478 | 18,478     | $1,256,504 | $1,847,801               | 1,847,801  
|         |                                                  | FLOTATION ELECTRICAL                                                |                       | 1         | LS         | 11,087 | 11,087     | $753,903   | $1,108,680               | 1,108,680  
|         |                                                  | FLOTATION INSTRUMENTATION                                           |                       | 1         | LS         | 7,383  | 7,383      | $502,058   | $738,320                 | 738,320    
|         |                                                  | FLOTATION HVAC                                                      |                       | 1         | LS         | 80     | 80         | $5,440     | $10,000                  | 10,000     
|         |                                                  | FLOTATION FIRE PROTECTION                                           |                       | 1         | LS         | 80     | 80         | $5,440     | $10,000                  | 10,000     
|         |                                                  | FLOTATION BUILDING Allowance for Repairs /
      Modifications      |                       | 1         | LS         | 500    | 500        | $34,000    | $50,000                  | 50,000     
|         |                                                  |                                                                     |                       |           |            |        |            |            |                          |            
|         |                                                  | SEPARATION WALL ALLOWANCE                                           |                       | 1         | LS         |        |            |            |                          |            
|         |                                                  |                                                                     |                       |           |            |        |            |            |                          |            
|220      |                                                  | SUB TOTAL FLOTATION & REGRIND                                       |                       |           |            |        | 65,827     | $4,476,264 |                          | $13,004,243

---

|PENGUINASI            | PRESSURE LEACHING | April-04
|--------------------- | ----------------- | --------
|NorthMet Project      |                   | Rev. C  
|Hoyt Lakes, Minnesota |                   |         

|Area 300 | Item
      Description PRESSURE
      LEACHING | Qty                                                              | Uni                | Unit Mhrs | Total Mhrs | Labor  | Unit Matl | Material   | Subcontract Specl Costs | Total Costs
|-------- | ---------------------------------------------- | ---------------------------------------------------------------- | ------------------ | --------- | ---------- | ------ | --------- | ---------- | ----------------------- | -----------
|         |                                                | SITE PREPARATION AND CIVIL                                       |                    | 1         | LS         | 500    | 500       | $34,000    | $10,000                 | $10,000    
|         |                                                | PRE ENGINEERED BUILDING Including Concrete and Architectural     |                    | 24,000    | SF         | 0.70   | 16,800    | $1,142,400 | $70                     | $1,680,000 
|         |                                                | BUILDING HVAC                                                    |                    | 24,000    | SF         | 0.05   | 1,200     | $81,600    | $8                      | $192,000   
|         |                                                | BUILDING FIRE PROTECTION                                         |                    | 24,000    | SF         | 0.02   | 480       | $32,640    | $4                      | $96,000    
|         |                                                | BUILDING ELECTRICAL lighting/convenience electrical              |                    | 24,000    | SF         | 0.05   | 1,200     | $81,600    | $6                      | $144,000   
|         |                                                | CONCRETE EQUIP FOUNDATIONS AND PIERS                             |                    | 350       | YD         | 6      | 2,100     | $142,800   | $300                    | $105,000   
|         |                                                | EQUIPMENT SUPPORT STRUCTURAL STEEL                               |                    | 35        | TN         | 30     | 1,050     | $71,400    | $3,200                  | $112,000   
|         |                                                | AUTOCLAVE AREA OVERHEAD CRANE                                    | 5t/1t              | 2         | EA         | 240    | 480       | $32,640    | $80,000                 | $160,000   
|         |                                                |                                                                  |                    |           |            |        |           |            |                         |            
|         | NEW                                            | CONCENTRATE THICKENER Budget Quotation                           | 44 ft. dia         | 1         | EA         | 1,500  | 1,500     | $102,000   | $301,125                | $301,125   
|         | NEW                                            | THICKENER O/F PUMP                                               |                    | 2         | EA         | 40     | 80        | $5,440     | $15,000                 | $30,000    
|         | NEW                                            | THICKENER U/F PUMP                                               |                    | 2         | EA         | 40     | 80        | $5,440     | $8,000                  | $16,000    
|         | NEW                                            | CONCENTRATE STORAGE TANK                                         | 26 ft dia. X 29 ft | 45,000    | LBS        | 0.03   | 1,350     | $91,800    | $1                      | $45,000    
|         | NEW                                            | CONCENTRATE STORAGE TANK AGITATOR                                | 29.52              | 1         | EA         | 100    | 100       | $6,800     | $50,000                 | $50,000    
|         | NEW                                            | CONCENTRATE FEED PUMPS                                           |                    | 2         | EA         | 40     | 80        | $5,440     | $12,000                 | $24,000    
|         | NEW                                            | AUTOCLAVE FEED TANK                                              | 3 m dia. X 3.5 m   | 8,000     | LBS        | 0.03   | 240       | $16,320    | $1                      | $8,000     
|         | NEW                                            | AUTOCLAVE FEED TANK AGITATOR                                     |                    | 2         | EA         | 40     | 80        | $5,440     | $10,000                 | $20,000    
|         | NEW                                            | AUTOCLAVE FEED PUMPS                                             |                    | 2         | EA         | 80     | 160       | $10,880    | $75,000                 | $150,000   
|         | NEW                                            | NaCL ADDITION SYSTEM                                             |                    | 1         | EA         | 400    | 400       | $27,200    | $150,000                | $150,000   
|         | NEW                                            | AUTOCLAVES Adjusted to 65% of AMEC study                         | 4.1m x 24.6m       | 2         | EA         | 4,000  | 8,000     | $544,000   | $3,475,046              | $6,950,092 
|         | NEW                                            | AUTOCLAVE AGITATORS                                              |                    | 12        | EA         | 150    | 1,800     | $122,400   | $200,000                | $2,400,000 
|         | NEW                                            | FLASH TANKS Adjusted to 65% of AMEC study                        |                    | 2         | EA         | 1,000  | 2,000     | $136,000   | $656,398                | $1,312,795 
|         | NEW                                            | SLURRY COOLER FEED PUMPS                                         |                    | 2         | EA         | 60     | 120       | $8,160     | $35,000                 | $70,000    
|         | NEW                                            | SLURRY COOLERS                                                   |                    | 2         | EA         | 80     | 160       | $10,880    | $50,000                 | $100,000   
|         | NEW                                            | COOLING TOWER                                                    |                    | 1         | EA         | 1,200  | 1,200     | $81,600    | $200,000                | $200,000   
|         | NEW                                            | VENT GAS SCRUBBER                                                |                    | 1         | EA         | 60     | 60        | $4,080     | $260,000                | $260,000   
|         | NEW                                            | VENT GAS SCRUBBER DISCHARGE PUMP                                 |                    | 2         | EA         | 40     | 80        | $5,440     | $5,000                  | $10,000    
|         | NEW                                            | RAFFINATE INJECTION PUMPS                                        |                    | 2         | EA         | 80     | 160       | $10,880    | $75,000                 | $150,000   
|         | NEW                                            | BOILER PACKAGE Adjusted to 65% of AMEC study                     |                    | 1         | EA         | 4,000  | 4,000     | $272,000   | $617,786                | $617,786   
|         | NEW                                            | BOILER BLOWOUT VESSELS                                           |                    | 2         | EA         | 40     | 80        | $5,440     | $8,000                  | $16,000    
|         | NEW                                            | HP AIR COMPRESSOR                                                |                    | 1         | EA         | 40     | 40        | $2,720     | $60,000                 | $60,000    
|         | NEW                                            | LP AIR COMPRESSOR                                                |                    | 1         | EA         | 40     | 40        | $2,720     | $40,000                 | $40,000    
|         | NEW                                            | SEAL WATER COOLER                                                |                    | 1         | EA         | 80     | 80        | $5,440     | $50,000                 | $50,000    
|         | NEW                                            | SEAL/RINSE WATER TREATMENT PACKAGE                               |                    | 1         | EA         | 100    | 100       | $6,800     | $50,000                 | $50,000    
|         | NEW                                            | OXYGEN BLOWOUT VESSEL                                            |                    | 2         | EA         | 40     | 80        | $5,440     | $8,000                  | $16,000    
|         | NEW                                            | SEAL WATER PUMPS                                                 |                    | 3         | EA         | 40     | 120       | $8,160     | $8,000                  | $24,000    
|         | NEW                                            | WATER TREATMENT PACKAGE                                          |                    | 1         | EA         | 200    | 200       | $13,600    | $100,000                | $100,000   
|         | NEW                                            | SUMP PUMPS                                                       |                    | 3         | EA         | 60     | 180       | $12,240    | $12,000                 | $36,000    
|         |                                                |                                                                  |                    |           |            |        |           |            |                         |            
|         |                                                | PRESSURE LEACHING PIPING Adjusted to 65% of AMEC
      study     |                    | 1         | LS         | 33,808 | 33,808    | $2,298,967 | $3,380,833              | $3,380,833 
|         |                                                | OUTSIDE LINES TO SOLID LIQUID SEPARATION Allowance               |                    | 1         | LS         | 16,904 | 16,90 4   | $1,149,483 | $1,690,417              | $1,690,417 
|         |                                                | PRESSURE LEACHING ELECTRICAL/LIGHTING Adjusted
      to 65% AMEC | 1                  | LS        | 12,680     | 12,680 | $862,244  | $1,268,006 | $1,268,006              |            
|         |                                                | PRESSURE LEACHING INSTRUMENTATION Adjusted to
      65% AMEC     | 1                  | LS        | 8,865      | 8,86 5 | $602,835  | $886,523   | $886,523                |            
|         |                                                |                                                                  |                    |           |            |        |           |            |                         |            
|300      |                                                | SUB TOTAL PRESSURE LEACHING                                      |                    |           |            |        | 118,638   | $8,067,369 |                         | $22,981,576

---

|PENGUINASI            | SOLID / LIQUID SEPARATION | April-04
|--------------------- | ------------------------- | --------
|NorthMet Project      |                           | Rev. C  
|Hoyt Lakes, Minnesota |                           |         

|Area 410 | Item
      Description SOLID
      / LIQUID SEPARATION | Qty                                                 | Unit             | Unit Mhrs | Total Mhrs | Labor | Unit Matl | Material   | Subcontract Specl Costs | Total Costs
|-------- | ------------------------------------------------------ | --------------------------------------------------- | ---------------- | --------- | ---------- | ----- | --------- | ---------- | ----------------------- | -----------
|         |                                                        |                                                     |                  |           |            |       |           |            |                         |            
|         |                                                        | SITE PREPARATION                                    |                  | 1         | LS         | 500   | 500       | $34,000    | $5,000                  | $5,000     
|         |                                                        | DEMOLITION                                          |                  | 1,185     | YD         | 1     | 1,185     | $80,593    | $-                      | $-         
|         |                                                        | BACKFILL                                            |                  | 1,200     | CY         | 0.08  | 96        | $6,528     | $5                      | $6,000     
|         |                                                        | CONCRETE EQUIP FOUNDATIONS AND PIERS                |                  | 120       | YD         | 6     | 720       | $48,960    | $300                    | $36,000    
|         |                                                        | TANK FARM CONCRETE                                  |                  | 180       | YD         | 7     | 1,260     | $86,940    | $301                    | $54,180    
|         |                                                        | PLATFORMS                                           |                  | 1,000     | SF         | 0.15  | 150       | $10,350    | $12                     | $12,000    
|         |                                                        | EQUIPMENT SUPPORT STRUCTURAL STEEL                  |                  | 20        | TN         | 30    | 600       | $40,800    | $3,200                  | $64,000    
|         |                                                        | BUILDING MODIFICATIONS                              |                  | 1         | LS         | 500   | 500       | $34,000    | $100,000                | $100,000   
|         |                                                        | BUILDING ARCHITECTURAL Allowance                    |                  | 1,200     | SF         | 1     | 1,200     | $81,600    | $75                     | $90,000    
|         |                                                        | BUILDING HVAC                                       |                  | 4,000     | SF         | 0.05  | 200       | $13,600    | $8                      | $32,000    
|         |                                                        | BUILDING FIRE PROTECTION                            |                  | 4,000     | SF         | 0.02  | 80        | $5,440     | $5                      | $20,000    
|         |                                                        | BUILDING ELECTRICAL Lighting/Convenience Electrical |                  | 4,000     | SF         | 0.05  | 200       | $13,600    | $6                      | $24,000    
|         |                                                        | CRANE                                               |                  | 1         | EA         | 400   | 400       | $27,200    | $50,000                 | $50,000    
|         |                                                        |                                                     |                  |           |            |       |           |            |                         |            
|         | NEW                                                    | LEACH THICKENER Budget Quotation                    | 17.7 m dia.      | 1         | EA         | 3000  | 3,000     | $204,000   | $380,000                | $380,000   
|         | NEW                                                    | LEACH THICKENER O/F PUMP                            |                  | 2         | EA         | 60    | 120       | $8,160     | $15,000                 | $30,000    
|         | NEW                                                    | LEACH THICKENER U/F PUMP                            |                  | 2         | EA         | 40    | 80        | $5,440     | $8,000                  | $16,000    
|         | NEW                                                    | FILTER FEED TANK                                    | 3 m dia. X 3.5 m | 1         | EA         | 200   | 200       | $13,600    | $30,000                 | $30,000    
|         | NEW                                                    | FILTER FEED TANK AGITATOR                           |                  | 1         | EA         | 40    | 40        | $2,720     | $6,000                  | $6,000     
|         | NEW                                                    | FILTER FEED PUMP                                    |                  | 2         | EA         | 30    | 60        | $4,080     | $8,000                  | $16,000    
|         | NEW                                                    | LEACH RESIDUE FILTER - Budget Quote                 |                  | 1         | EA         | 500   | 500       | $34,000    | $1,690,000              | $1,690,000 
|         | NEW                                                    | TAILINGS REPULP TANK                                | 3 m dia. X 3.5 m | 1         | EA         | 200   | 200       | $13,600    | $30,000                 | $30,000    
|         | NEW                                                    | TAILINGS REPULP TANK AGITATOR                       |                  | 1         | EA         | 40    | 40        | $2,720     | $6,000                  | $6,000     
|         | NEW                                                    | TAILINGS REPULP PUMP                                |                  | 2         | EA         | 40    | 80        | $5,440     | $8,000                  | $16,000    
|         | NEW                                                    | THICKENER O/F SURGE TANK                            | 5 m dia. X 5.5 m | 1         | EA         | 600   | 600       | $40,800    | $100,000                | $100,000   
|         | NEW                                                    | POLISH FILTER FEED PUMP                             |                  | 2         | EA         | 40    | 80        | $5,440     | $6,000                  | $12,000    
|         | NEW                                                    | POLISH FILTER                                       | 3.5 m dia.       | 2         | EA         | 120   | 240       | $16,320    | $175,000                | $350,000   
|         | NEW                                                    | POLISH FILTER BLOWER                                |                  | 1         | EA         | 60    | 60        | $4,080     | $15,000                 | $15,000    
|         | NEW                                                    | ROUGHER/SCAVENGER CELLS Budget Quote                | 2.8m3            | 5         | EA         | 30    | 150       | $10,200    | $18,000                 | $90,000    
|         | NEW                                                    | CLEANER FLOTATION CELLS Budget Quote                | 0.08m3           | 3         | EA         | 40    | 120       | $8,160     | $8,333                  | $25,000    
|         | NEW                                                    | ROUGHER/SCAV FLOT CELLS RETURN PUMP                 |                  | 1         | EA         | 40    | 40        | $2,720     | $6,000                  | $6,000     
|         | NEW                                                    | CONCENTRATE STORAGE TANK FEED PUMP                  |                  | 1         | EA         | 40    | 40        | $2,720     | $5,000                  | $5,000     
|         | NEW                                                    | LEACH RESIDUE TAILINGS PUMPBOX                      |                  | 1         | EA         | 80    | 80        | $5,440     | $20,000                 | $20,000    
|         | NEW                                                    | LEACH RESIDUE TAILINGS PUMP                         |                  | 2         | EA         | 80    | 160       | $10,880    | $45,000                 | $90,000    
|         | NEW                                                    | SUMP PUMPS                                          |                  | 2         | EA         | 40    | 80        | $5,440     | $6,000                  | $12,000    
|         |                                                        |                                                     |                  |           |            |       |           |            |                         |            
|         |                                                        | SOLID / LIQUID SEPARATION PIPING                    |                  | 1         | LS         | 5,890 | 5,890     | $400,520   | $589,000                | $589,000   
|         |                                                        | SOLID LIQUID SEPARATION ELECTRICAL                  |                  | 1         | LS         | 4,418 | 4,418     | $300,390   | $441,750                | $441,750   
|         |                                                        | SOLID LIQUID INSTRUMENTATION                        |                  | 1         | LS         | 3,534 | 3,534     | 240,312    | $353,400                | $353,400   
|         |                                                        |                                                     |                  |           |            |       |           |            |                         |            
|410      |                                                        | SUB TOTAL SOLID / LIQUID SEPARATION                 |                  |           |            |       | 26,903    | $1,830,793 |                         | $4,822,330 

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|PENGUINASI            | PGM RECOVERY | April-04
|--------------------- | ------------ | --------
|NorthMet Project      |              | Rev. C  
|Hoyt Lakes, Minnesota |              |         

|Area 420 | Item
      Description PGM RECOVERY | Qty                                                 | Unit            | Unit Mhrs | Total Mhrs | Labor | Unit Matl | Material   | Subcontract Specl  Costs | Total Costs
|-------- | ----------------------------------- | --------------------------------------------------- | --------------- | --------- | ---------- | ----- | --------- | ---------- | ------------------------ | -----------
|         |                                     |                                                     |                 |           |            |       |           |            |                          |            
|         |                                     | SITE PREPARATION                                    |                 | 1         | LS         | 500   | 500       | $34,000    | $5,000                   | $5,000     
|         |                                     | DEMOLITION                                          |                 | 1,185     | YD         | 1     | 1,185     | $80,593    | $-                       | $-         
|         |                                     | BACKFILL                                            |                 | 1,200     | CY         | 0.08  | 96        | $6,528     | $5                       | $6,000     
|         |                                     | CONCRETE EQUIP FOUNDATIONS AND PIERS                |                 | 120       | YD         | 6     | 720       | $48,960    | $300                     | $36,000    
|         |                                     | TANK FARM CONCRETE                                  |                 | 180       | YD         | 7     | 1,260     | $86,940    | $301                     | $54,180    
|         |                                     | PLATFORMS                                           |                 | 500       | SF         | 0.15  | 75        | $5,175     | $12                      | $6,000     
|         |                                     | EQUIPMENT SUPPORT STRUCTURAL STEEL                  |                 | 20        | TN         | 30    | 600       | $40,800    | $3,200                   | $64,000    
|         |                                     | BUILDING MODIFICATIONS                              |                 | 1         | LS         | 500   | 500       | $34,000    | $100,000                 | $100,000   
|         |                                     | BUILDING ARCHITECTURAL Allowance                    |                 | 1,200     | SF         | 1     | 1,200     | $81,600    | $75                      | $90,000    
|         |                                     | BUILDING HVAC                                       |                 | 4,000     | SF         | 0.05  | 200       | $13,600    | $8                       | $32,000    
|         |                                     | BUILDING FIRE PROTECTION                            |                 | 4,000     | SF         | 0.02  | 80        | $5,440     | $5                       | $20,000    
|         |                                     | BUILDING ELECTRICAL Lighting/Convenience Electrical |                 | 4,000     | SF         | 0.05  | 200       | $13,600    | $6                       | $24,000    
|         |                                     | CRANE                                               |                 | 1         | EA         | 400   | 400       | $27,200    | $50,000                  | $50,000    
|         |                                     |                                                     |                 |           |            |       |           |            |                          |            
|         | NEW                                 | PLANT AIR COMPRESSOR                                |                 | 1         | EA         | 60    | 60        | $4,080     | $40,000                  | $40,000    
|         | NEW                                 | INSTRUMENT AIR COMPRESSOR                           |                 | 1         | EA         | 60    | 60        | $4,080     | $40,000                  | $40,000    
|         | NEW                                 | SULPHUR BURNER PACKAGE                              |                 | 1         | EA         | 800   | 800       | $54,400    | $200,000                 | $200,000   
|         | NEW                                 | SULPHUR BURNER BLOWER                               |                 | 1         |            |       | -         | -          |                          | -          
|         | NEW                                 | IN LINE MIXER                                       |                 | 1         | EA         | 40    | 40        | $2,720     | $10,000                  | $10,000    
|         | NEW                                 | Fe REDUCTION TANK                                   | 6.5 m dia x 7 m | 1         | EA         | 800   | 800       | $54,400    | $120,000                 | $120,000   
|         | NEW                                 | Fe REDUCTION TANK AGITATOR                          |                 | 1         | EA         | 40    | 40        | $2,720     | $13,000                  | $13,000    
|         | NEW                                 | PIPE REACTOR FEED PUMP                              |                 | 2         | EA         | 40    | 80        | $5,440     | $17,000                  | $34,000    
|         | NEW                                 | PIPE REACTOR                                        | 315mm D x 55m   | 2         | EA         | 120   | 240       | $16,320    | $10,000                  | $20,000    
|         | NEW                                 | CLARIFIER                                           |                 | 2         | EA         | 120   | 240       | $16,320    | $80,000                  | $160,000   
|         | NEW                                 | PGM FILTER                                          |                 | 2         | EA         | 500   | 1,000     | $68,000    | $690,002                 | $1,380,005 
|         | NEW                                 | CLARIFIER O/F STANDPIPE                             |                 | 2         | EA         | 40    | 80        | $5,440     | $8,000                   | $16,000    
|         | NEW                                 | POLISH FILTER FEED PUMP                             |                 | 2         | EA         | 80    | 160       | $10,880    | $30,000                  | $60,000    
|         | NEW                                 | CLARIFIER U/F DIAPHRAM PUMP                         |                 | 4         | EA         | 40    | 160       | $10,880    | $8,000                   | $32,000    
|         | NEW                                 | REPULP TANK                                         | 1m dia x 1.2m   | 1         | EA         | 20    | 20        | $1,360     | $2,000                   | $2,000     
|         | NEW                                 | REPULP TANK AGITATOR                                |                 | 1         | EA         | 20    | 20        | $1,360     | $4,000                   | $4,000     
|         | NEW                                 | REPULP PUMP                                         |                 | 2         | EA         | 30    | 60        | $4,080     | $4,000                   | $8,000     
|         | NEW                                 | AUTOCLAVE HOLDING TANK                              | 2m dia x 2.5m   | 1         | EA         | 40    | 40        | $2,720     | $6,500                   | $6,500     
|         | NEW                                 | AUTOCLAVE HOLDING TANK AGITATOR                     |                 | 1         | EA         | 40    | 40        | $2,720     | $5,000                   | $5,000     
|         | NEW                                 | AUTOCLAVE CHARGE PUMP                               |                 | 2         | EA         | 40    | 80        | $5,440     | $5,000                   | $10,000    
|         | NEW                                 | BATCH LEACH AUTOCLAVE                               | 1m dia x 1.5m   | 1         | EA         | 80    | 80        | $5,440     | $60,000                  | $60,000    
|         | NEW                                 | BATCH LEACH AUTOCLAVE AGITATOR                      |                 | 1         | EA         | 40    | 40        | $2,720     | $25,000                  | $25,000    
|         | NEW                                 | FILTER FEED TANK                                    | 2m dia x 2.5m   | 1         | EA         | 40    | 40        | $2,720     | $6,500                   | $6,500     
|         | NEW                                 | FILTER FEED TANK AGITATOR                           |                 | 1         | EA         | 40    | 40        | $2,720     | $5,000                   | $5,000     
|         | NEW                                 | FILTER FEED PUMP                                    |                 | 2         | EA         | 40    | 80        | $5,440     | $8,000                   | $16,000    
|         | NEW                                 | PGM FILTER                                          |                 | 1         | EA         | 50    | 50        | $3,400     | $50,000                  | $50,000    
|         | NEW                                 | TRAY DRYER                                          |                 | 1         | EA         | 80    | 80        | $5,440     | $50,000                  | $50,000    
|         | NEW                                 | PGM PRODUCT BIN                                     |                 | 1         | EA         | 10    | 10        | $680       | $5,000                   | $5,000     
|         |                                     |                                                     |                 |           |            |       |           |            |                          |            
|         |                                     | PGM RECOVERY PIPING                                 |                 | 1         | LS         | 4756  | 4,756     | $323,409   | $475,600.97              | $475,601   
|         |                                     | PRESSURE LEACHING ELECTRICAL/LIGHTING               |                 | 1         | LS         | 2253  | 2,253     | $153,204   | $225,300.36              | $225,300   
|         |                                     | PRESSURE LEACHING INSTRUMENTATION                   |                 | 1         | LS         | 1462  | 1,462     | $99,416    | $146,200.24              | $146,200   
|         |                                     |                                                     |                 |           |            |       |           |            |                          |            
|420      |                                     | SUB TOTAL PGM RECOVERY                              |                 |           |            |       | 19,927    | $1,356,385 |                          | $3,712,286 

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