**Exhibit 99.1**

|  | SANDSTORM GOLD  LTD. ANNUAL INFORMATION FORM FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2012  February 18, 2013 Suite 1400, 400 Burrard Street Vancouver, B.C. V6C 3A6 |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | SANDSTORM GOLD  LTD. ANNUAL INFORMATION FORM FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2012  TABLE OF CONTENTS INTRODUCTORY NOTES 3 Cautionary Note Regarding  Forward-Looking Information 3 Currency Presentation 3 CORPORATE STRUCTURE 4  GENERAL DEVELOPMENT OF THE BUSINESS 4 Public Offerings 4 Credit Facility 5  Mineral Interests 5 Spin-out of Sandstorm Metals 12 Consolidation of Common  Shares 12 Listing on the NYSE MKT LLC 13 Listing on the Toronto Stock  Exchange 13 Acquisition of 59.9% Interest in Premier Royalty Inc. 13  Transaction with Premier Gold Mines Ltd. 13 DESCRIPTION OF THE BUSINESS 14  Principal Product 14 Competitive Conditions 15 Operations 15 RISK FACTORS 16  Risks Relating to the Company 16 Risks Relating to the Mining Operations 21  MINERAL PROPERTIES 25 CIM Standards Definitions 25 Aurizona Mine, Brazil 27  Santa Elena Mine, Sonora, Mexico 37 Ming Mine, Canada 44 Black Fox Mine,  Canada 56 Bachelor Lake Mine, Canada 70 Serra Pelada Mine, Brazil 82 Entrée  JV Project, Mongolia 97 DIVIDENDS 125 DESCRIPTION OF CAPITAL STRUCTURE 125  TRADING PRICE AND VOLUME 125 Common Shares 125 Warrants 126 DIRECTORS AND  OFFICERS 128 Cease Trade Orders, Bankruptcies, Penalties or Sanctions 130  Conflicts of Interest 130 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL  TRANSACTIONS 131 TRANSFER AGENT AND REGISTRAR 131 MATERIAL CONTRACTS 131  INTERESTS OF EXPERTS 132 Qualified Persons Under NI 43-101 132 Auditors 132  AUDIT COMMITTEE 132 - 1 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Relevant  Education and Experience 133 Reliance on Certain Exemptions 133 Pre-Approval  Policies and Procedures 134 External Auditor Service Fees 134 ADDITIONAL  INFORMATION 134 SCHEDULE “A” 1 - 2 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | INTRODUCTORY  NOTES Cautionary Note Regarding Forward-Looking Information This annual  information form (“AIF”) contains “forward-looking statements” or  “forward-looking information” within the meaning of applicable securities  legislation. Forward-looking information is provided as of the date of this  AIF and Sandstorm Gold Ltd. (“Sandstorm Gold” or the “Company”) does not  intend, and does not assume any obligation, to update this forward-looking  information, except as required by law. Generally, forward-looking  information can be identified by the use of forward-looking terminology such  as “plans”, “expects” or “does not expect”, “is expected”, “budget”,  “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not  anticipate”, or “believes”, or variations of such words and phrases or  statements that certain actions, events or results “may”, “could”, “would”,  “might” or “will be taken”, “occur” or “be achieved”. Forward-looking  information is based on reasonable assumptions that have been made by  Sandstorm Gold as at the date of such information and is subject to known and  unknown risks, uncertainties and other factors that may cause the actual  results, level of activity, performance or achievements of Sandstorm Gold to  be materially different from those expressed or implied by such  forward-looking information, including but not limited to: the impact of  general business and economic conditions; delays in the construction of the  Bachelor Lake mine, the Bracemac-McLeod mine, the Summit mine, the Ming mine,  the Serra Pelada mine, the Deflector mine and the Entrée JV Project (as  defined herein) and operations at the Mt. Hamilton project, the Coringa  project, the Cuiú Cuiú project and the Ann Mason project; the absence of  control over mining operations from which Sandstorm Gold will purchase gold  and other precious metals and risks related to those mining operations,  including risks related to international operations, government and  environmental regulation, actual results of current exploration activities,  conclusions of economic evaluations and changes in project parameters as  plans continue to be refined; problems inherent to the marketability of gold  and other precious metals; industry conditions, including fluctuations in the  price of metals, fluctuations in foreign exchange rates and fluctuations in  interest rates; government entities interpreting existing tax legislation or  enacting new tax legislation in a way which adversely affects Sandstorm Gold;  stock market volatility; competition; as well as those factors discussed in  the section entitled “Risk Factors” herein. Forward-looking information in  this AIF includes, among other things, disclosure regarding: Sandstorm Gold’s  existing ten gold streams with Luna Gold Corp. (“Luna”), SilverCrest Mines  Inc. (“SilverCrest”), Rambler Metals & Mining plc. (“Rambler”), Santa Fe  Gold Corp. (“Santa Fe”), Brigus Gold Corp. (“Brigus”), Metanor Resources Inc.  (“Metanor”), Donner Metals Ltd. (“Donner”), Colossus Minerals Inc.  (“Colossus”), Mutiny Gold Ltd. (“Mutiny”) and Entrée Gold Inc. (“Entrée”)  plus Sandstorm Gold’s four royalties with Solitario Exploration & Royalty  Corp. (“Solitario”), Magellan Minerals Ltd. (“Magellan”) and Entrée, as well  as its future outlook and the mineral reserve and mineral resource estimates  for Luna, SilverCrest, Rambler, Brigus, Metanor and Entrée. Forward-looking  information is based on assumptions management believes to be reasonable,  including but not limited to the continued operation of the mining operations  from which Sandstorm Gold will purchase gold and other precious metals, no  material adverse change in the market price of commodities, that the mining  operations will operate in accordance with their public statements and achieve  their stated production outcomes, and such other assumptions and factors as  set out therein. Although Sandstorm Gold has attempted to identify important  factors that could cause actual actions, events or results to differ  materially from those contained in forward-looking information, there may be  other factors that cause actions, events or results not to be as anticipated,  estimated or intended. There can be no assurance that such information will  prove to be accurate, as actual results and future events could differ  materially from those anticipated in such information. Accordingly, readers  should not place undue reliance on forward-looking information. Currency  Presentation All dollar amounts referenced, unless otherwise indicated, are  expressed in United States dollars. - 3 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | CORPORATE  STRUCTURE The Company was incorporated under the Business Corporations Act  (British Columbia) on March 23, 2007. The Company changed its name from  “Sandstorm Resources Ltd.” to “Sandstorm Gold Ltd.” on February 17, 2011. The  Company’s head, registered, and records office are located at Suite 1400, 400  Burrard Street, Vancouver, British Columbia, V6C 3A6. The Company has two  principal wholly-owned subsidiaries, Sandstorm Gold (Barbados) Limited,  incorporated under the laws of Barbados, and Sandstorm Gold (Canada) Ltd.,  incorporated under the laws of the Province of British Columbia. GENERAL  DEVELOPMENT OF THE BUSINESS Public Offerings On April 23, 2009, the Company  completed a public offering of 116,909,580 subscription receipts at a price  of C$0.40 per subscription receipt for gross proceeds of C$46.8 million (the  “April 2009 Offering”). The gross proceeds from the April 2009 Offering were  held in escrow until May 15, 2009, and were released upon completion of the  transactions with each of Luna and SilverCrest as described below. On May 22,  2009, each subscription receipt was automatically exercised, without payment  of additional consideration, into one common share (each, a “Common Share”)  and one-half of one common share purchase warrant (each whole common share  purchase warrant, a “2009 Warrant”). As adjusted to reflect the 5:1  consolidation of the Company’s Common Shares described below, each five 2009  Warrants entitle the holder to acquire one Common Share at a price of $3.00  until April 23, 2014. A portion of the net proceeds from the April 2009  Offering were used to fund the Luna, SilverCrest, and Santa Fe transactions  described below. The remaining net proceeds were used for general corporate  and working capital purposes. On October 14, 2009, the Company completed a  public offering of 81,778,800 units at a price of C$0.45 per unit for gross  proceeds of C$36.8 million (the “October 2009 Offering”). Each unit was  comprised of one Common Share and one-half of one 2009 Warrant. A portion of  the net proceeds from the October 2009 Offering were used to fund the Rambler  transaction described below. The remaining net proceeds were used by the  Company for the acquisition of gold and other precious metals purchase  agreements (“Gold Streams”) from Metanor and Rambler. On October 19, 2010,  the Company completed a public offering of 78,768,100 units at a price of  C$0.73 per unit for gross proceeds of C$57.5 million (the “October 2010  Offering”). Each unit was comprised of one Common Share and one-quarter of  one common share purchase warrant (each whole common share purchase warrant,  a “2010 Warrant”). As adjusted to reflect the 5:1 consolidation of the  Company’s Common Shares described below, each five 2010 Warrants entitle the  holder to purchase one Common Share at a price of $5.00 until October 19,  2015. A portion of the net proceeds were used to fund the Brigus and Metanor  transactions described below. The remaining net proceeds were used for  general corporate and working capital purposes. On September 7, 2012, the  Company completed a public offering of 15,007,500 units at a price of C$10.00  per unit for gross proceeds of C$150,075,000 (the “September 2012 Offering”).  Each unit was comprised of one Common Share and one-third of one common share  purchase warrant (each whole common share purchase warrant, a “2012  Warrant”). Each 2012 Warrant entitles the holder to purchase one Common Share  at a price of $14.00 until September 7, 2017. - 4 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The net  proceeds from the September 2012 Offering have been and continue to be used  to finance the acquisition of Gold Streams and royalties (including the  Colossus and Mutiny Gold Streams described in greater detail throughout this  document) and for working capital purposes. Credit Facility On January 12,  2012, the Company entered into a revolving credit agreement with The Bank of  Nova Scotia, which allowed the Company to borrow up to $50 million (the  “Revolving Loan”). The Revolving Loan had a term of three years, which was  extendable by mutual consent of The Bank of Nova Scotia and the Company. At  December 31, 2012, the Company had not drawn down on the Revolving Loan and  the full balance remained available. On February 11, 2013, the Company  amended the Revolving Loan to increase the amount which the Company is  permitted to borrow thereunder to up to $100 million (the “Amended Revolving  Loan”). The Amended Revolving Loan has a term of four years, which is  extendable by mutual consent of The Bank of Nova Scotia, Bank of Montreal,  National Bank of Canada and the Company. The Amended Revolving Loan will  continue to be used for the acquisition of Gold Streams. The amounts drawn on  the Amended Revolving Loan are subject to interest at LIBOR plus 3.00%-4.25%  per annum, and the undrawn portion of the Amended Revolving Loan is subject  to a standby fee of 0.75%-1.05% per annum, dependent on the Company’s  leverage ratio. Mineral Interests Aurizona Gold Stream On May 15, 2009, the  Company entered into an agreement (the “Aurizona Gold Stream”) with Luna to purchase  17% of the life of mine gold produced from Luna’s Aurizona mine, located in  Brazil (the “Aurizona Mine”), for $17.8 million and 5,500,000 Common Shares  as an upfront payment, plus ongoing per ounce payments equal to the lesser of  $400 (subject to a 1% annual inflationary adjustment beginning on February 9,  2014) and the then prevailing market price per ounce of gold. On September  19, 2012, the Company agreed to contribute up to $10 million in capital  towards the Phase 1 expansion (the “Phase 1 Expansion”) at the Aurizona Mine.  The Company’s contribution towards the Phase 1 Expansion will be equal to 17%  of the capital costs incurred by Luna towards the Phase 1 Expansion to a  maximum contribution of $10 million. In addition, the Company committed to issue,  if requested by Luna, a $20 million non-revolving loan facility (“Luna Credit  Facility”) with a three year term, which may only be used to fund the Phase 1  Expansion and associated exploration costs. If issued, the Luna Credit  Facility will bear interest at a rate of 12% per annum and undrawn amounts  will be subject to a standby fee of 1.2%. In conjunction with the Company’s  contribution, Luna provided the Company with a contractual guarantee that the  Aurizona Mine will complete the Phase 1 Expansion by the end of 2013. The  Aurizona Mine is an open pit mine with a gravity and carbon-in-leach milling  operation which was expected to average over 60,000 ounces of gold production  annually over the expected mine life of 11 years. The Aurizona Mine commenced  commercial production on February 9, 2011. For further details regarding the  Aurizona Mine, see “Mineral Properties – Aurizona Mine, Brazil” below. If  Luna decides to develop an underground mine on the Aurizona property (the  “Aurizona Underground Mine”), the Company has the right to purchase 17% of  the gold from the underground mine at a per ounce price equal to the lesser  of $500 (subject to a 1% annual inflationary adjustment beginning three years  after the mine achieves commercial production (an “Inflationary Adjustment”))  and the then prevailing market price per ounce of gold. If Sandstorm Gold  elects to exercise its right to purchase gold from the Aurizona Underground  Mine, Sandstorm Gold will be required to pay 17% of the capital expenditures  incurred to determine the economic viability and to construct the mine. - 5 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Santa Elena  Gold Stream On May 15, 2009, the Company entered into an agreement (the  “Santa Elena Gold Stream”) with SilverCrest to purchase 20% of the life of  mine gold produced from SilverCrest’s Santa Elena mine, located in Mexico  (the “Santa Elena Mine”), for $12.0 million and 3,500,000 Common Shares as an  upfront payment, plus ongoing per ounce payments equal to the lesser of $350  (subject to a 1% annual inflationary adjustment beginning on July 13, 2014)  and the then prevailing market price per ounce of gold. The Santa Elena Mine  operates as a conventional open pit, heap-leach gold-silver operation. The  operating open pit mine life is expected to be 6.5 years. Over the operating mine  life, average annual metal production is expected to be approximately 30,000  ounces of gold. On July 13, 2011, the Santa Elena Mine achieved commercial  production. For further details regarding the Santa Elena Mine, see “Mineral  Properties – Santa Elena Mine, Mexico” below. If SilverCrest decides to  develop an underground mine on the Santa Elena property (the “Santa Elena  Underground Mine”), the Company has the right to purchase 20% of the gold  from the underground mine at a per ounce price equal to the lesser of $450  (subject to an Inflationary Adjustment) and the then prevailing market price  per ounce of gold. If Sandstorm Gold elects to exercise its right to purchase  gold from the Santa Elena Underground Mine, Sandstorm Gold will be required  to pay 20% of the capital expenditures incurred or projected (adjusted using  a payable gold to payable gold equivalent ratio of silver) to determine the  economic viability and to construct the underground mine and mill. Summit  Gold Stream On September 14, 2009 (as amended), the Company entered into an  agreement (the “Summit Gold Stream”) to purchase 50% of the first 10,000  ounces of gold produced, and 22% of the gold produced thereafter, from Santa  Fe’s Summit mine, located in the United States of America (the “Summit  Mine”), for $4.0 million as an upfront payment plus ongoing per ounce  payments equal to the lesser of $400 (subject to an Inflationary Adjustment)  and the then prevailing market price per ounce of gold. Santa Fe had provided  to Sandstorm Gold a completion guarantee under which Santa Fe may be required  to return a portion of the upfront payment if by June 30, 2012, the Summit  Mine has not produced a minimum of 4,000 ounces of gold in any consecutive  six month period. An extension to fulfil this guarantee from the original  date of April 7, 2011 was granted by the Company and, in exchange for  deferring the deadline, Santa Fe agreed to sell the Company 817 ounces of  gold at $400 per ounce. Currently, the Company is in discussions with Santa  Fe regarding the deferral of amounts due by Santa Fe to the Company pursuant  to the completion guarantee. The Summit Mine is an underground silver-gold  mine located in southwestern New Mexico, United States. It is a low  sulphidation epithermal deposit, which Santa Fe has been mining and stock  piling mineralized rock since September 2009. Mineralized rock from the  Summit Mine is transported to Santa Fe’s mill located in Lordsburg where a  gold-silver concentrate will be produced. In March 2010, Santa Fe began  commissioning the Lordsburg milling operations. Since then, Santa Fe has  begun shipping concentrate to a European smelter for recovery of gold. In  addition to concentrate sales, bulk flux shipments have been made to smelters  located in Arizona. Ming Gold Stream On March 4, 2010 (as amended), the  Company entered into an agreement (the “Ming Gold Stream”) to purchase 25% of  the first 175,000 ounces of gold produced, and 12% of the gold produced  thereafter, from Rambler’s Ming mine, located on the Baie Verte Peninsula in  Newfoundland, Canada (the “Ming Mine”). For consideration, the Company paid  $7.0 million in 2010 and $13.0 million in 2011 for a total of $20.0 million  in up front payments. - 6 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Rambler has  provided to Sandstorm Gold the following completion guarantees: (i) that  within 24 months of the commencement of production, Rambler must have  produced and sold a minimum of 24,000 ounces of payable gold or Sandstorm  Gold will have the option to require a partial refund of the upfront  deposits, and (ii) that Sandstorm Gold will receive minimum cash flows from  the contract of $3.6 million in the first year of production, $3.6 million in  the second year of production, and $3.1 million in the third year of  production. The Ming Mine is a past producing underground massive sulfide  copper-gold mine located in northwestern Newfoundland. The area has a strong  history of gold, base metal and industrial minerals mining. Mining at the  Ming Mine commenced in November 2011 and commercial production was declared  as of November 1, 2012. Ore is mined at the Ming Mine and trucked to the  Nugget Pond Mill. Until May 2012, the ore was being processed through the  cyanide leach circuit for gold only extraction. Beginning in mid-2012,  Rambler began producing a copper concentrate which also contains gold and  Rambler began shipping the copper concentrate from the nearby port of  Goodyear’s Cove in December 2012. For further details regarding the Ming  Mine, see “Mineral Properties – Ming Mine, Canada” below. Black Fox Gold  Stream On November 9, 2010, the Company entered into an agreement (the “Black  Fox Gold Stream”) with Brigus to purchase 12% of the life of mine gold  produced from Brigus’ Black Fox mine, located in Ontario, Canada (the “Black  Fox Mine”), for $56.3 million in upfront payments plus ongoing per ounce  payments equal to the lesser of $500 (subject to an inflationary adjustment  beginning in 2013, not to exceed 2% per annum) and the then prevailing market  price per ounce of gold. Brigus had the option (the “Repurchase Option”),  until January 1, 2013, to repurchase 50% of the gold to be purchased under  the Black Fox Gold Stream by making a $36.6 million payment to the Company.  Upon receipt of the payment from Brigus, the Company was to reduce the  percentage of gold to be purchased from the Black Fox Mine from 12% to 6%. In  November 2012, Brigus partially exercised the Repurchase Option and paid the  Company $24,396,668 which reduced the percentage of gold to be purchased by  the Company from the Black Fox Mine to 8%. The Company also had the right to  purchase, by remitting the per ounce payments (described above), 10% of the  gold produced from an area defined under the Black Fox Gold Stream as the  “Black Fox Extension”, covering a portion of Brigus’ Pike River property. As  a result of the partial exercise of the Repurchase Option by Brigus, the  Company’s right to purchase 10% of the gold produced from the Black Fox  Extension has been reduced to 6.3%. The Black Fox Mine is located outside of  Matheson, Ontario in the Timmins Gold District and has been in commercial  production since May 2009. The mine currently operates as both an open pit  mine and an underground mine. The open pit mine has been in commercial  production since May 2009 and the underground mine has been in commercial  production since October 2011. Ore is trucked to the Black Fox mill, which is  a 2,000 tonnes per day mill east of the mine. For further details regarding  the Black Fox Mine, see “Mineral Properties – Black Fox Mine, Canada” below.  Bachelor Lake Gold Stream On January 17, 2011, the Company entered into an  agreement (the “Bachelor Lake Gold Stream”) with Metanor to purchase 20% of  the life of mine gold produced from Metanor’s Bachelor Lake Gold project  located outside of Val d’Or, Quebec (the “Bachelor Lake Mine”), for an upfront  payment of $20.0 million plus ongoing per ounce payments equal to the lesser  of $500 and the then prevailing market price per ounce of gold. - 7 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Metanor has  provided a guarantee that the Company will receive a minimum of $1.0 million  in pre-tax cash flow in 2012; $5.5 million in pre-tax cash flow in 2013,  2014, and 2015; and $2.5 million in pre-tax cash flow in 2016. The Bachelor  Lake Mine is located outside of Val d’Or in Quebéc, Canada with commercial  production expected in the first half of 2013. Metanor completed a bulk  sample in 2012 and processed the ore in the Bachelor Lake Mill. Underground  development for ore and exploration purposes is ongoing. For further details  regarding the Bachelor Lake Mine, see “Mineral Properties – Bachelor Lake  Mine, Canada” below. Bracemac-McLeod Gold Stream On July 12, 2011 (as  amended), the Company entered into an agreement (the “Donner Gold Stream”)  with Donner via a back-to-back agreement with Sandstorm Metals & Energy  Ltd. (“Sandstorm Metals”) to purchase 24.5% of the life of mine gold produced  from the Bracemac-McLeod development project (the “Bracemac-McLeod Mine”).  For consideration, the Company made an upfront payment of $5.0 million in  June 2012 and an upfront payment of $3 million in November 2012 and ongoing  per ounce payments equal to the lesser of $350 per ounce of gold or gold  equivalent and the then prevailing market price of gold. The Company has  received a guarantee that the Company will receive minimum before tax cash  flows of $2 million in 2014; $2 million in 2015; $2 million in 2016; and $2  million in 2017. The Bracemac-McLeod Mine is a high grade volcanogenic  massive sulphide deposit located in the historical and prolific mining  district of Matagami, Quebec. Xstrata Canada Corporation (“Xstrata”) has been  operating in the Matagami district for almost 50 years with ten previously  operating mines and one current producing mine. Xstrata plans to utilize the  existing Matagami mill to produce concentrates of zinc and copper.  Bracemac-McLeod will be an underground mine, accessed via two ramps, and is  expected to begin ore production in 2013. Colossus Gold Stream On September  18, 2012, the Company entered into an agreement (the “Colossus Gold Stream”)  with Colossus and Colossus Mineração Ltda. to purchase, for a period of 40  years (which may be extended), an amount equal to 1.5% of the gold and 35% of  the platinum produced from the Serra Pelada mine, located in Brazil (the  “Serra Pelada Mine”), for $60 million plus ongoing per ounce payments equal  to the lesser of $400 per ounce for the gold and the then prevailing market  price per ounce of gold and the lesser of $200 per ounce for the platinum and  the then prevailing market price per ounce of platinum (subject to a 1%  annual inflationary adjustment beginning in September 2015). Colossus has the  option (the “Repurchase Option”), until April 1, 2015, to repurchase up to  50% of the Colossus Gold Stream by making a $39 million payment to the  Company, whereupon the percentage of gold and platinum which the Company is  entitled to purchase from Colossus will be decreased to 0.75% and 17.5%,  respectively. Colossus has guaranteed certain minimum annual deliveries for  the initial 10 year period, commencing in 2013, so long as the Serra Pelada  Mine is in operation. Colossus has also provided a guarantee that in the  event that the Serra Pelada Mine shuts down for a period of 24 months and the  Company has not recognized cash flow equal to the initial upfront deposit,  then Colossus will refund the balance to the Company. In addition, Colossus  has agreed to refund a pro-rata portion of the upfront deposit in the event  that the Serra Pelada Mine does not achieve a completion test within 48  months of funding. As part of the transaction, the Company also agreed to  purchase, for a period of 40 years (which may be extended), an amount equal  to 35% of the palladium produced from the Serra Pelada Mine (the “Palladium  Stream”) in exchange for paying a $15 million deposit plus ongoing payments  equal to the - 8 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | lesser of $100  per ounce of palladium and the then prevailing market price per ounce of  palladium (subject to a 1% annual inflationary adjustment beginning in  September 2015). Colossus has the option, until April 1, 2015, to repurchase  up to 50% of the Palladium Stream by making a $9.75 million payment to the  Company, whereupon the percentage of palladium which the Company is entitled  to purchase from Colossus will be decreased to 17.5%. Concurrently, the  Company entered into a similar back-to-back agreement with Sandstorm Metals  whereby Sandstorm Metals purchased the Palladium Stream from the Company in  exchange for issuing a promissory note which provides that the $15 million  will be paid to the Company, in cash or shares, by September 19, 2013. The  Serra Pelada Mine is a high-grade gold-platinum-palladium deposit in the  mineral and mining Carajas region in Para State, northern Brazil. The  existing infrastructure and accessibility to the site are excellent due to  the close proximity of a number of major mines. During the 1980s, Serra  Pelada hosted the largest ever gold rush in Latin America, with up to 80,000  artisanal miners producing 2 million ounces of gold, plus platinum and  palladium, from a hand dug open pit. Colossus has been involved in the  development of the Serra Pelada Mine since 2007 and is targeting initial  production by the end of 2013. The Serra Pelada Mine is fully permitted and  construction is underway. It is expected to be a high-grade, low-cost  polymetallic producer. For further details regarding the Serra Pelada Mine,  see “Mineral Properties – Serra Pelada Mine, Brazil” below. Mutiny Gold  Stream On December 5, 2012, the Company entered into an agreement (the  “Mutiny Gold Stream”) with Mutiny and three of its subsidiaries, Deflector  Gold Pty Ltd., Gullewa Gold Project Pty Ltd. and Central Infrastructure Pty  Ltd. to purchase, for a period of 40 years (which may be extended), an amount  equal to 15% of the gold produced from Mutiny’s Deflector project, located in  Western Australia (the “Deflector Mine”), for $9 million (the “Initial  Deposit”). The Company will make a future cash remittance of $29 million (the  “Second Deposit”) once Mutiny has received final mining permits for the  Deflector Mine as well as completing certain funding conditions. In addition,  the Company will make ongoing per ounce payments equal to the lesser of $500  per ounce for the gold and the then prevailing market price per ounce of gold  (subject to an annual variable inflationary adjustment beginning on the  fourth anniversary of the date on which the Second Deposit was made). If the  Deflector Mine produces more than 85,000 ounces of gold in a given year, the  Company will make a one time $4 million payment to Mutiny. Mutiny has the  option (the “Repurchase Option”), for a period of 36 months from the date on  which the Second Deposit was made, to repurchase up to 50% of the Mutiny Gold  Stream by making a payment equal to the greater of $24.7 million or the value  of 14,472 ounces of gold, whereupon the percentage of gold which the Company  is entitled to purchase from Mutiny will be decreased to 7.5%. If Mutiny  subsequently discovers and develops an additional mine within a defined area  outside of the area subject to the Mutiny Gold Stream, the Company has the  right, but not the obligation, to purchase 15% of the gold produced at a per  ounce price of $500 in exchange for the Company paying 15% of the capital  expenditures incurred for the development of such additional mine. The  Deflector Mine is a high-grade gold and copper deposit located in the South  Murchison, Western Australia. A definitive feasibility study completed in  October 2012 projects 55,000 ounces of annual gold production from the  Deflector Mine over a 7.5 year mine life. Production will begin from an open  pit operation and expand underground, with ore from both the open pit and  underground being processed through the existing Gullewa processing facility.  The facility is being upgraded and will include a floatation circuit as well  as a revamped mill and gravity circuit, providing plan capacity of 480,000  tonnes per year for oxide and transition ore during the first two years of  production and 380,000 tonnes per year for primary ore thereafter.- 9 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | Entrée Metal  Credits Agreement On February 14, 2013, the Company entered into a funding  agreement (the “Entrée Metal Credits Agreement”) with Entrée to purchase, for  a period of 50 years (which may be extended), metal credits equal to: (a)  6.77% of the gold, 6.77% of the silver and 0.50% of the copper produced from  the Hugo North Extension deposit (Lower Level); (b) 10.15% of the gold,  10.15% of the silver and 0.75% of the copper produced from the Hugo North  Extension deposit (Upper Level); (c) 5.13% of the gold, 5.13% of the silver  and 0.50% of the copper produced from the Heruga Deposit (Lower Level); and  (d) 7.70% of the gold, 7.70% of the silver and 0.75% of the copper produced  from the Heruga Deposit (Upper Level); (all of which are subject to adjustment  upon the occurrence of certain stated events).  The above-mentioned deposits are all  located in the South Gobi desert of Mongolia and form part of the Oyu Tolgoi  mining complex (the lower and upper levels of the Hugo North Extension and  the lower and upper levels of the Heruga Deposit collectively referred to  herein as the “Entrée JV Project”), for $40 million.  In addition, the Company will make ongoing  payments equal to the lesser of the prevailing market price and $220 per  ounce for the gold, $5 per ounce for the silver and $0.50 per pound for the  copper, until approximately 8.6 million ounces of gold, 40.3 million ounces  of silver and 9.1 billion pounds of copper have been produced from the Entrée  JV Project (the “Initial Fixed Prices”).   Thereafter, the ongoing payments will increase to the lesser of the  prevailing market price and $500 per ounce for the gold, $10 per ounce for  the silver and $1.10 per pound for the copper (the “Subsequent Fixed  Prices”). The Initial Fixed Prices are all subject to a 1% annual  inflationary adjustment beginning on the fourth anniversary of the date upon  which the Company commences receiving payable gold, silver and copper. The  Subsequent Fixed Prices are all subject to a 1% annual inflationary  adjustment beginning on the first anniversary of the date upon which the  fixed prices which the Company pays for the gold, silver and copper are  adjusted from the Initial Fixed Prices to the Subsequent Fixed Prices. The  Entrée Metal Credits Agreement does not require the delivery of physical  metal and Entrée may use future cash flows from any of its mineral property  interests to delivery metal credits to the Company to fulfill its  requirements under the Entrée Metal Credits Agreement. In addition, Entrée  has provided the Company with a right of first refusal on any future  production–based funding agreements on Entrée’s share of production from the  Entrée JV Project. Concurrently, the Company entered into a similar  back-to-back agreement with Sandstorm Metals whereby Sandstorm Metals  purchased the copper portion of the Entrée Metal Credits Agreement (the  “Copper Agreement”) from the Company in exchange for issuing $5 million in  shares of Sandstorm Metals to the Company. Upon receiving acceptance from the  TSX Venture Exchange (the “TSXV”), Sandstorm Metals issued 11,133,333 shares  to the Company at a price of C$0.45 per share. The Hugo North Extension is  one of the world’s richest porphyry copper-gold deposits and the Heruga  Deposit is a world class, copper-gold-molybdenum porphyry deposit.  Both are located in the South Gobi desert  of Mongolia, approximately 570 kilometres south of the capital city of  Ulaanbaatar and 80 kilometres north of the border with China.  The Hugo North Extension and the Heruga  Deposit are part of the Oyu Tolgoi mining complex and are being developed by  Oyu Tolgoi LLC, a subsidiary of Ivanhoe Mines Ltd. (now known as Turquoise  Hill Resources Ltd.) and the Government of Mongolia, and its project manager  Rio Tinto.  Entrée retains a 20%  interest in the resources of the Hugo North Extension and Heruga  deposits.  The first development  production from Entrée’s joint venture ground is expected in 2015. - 10 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | For further  details regarding the Entrée JV Project, see “Mineral Properties – Entrée JV  Project, Mongolia” below. Entrée Private Placement The Company has also  agreed to purchase 17,857,142 common shares of Entrée (the “Entrée Shares”)  at a price of C$0.56 per Entrée Share, for gross proceeds to Entrée of C$10  million (the “Private Placement”). Closing of the Private Placement has not  yet occurred and is subject to the approval of the Toronto Stock Exchange  (the “TSX”). Following completion of the Private Placement and before taking  into account any exercise by Rio Tinto International Holding Limited of its pre-emptive  rights, the Company expects that it will own approximately 12% of the issued  and outstanding common shares of Entrée. Entrée Ann Mason Royalty The Company  has also agreed to purchase from Entrée a 0.4% net smelter return royalty on  the future sale of any metals and minerals (the “Ann Mason Royalty”) derived  from a portion of the Ann Mason project (which includes the Ann Mason and  Blue Hill deposits, collectively referred to herein as the “Ann Mason  Deposits”), located in Nevada, USA.  In  consideration for the royalty, the Company has made a $5 million payment to  Entrée.  Entrée has granted the Company  a right of first refusal on any future royalty or metals stream financing for  the Ann Mason Deposits. Solitario Royalty On June 11, 2012, the Company  entered into agreements (the “Solitario Royalty”) with Solitario and Mt.  Hamilton LLC (“Hamilton”) pursuant to which it purchased, in perpetuity, a  2.4% net smelter return royalty (the “Mt. Hamilton NSR”) on the Mt. Hamilton  gold project, located in White Pine County, Nevada, USA (the “Mt. Hamilton  Project”) for $10 million (of which $6 million was paid in fiscal 2012 and  the remaining $4 million was paid in 2013). The Mt. Hamilton Project is held  by Mt. Hamilton which is 80% owned by Solitario and 20% owned by Ely Gold  & Minerals Inc. Mt. Hamilton has the option (the “Repurchase Option”),  until December 11, 2014, to repurchase the Mt. Hamilton NSR for $12 million  provided that Mt. Hamilton enters into a Gold Stream with the Company having  an upfront deposit of not less than $30 million. The Company has received a  guarantee from Mt. Hamilton that the Company will receive minimum before tax  cash flow of $10 million by December 21, 2022. In addition, Mt. Hamilton has  provided the Company with a right of first refusal on any future royalty or  metals stream financing for the Mt. Hamilton Project. Solitario has stated  that the Mt. Hamilton Project is expected to be an open pit mining operation  with heap leach processing and projected gold recoveries of 79%. The reserves  are contained within a well-defined ore body displaying excellent continuity  of mineralization that will be mined within a single open pit. Processing is  straight-forward with two-stage crushing to minus 3⁄4-inch, no agglomeration  and rapid gold leach rates, followed by conventional ADR  (adsorption-desorption-recovery) metal extraction. In September 2012,  Solitario announced its initial National Instrument 43-101 (“NI 43-101”)  resource estimate for the Seligman deposit on the Mt. Hamilton Project. The 53-hole  2012 drilling campaign was designed to achieve several objectives. The main  focus was to convert Seligman inferred resources in specific areas to  measured and indicated categories. Other objectives included obtaining sample  material to carry-out metallurgical and geochemical testing and to measure  geotechnical characteristics for mine planning at Seligman. Several holes  were also drilled at the Centennial gold deposit to convert inferred  resources to measured and indicated categories as well as to test potential  extensions of mineralization to the south. The Centennial deposit was the  subject of a Feasibility Study issued earlier in 2012 prepared by SRK  Consulting (U.S.) Inc. - 11 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | In December  2012, Solitario announced assay results for 25 new drill holes on its  recently completed 2012 Mt. Hamilton drilling program. Eight of the holes  were drilled within the vicinity of the Centennial ore body and 17 holes were  drilled in the Seligman deposit area. Magellan Royalties On May 11, 2012, the  Company entered into agreements (the “Magellan Royalties”) with Magellan,  Magellan Minerais Prospecção Geológica Ltda. (“Magellan Brazil”) and Chapleau  Exploracao Mineral Ltda. (“Chapleau”) pursuant to which it purchased, in  perpetuity, a 2.5% net smelter return royalty on Magellan’s Coringa gold  project in Para State, Brazil (the “Coringa Project”) owned by Chapleau ((the  “Coringa NSR”) and a 1.0% net smelter return royalty on Magellan’s Cuiú Cuiú  gold project in Para State, Brazil (the “Cuiú Cuiú Project”) owned by  Magellan Brazil (the “Cuiú Cuiú NSR”) for $7 million for the Coringa NSR and  $500,000 for the Cuiú Cuiú NSR, plus the subscription by the Company for one  million shares of Magellan at a price of C$0.50 per share for proceeds to  Magellan of C$500,000. In addition, Magellan and Chapleau provided the  Company with a right of first refusal on any future royalty or metals stream  financing for the Coringa Project and Magellan and Magellan Brazil provided  the Company with a right of first refusal on any future royalty or metals  stream financing for the Cuiú Cuiú Project. The Coringa Project is a narrow,  high grade vein system extending over an eighteen kilometre strike with  exploration upside. In December 2012, Magellan announced that they had SEDAR  filed a Preliminary Economic Assessment (“PEA”) on the Coringa Project. The  PEA was prepared by Global Resource Engineering Ltd. and was based on the  updated resource on the Coringa Project as defined in the NI 43-101 technical  report dated May 2012. Given the positive economics of the PEA, in January  2013, Magellan announced that it has engaged a group of prominent mining  industry consultants led by Ausenco Solutions Canada Inc. to complete a  feasibility study on the Coringa Project. The Cuiú Cuiú Project is located 180  kilometres southwest of Itaituba in northern Brazil where exploration work  has identified a series of major gold soil anomalies. The Cuiú Cuiú Project  previously produced an estimated 1.5 – 2 million ounces of alluvial gold. In  November 2012, Magellan announced that it had commenced an exploration  diamond drilling program at the Cuiú Cuiú Project to test three separate and  previously untested targets. The current drill program comprises a minimum of  1,500 metres and is expected to be completed in the first half of 2013.  Spin-out of Sandstorm Metals On May 13, 2010, Sandstorm Gold completed a plan  of arrangement (the “Arrangement”) with Sandstorm Metals. Under the  Arrangement, Sandstorm Gold spun-out its option agreement on the Eagle Lake  property owned by Eagle Plains Resources Ltd. located in Saskatchewan, Canada  and working capital of C$500,000 to Sandstorm Metals in exchange for  6,836,810 shares of Sandstorm Metals. Thereafter, Sandstorm Gold distributed  all of its shares of Sandstorm Metals to the existing Sandstorm Gold  shareholders. Consolidation of Common Shares On May 9, 2012, the Common  Shares were consolidated on a 5:1 basis. For clarification, only the Common  Shares were consolidated. The 2009 Warrants and the 2010 Warrants were not  consolidated, but their exercise terms were adjusted in accordance with the  provisions contained in their respective warrant indentures. Supplemental  warrant indentures describing these adjustments are filed on SEDAR at  www.sedar.com. - 12 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Listing on the  NYSE MKT LLC On August 20, 2012, the Common Shares commenced trading on the  NYSE MKT LLC (“NYSE MKT”) under the symbol “SAND”. The Company’s three series  of publicly traded warrants (namely the 2009 Warrants, the 2010 Warrants and  the 2012 Warrants) are not listed on the NYSE MKT. Listing on the Toronto  Stock Exchange On November 23, 2012, the Common Shares and the Company’s  three series of publicly traded warrants (namely the 2009 Warrants, the 2010  Warrants and the 2012 Warrants) commenced trading on the TSX and were  delisted from trading on the TSXV. Acquisition of 59.9% Interest in Premier  Royalty Inc. Subsequent to year-end and through a series of transactions, the  Company acquired 46,678,221 common shares (the “Premier Shares”) and  6,965,676 common share purchase warrants (the “Premier Warrants”) of Premier  Royalty Inc. (“Premier Royalty”). The 46,678,221 Premier Shares represent  approximately 59.9% of the current issued and outstanding Premier Shares.  Assuming the exercise of all of the Premier Warrants, the Company would then  own an aggregate of 53,643,897 Premium Shares, representing approximately  63.2% of the then issued and outstanding Premier Shares (on a partially  diluted basis). Premier Royalty is a public company listed on the TSX and it  has a base of existing royalties and a team which is capable of growth  through accretive acquisitions. Owning a controlling interest in Premier  Royalty provides the Company with continued exposure to smaller stream and  royalty acquisitions, allowing the Company’s team to focus on transactions  which are material to the Company’s shareholders. Transaction with Premier  Gold Mines Ltd. As part of the transactions through which the Company  acquired its 59.9% interest in Premier Royalty, the Company entered into a  share purchase agreement dated January 28, 2013 (the “Acquisition Agreement”)  with Premier Gold Mines Ltd. (“Premier Gold”) to acquire 33,655,821 Premier  Shares (the “Acquisition Shares”) and the Premier Warrants. Each Premier  Warrant entitles the Company to purchase one Premier Share at a price of  C$2.00, as follows: (a) 5,508,176 Premier Warrants are exercisable commencing  on June 4, 2013 and ending on December 4, 2016 (subject to expiry  acceleration terms); and (b) 1,457,500 Premier Warrants are exercisable until  October 7, 2014. Pursuant to the terms of the Acquisition Agreement, each  Acquisition Share and 0.207 of a Premier Warrant (together a “Premier Royalty  Unit”) were purchased by the Company at a price of C$2.10 per Premier Royalty  Unit. The purchase price was satisfied by the Company by the issuance to  Premier Gold of 5,604,277 special warrants (the “Special Warrants”), each  Special Warrant exercisable by Premier Gold, without payment of any  additional consideration, into one Common Share. The Company also provided  Premier Gold with a temporary six month credit facility of up to $70 million,  which will bear interest at a 0.3% premium to the interest rate which the  Company would be charged by its lenders if funds were drawn from its  revolving credit facility. The Acquisition Agreement contains a top-up  provision whereby if the Company acquires 100% of the remaining issued and  outstanding securities of Premier Royalty on or before the 18 month  anniversary of the execution date of the Acquisition Agreement (the “Subsequent  Acquisition”) and the average price of the securities of Premier Royalty  purchased through the Subsequent Acquisition is - 13 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | greater than  the per Premier Royalty Unit price paid by the Company under the Acquisition  Agreement, then the Company must pay Premier Gold an amount which is equal to  the difference between the per Premier Royalty Unit price paid under the  Acquisition Agreement and the average price of the voting securities of  Premier Royalty which Premier Gold would have received if Premier Gold had  sold the Acquisition Shares and the Premier Warrants to the Company pursuant  to the Subsequent Acquisition. Premier Gold is a public company listed on the  TSX. DESCRIPTION OF THE BUSINESS Sandstorm Gold is a non-operating gold  streaming company. Sandstorm Gold seeks to acquire Gold Streams from  companies that have advanced stage development projects or operating  mines.  In return for making a one-time  upfront payment to acquire a Gold Stream, Sandstorm Gold receives the right  to purchase, at a fixed price per unit, a percentage of a mine’s production  for the operating life of the asset.   Sandstorm Gold is focused on acquiring Gold Streams on mines with low  production costs, significant exploration potential and strong management  teams.  Sandstorm Gold currently has  ten Gold Streams, one with each of Luna, SilverCrest, Santa Fe, Rambler,  Brigus, Metanor, Donner, Colossus, Mutiny and Entrée. In addition to its ten  Gold Streams, Sandstorm Gold has four net smelter return (“NSR”) royalty  agreements - one with Solitario, two with Magellan and one with Entrée. A  royalty is a payment to a royalty holder by a property owner or an operator  of a property and is typically based on a percentage of the minerals or other  products produced or the revenues or profits generated from the property.  Royalties are not typically working interests in a property and, depending on  the nature of a royalty interest and the laws applicable to it and the  project, the royalty holder is generally not responsible for, and has no  obligation to contribute additional funds for any purpose, including, but not  limited to, operating or capital costs or environmental or reclamation  liabilities. An NSR royalty is generally based on the value of production or  net proceeds received by an operator from a smelter or refinery. These  proceeds are usually subject to deductions or charges for transportation,  insurance, smelting and refining costs as set out in the specific royalty  agreement. For gold royalties, the deductions are generally minimal. NSR’s  generally provide cash flow which is free of any operating or capital costs  and environmental liabilities. A smaller percentage NSR in a project can  effectively equate to the economic value of a larger percentage profit or  working interest in the same project. Gold Streams and royalties are an  alternative to other more conventional forms of financing, including equity,  convertible securities and debt financings which can be used to finance  mineral projects. Sandstorm Gold competes directly with these other sources  of capital to provide financing and assists other companies in the resource  industry grow their businesses, while acquiring attractive assets in the  process. Sandstorm Gold plans to grow and diversify its low cost production  profile through the acquisition of additional Gold Streams. Principal Product  The Company’s principal product is gold that it has agreed to purchase in the  future pursuant to its Gold Stream agreements with Luna, SilverCrest, Santa  Fe, Rambler, Brigus, Metanor, Donner, Colossus, Mutiny and Entrée. There is a  worldwide gold market into which the Company can sell the gold purchased  under the gold purchase agreements and, as a result, the Company will not be  dependent on a particular purchaser with regard to the sale of the gold that  it expects to acquire from the Aurizona, Santa Elena, Summit, Ming, Black  Fox, Bachelor Lake, Bracemac-McLeod, Serra Pelada, Deflector - 14 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | mines and the  Entrée JV Project in the future. The Company also expects to receive payments  pursuant to its NSR royalty agreements with Solitario, Magellan and Entrée.  Competitive Conditions Sandstorm Gold competes with other companies to  identify suitable Gold Streams and enter into agreements for the purchase of  gold and other precious metals. Operations Raw Materials The Company expects  to purchase gold from (i) the Aurizona Mine, the Summit Mine and the Serra  Pelada Mine for the lesser of $400 per ounce of payable gold (subject to an  Inflationary Adjustment) and the then prevailing market price per ounce of  gold; (ii) the Santa Elena Mine and the Bracemac-McLeod Mine for the lesser  of $350 per ounce of payable gold (subject to an Inflationary Adjustment for  the Santa Elena payments) and the then prevailing market price per ounce of  gold; (iii) the Ming Mine for no additional payment; (iv) the Black Fox Mine,  Bachelor Lake Mine and the Deflector Mine for the lesser of $500 per ounce of  payable gold (subject to an Inflationary Adjustment for the Black Fox  payments and the Deflector Mine payments) and the then prevailing market  price per ounce of gold; and (v) the Entrée JV Project, for the lesser of  $220 per ounce of gold and then prevailing market price per ounce of gold,  until approximately 8.6 million ounces of gold have been produced from the Entrée  JV Project and then thereafter at the lesser of $500 per ounce of gold and  the then prevailing market price per ounce of gold (with each set pricing  being subject to an Inflationary Adjustment). In addition, the Company  expects to receive payments pursuant to its NSR royalty agreements on the Mt.  Hamilton, Coringa, Cuiú Cuiú and Ann Mason projects. The Company also expects  to purchase platinum from the Serra Pelada Mine for the lesser of $200 per  ounce of platinum and the then prevailing market price per ounce of platinum  (subject to an Inflationary Adjustment). In addition, the Company expects to  purchase silver from the Entrée JV Project for the lesser of $5 per ounce of  silver and the then prevailing market price per ounce of silver until  approximately 40.3 million ounces of silver have been produced from the  Entrée JV Project and then thereafter at the lesser of $10 per ounce of  silver and then prevailing market price per ounce of silver (with each set  pricing being subject to an Inflationary Adjustment). Employees At the end of  the most recently completed financial year, the Company had 13 employees. No  management functions of the Company are performed to any substantial degree  by a person other than the directors or executive officers of the Company.  Foreign Interests The Company expects to be purchasing payable gold from the  Aurizona Mine in Brazil, payable gold from the Santa Elena Mine in Mexico,  payable gold from the Summit Mine in the United States, payable gold from the  Ming Mine, Black Fox Mine, Bachelor Lake Mine and Bracemac-McLeod Mine in  Canada, payable gold and platinum from the Serra Pelada Mine in Brazil,  payable gold from the Deflector Mine in Western Australia and gold and silver  from the Entrée JV Project in Mongolia. The Company also expects to receive  payments under its NSR royalty agreements on the Mt. Hamilton Project and the  Ann Mason Project in the United States and the Coringa Project and the Cuiú  Cuiú Project in Brazil. Any changes in regulations or shifts in political  attitudes in such foreign countries are beyond the control of the Company and  may adversely affect its business. The Company may be affected in varying  degrees by such factors as government regulations (or changes thereto) with  respect to the restrictions on production, export controls, income taxes,  expropriation of property, repatriation of profits, environmental - 15 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | legislation,  land use, water use, land claims of local people and mine safety. The effect  of these factors cannot be accurately predicted. See “Description of the  Business – Risk Factors – Risks Relating to the Mining Operations –  International Interests”. RISK FACTORS The operations of the Company are  speculative due to the nature of its business which is the investment in Gold  Streams. These risk factors could materially affect the Company’s future  operating results and could cause actual events to differ materially from  those described in forward-looking statements relating to the Company. The  risks described herein are not the only risks facing the Company. Additional  risks and uncertainties not currently known to the Company, or that the  Company currently deems immaterial, may also materially and adversely affect  its business. Risks Relating to the Company Global Financial Conditions Global  financial conditions have always been subject to volatility. Access to public  financing has been negatively impacted by sovereign debt concerns in Europe  and the United States, as well as concerns over global growth rates and  conditions. These factors may impact the ability of the Company to obtain  equity or debt financing in the future and, if obtained, on terms favourable  to the Company. Increased levels of volatility and market turmoil can  adversely impact the Company’s operations and the value and the price of the  Common Shares could to be adversely affected. Subject to the Same Risk  Factors as the Aurizona Mine, the Santa Elena Mine, the Summit Mine, the Ming  Mine, the Black Fox Mine, the Bachelor Lake Mine, the Bracemac-McLeod Mine,  the Serra Pelada Mine, the Deflector Mine, the Entrée JV Project, the Mt.  Hamilton Project, the Coringa Project, the Cuiú Cuiú Project and the Ann  Mason Project To the extent that they relate to the production of gold from,  or the continued operation of, the Aurizona Mine, Santa Elena Mine, Summit  Mine, Ming Mine, Black Fox Mine, Bachelor Lake Mine, Bracemac-McLeod Mine,  Serra Pelada Mine, Deflector Mine, Entrée JV Project, Mt. Hamilton Project,  Coringa Project, Cuiú Cuiú Project and Ann Mason Project (collectively the  “Mining Operations”), the Company will be subject to the risk factors  applicable to the operators of such mines or projects, as set forth below  under “Risks Relating to the Mining Operations.” In the section “Risks  Relating to the Mining Operations”, the “Mining Companies” refers to Luna,  SilverCrest, Santa Fe, Rambler, Brigus, Metanor, Donner, Colossus, Mutiny,  Entrée, Solitario and Magellan. Market Price of the Common Shares, 2009  Warrants, 2010 Warrants and 2012 Warrants The Common Shares, 2009 Warrants,  2010 Warrants and 2012 Warrants are all listed and posted for trading on the  TSX. The Common Shares are also listed and posted for trading on the NYSE  MKT. The Company’s business is in a stage of development and an investment in  the Company’s securities is highly speculative. Securities of companies  involved in the resource industry have experienced substantial volatility in  the past, often based on factors unrelated to the financial performance or  prospects of the companies involved. The price of the Common Shares, 2009  Warrants, 2010 Warrants and 2012 Warrants are also likely to be significantly  affected by short-term changes in commodity prices or in the Company’s  financial condition or results of operations as reflected in its quarterly  and annual financial statements. No Control Over Mining Operations The  Company has agreed to purchase: (a) an amount equal to 17% of gold produced  over the life of the Aurizona Mine, (b) an amount equal to 20% of the gold  produced over the life of the Santa Elena Mine, (c) an amount equal to 50% of  the first 10,000 ounces of payable gold produced and 22% - 16 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | thereafter over  the life of the Summit Mine, (d) an amount equal to 25% of the first 175,000  ounces of payable gold produced and 12% thereafter over the life of the Ming  Mine, (e) amount equal to 12% (subject to the applicable Repurchase Option  described above) of gold produced over the life of the Black Fox Mine, (f) an  amount equal to 20% of gold produced over the life of the Bachelor Lake Mine,  (g) an amount equal to 24.5% of gold produced over the life of the  Bracemac-McLeod Mine, (h) an amount equal to 1.5% of gold produced and 35% of  the platinum produced (subject to the applicable Repurchase Option described  above) over the life of the Serra Pelada Mine, (i) an amount equal to 15%  (subject to the applicable Repurchase Option described above) of the gold  produced over the life of the Deflector Mine, and (j) over the life of the  Entrée JV Project, an amount equal to 6.77% of each of the silver and gold  produced from the Hugo North Extension (Lower Level), an amount equal to  10.15% of each of the gold and silver produced from the Hugo North Extension  (Upper Level), an amount equal to 5.13% of each of the gold and silver  produced from the Heruga Deposit (Lower Level) and an amount equal to 7.70%  of each of the gold and silver produced from the Heruga Deposit (Upper Level.  In addition, the Company expects to receive payments under its NSR royalty  agreements on the Mt. Hamilton Project (2.4% NSR), Coringa Project (2.5% NSR),  Cuiú Cuiú Project (1.0% NSR) and Ann Mason Project (0.4% NSR). The Company  has no contractual rights relating to the operation of the Mining Operations.  Except for any payments which may be payable under the completion guarantees  relating to the Aurizona Mine, Santa Elena Mine, Summit Mine, Ming Mine,  Bachelor Lake Mine, Bracemac-McLeod Mine or Serra Pelada Mine, the Company  will not be entitled to any material compensation if any of the Mining  Operations shut down or discontinue their operations on a temporary or  permanent basis. All of the Mining Operations may not commence commercial  production within the time frames anticipated, if at all, and there can be no  assurance that the production from such Mining Operations will ultimately  meet forecasts or targets. At any time, any of the operators of the Mining  Operations or their successors may decide to suspend or discontinue  operations. The Company is subject to the risk that the Mining Operations may  shut down on a temporary or permanent basis due to issues including but not  limited to economic conditions, lack of financial capital, floods, fire,  weather related events, mechanical malfunctions, community or social related  issues, social unrest, exploration and other risks. These issues are common  in the mining industry and can occur frequently. There is a risk that the  carrying values of the Company’s assets may not be recoverable if the Mining  Companies operating the Mining Operations cannot raise additional finances to  continue to develop those assets. The exact effect of these factors cannot be  accurately predicted, but the combination of these factors may result in the  Mining Operations becoming uneconomic resulting in their shutdown and  closure. Acquisition Strategy As part of the Company’s business strategy, it  has sought and will continue to seek to purchase Gold Streams from third  party natural resource companies. In pursuit of such opportunities, the  Company may fail to select appropriate acquisition candidates or negotiate  acceptable arrangements, including arrangements to finance the acquisitions.  The Company cannot assure that it can complete any acquisition or business  arrangement that it pursues, or is pursuing, on favourable terms, or that any  acquisitions or business arrangements completed will ultimately benefit the  Company. Operating Model Risk The Company is not directly involved in the  ownership or operation of mines. The Gold Stream agreements that the Company  enters into are subject to most of the significant risks and rewards of a mining  company, with the primary exception that, under such agreements, the Company  acquires gold at a fixed cost. As a result of the Company’s operating model,  the cash flow of the Company is dependent upon the activities of third  parties which creates the risk that at any time those third parties may: (a)  have business interests or targets that are inconsistent with those of the  Company, (b) take action contrary to the Company’s policies or objectives,  (c) be unable or unwilling to fulfill their obligations under their  agreements with the Company, or (d) experience financial, operational or  other difficulties, including insolvency, which could limit a third party’s  ability to perform its obligations under the third party - 17 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | arrangements.  In addition, the termination of one or more of the Company’s Gold Stream  agreements could have a material adverse effect on the results of operations  or financial condition of the Company. Income Taxes The Company has a  subsidiary in Barbados which entered into Gold Streams in connection with the  Aurizona Mine, Santa Elena Mine and Summit Mine. No assurance can be given  that new taxation rules will not be enacted or that existing rules will not  be applied in a manner which could result in the Company’s future profits being  subject to increased levels of income tax. The Company’s international  transactions have not yet been reviewed by the Canada Revenue Agency and,  should such transactions be reviewed, no assurances can be given that the tax  matters will be resolved favourably. The Company’s remaining Gold Streams and  royalties have been entered into directly by Canadian based subsidiaries and  will, therefore, be subject to Canadian, and/or U.S. taxation, as the case  may be. Credit and Liquidity Risk The Company is exposed to counterparty  risks and liquidity risks including, but not limited to: (i) through the  companies with which the Company has gold and other precious metals purchase  agreements or royalty agreements; (ii) through financial institutions that  hold the Company’s cash and cash equivalents; (iii) through companies that  have payables to the Company; (iv) through the Company’s insurance providers;  and (v) through the Company’s lenders. The Company is also exposed to  liquidity risks in meeting its operating expenditure requirements in  instances where cash positions are unable to be maintained or appropriate  financing is unavailable. These factors may impact the ability of the Company  to obtain loans and other credit facilities in the future and, if obtained,  on terms favourable to the Company. If these risks materialize, the Company’s  operations could be adversely impacted and the trading price of the Common  Shares, 2009 Warrants, 2010 Warrants and 2012 Warrants could be adversely  affected. Dependence Upon Key Management Personnel The Company is dependent  upon a number of key management personnel. The Company’s ability to manage  its activities will depend in large part on the efforts of these individuals.  The Company faces intense competition for qualified personnel, and there can  be no assurance that the Company will be able to attract and retain such  personnel. The loss of the services of one or more of such key management  personnel could have a material adverse effect on the Company. Commodity  Prices The price of the Common Shares, 2009 Warrants, 2010 Warrants and 2012  Warrants and the Company’s financial results may be significantly adversely  affected by a decline in the price of gold. The price of gold fluctuates  widely, and is affected by numerous factors beyond the Company’s control,  including but not limited to, the sale or purchase of gold by various central  banks and financial institutions, interest rates, exchange rates, inflation  or deflation, fluctuation in the value of the United States dollar and foreign  currencies, global and regional supply and demand, and the political and  economic conditions of major gold-producing countries throughout the world.  The price of gold has fluctuated widely in recent years. In the event that  the prevailing market price of gold is less than $500 per ounce (subject to  the applicable Inflationary Adjustments in connection with the agreements  with Brigus and Mutiny) in the case of the agreements with Metanor, Brigus  and Mutiny, $400 per ounce (subject to the applicable Inflationary  Adjustments) in the case of the agreements with Luna, Santa Fe and Colossus  and $350 per ounce (subject to the applicable Inflationary Adjustment with  respect to SilverCrest) in the case of the agreement with SilverCrest and  Donner, the purchase price will be the then prevailing market price per ounce  of gold and the Company will not generate positive cash flow or earnings on  those Gold Streams. - 18 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | In the case of  the agreement with Entrée, in the event that the prevailing market price of  gold is less than $220 per ounce, until approximately 8.6 million ounces of  gold have been produced from the Entrée JV Project and then thereafter in the  event that the prevailing market price of gold is less than $500 per ounce  (with each set pricing being subject to the applicable Inflationary  Adjustment), the purchase price will be the then prevailing market price per  ounce of gold and the Company may not generate positive cash flow or earnings  on the Entrée Gold Stream. The following table sets forth the high, low and  annual average London Bullion Market Association afternoon fixed price per  ounce of gold in United States dollars for the past 10 years: Year Average  per Ounce of Gold ($) High (per ounce) ($) Low (per ounce) ($) 2012 1,668.98  1,791.75 1,540.00 2011 1,571.52 1,895.00 1,319.00 2010 1,224.52 1,421.00  1,058.00 2009 972.98 1,212.50 810.00 2008 871.96 1,011.25 712.50 2007 695.39  841.10 608.40 2006 603.77 725.00 524.75 2005 444.45 536.50 411.10 2004 409.17  454.20 375.00 2003 363.32 416.25 319.90 In addition, the price of the Common  Shares, 2009 Warrants, 2010 Warrants and 2012 Warrants and the Company’s  financial results may be significantly adversely affected by a decline in the  price of platinum. The price of platinum fluctuates widely and is affected by  numerous factors beyond the Company’s control such as international, economic  and political trends, expectations for inflation, currency exchange  fluctuations, interest rates, global or regional consumption patterns,  speculative activities and worldwide production levels. The effect of these  factors cannot be accurately predicted. The price of platinum has fluctuated  widely in recent years. Competition The Company competes with other companies  for Gold Streams and similar transactions, some of which may possess greater  financial and technical resources. Such competition may result in the Company  being unable to enter into desirable Gold Streams or similar transactions, to  recruit or retain qualified employees or to acquire the capital necessary to  fund its Gold Streams. Existing or future competition in the mining industry  could materially adversely affect the Company’s prospects for entering into  additional Gold Streams, royalties and similar transactions in the future.  Dividend Policy No dividends on the Common Shares have been paid by the  Company to date. The Company does not intend to declare or pay any cash  dividends in the foreseeable future. Payment of any future dividends will be  at the discretion of the Company’s Board of Directors after taking into  account many factors including the Company’s operating results, financial  condition and current and anticipated cash needs. Equity Price Risk The  Company holds shares, convertible debentures and warrants of other  exploration and mining companies with a combined market value as at December  31, 2012 of $7.7 million. Subsequent to year-end, the Company acquired a  59.9% interest in the issued and outstanding shares of Premier Royalty. The  Company is exposed to equity price risk as a result of holding long-term  investments in these companies. The daily exchange traded volume of these  shares, including the shares underlying the warrants, may not be sufficient  for the Company to liquidate its position in a short period of time without  potentially affecting - 19 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | the market  value of such shares. Just as investing in the Company is inherent with risks  such as those set out in this AIF, by investing in these other companies, the  Company is exposed to the risks associated with owing equity securities and  those risks inherent in the investee companies. The Company does not actively  trade these investments. [NTD TO MANAGEMENT: IS THERE AN ADDITIONAL RISK  RELATED TO OUR MAJORITY INTEREST IN PREMIER ROYALTY? IF SO, WE SHOULD STATE  WHAT WE PERCEIVE THAT RISK IS.] Conflicts of Interest Certain of the  directors and officers of the Company also serve as directors and/or officers  of other companies involved in natural resource exploration, development and  mining operations and consequently there exists the possibility for such  directors and officers to be in a position of conflict. Any decision made by  any of such directors and officers will be made in accordance with their  duties and obligations to deal fairly and in good faith with a view to the  best interests of the Company and its shareholders. In addition, each of the  directors is required to declare and refrain from voting on any matter in  which such directors may have a conflict of interest in accordance with the  procedures set forth in the Business Corporations Act (British Columbia) and  other applicable laws. Future Sales or Issuances of Securities Sandstorm Gold  may issue additional securities to finance future activities. Sandstorm Gold  cannot predict the size of future issuances of securities or the effect, if  any, that future issuances and sales of securities will have on the market  price of the Common Shares, 2009 Warrants, 2010 Warrants and 2012 Warrants.  Sales or issuances of substantial numbers of Common Shares, or the perception  that such sales could occur, may adversely affect prevailing market prices of  the Common Shares, 2009 Warrants, 2010 Warrants and 2012 Warrants. With any  additional sale or issuance of Common Shares or the exercise of the 2009  Warrants, 2010 Warrants and 2012 Warrants, investors will suffer dilution to  their voting power and Sandstorm Gold may experience dilution in its earnings  per share. The Company may fail to achieve and maintain the adequacy of  internal control over financial reporting pursuant to the requirements of the  Sarbanes-Oxley Act The Company is not yet required to assess its internal  controls in order to satisfy the requirements of Section 404 of the  Sarbanes-Oxley Act of 2002 (“SOX”). However, SOX will require an annual  assessment by management of the effectiveness of the Company’s internal  control over financial reporting and an attestation report by the Company’s  independent registered Chartered Accountants addressing this assessment  beginning with the Company’s fiscal year ended December 31, 2013. The Company  may, in the future, fail to achieve and maintain the adequacy of its internal  control over financial reporting, as such standards are modified,  supplemented or amended from time to time, and the Company may not be able to  ensure that it can conclude on an ongoing basis that it has effective  internal control over financial reporting in accordance with Section 404 of  SOX. The Company’s failure to satisfy the requirements of Section 404 of SOX  on an ongoing, timely basis could result in the loss of investor confidence  in the reliability of its financial statements which, in turn, could harm the  Company’s business and negatively impact the trading price of the Common  Shares, 2009 Warrants, 2010 Warrants and 2012 Warrants. In addition, any  failure to implement required new or improved controls, or difficulties  encountered in their implementation, could harm the Company’s operating  results or cause it to fail to meet its reporting obligations. There can be  no assurance that the Company will be able to remediate material weaknesses,  if any, identified in future periods, or maintain all of the controls  necessary for continued compliance, and there can be no assurance that the  Company will be able to retain sufficient skilled finance and accounting  personnel. No evaluation can provide complete assurance that the Company’s  internal control over financial reporting will detect or uncover all failures  of persons within the Company to disclose material information otherwise  required to be reported. The effectiveness of the Company’s controls and  procedures could also be limited by simple errors or faulty judgments. In  addition, as the Company continues to expand, the challenges involved in  implementing appropriate internal controls over financial reporting will  increase - 20 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | and will  require that the Company continue to improve its internal controls over  financial reporting. Although the Company intends to devote substantial time  and incur costs, as necessary, to ensure compliance, the Company cannot be  certain that it will be successful in complying with Section 404 on an  ongoing basis. Risks Relating to the Mining Operations Exploration,  Development and Operating Risks The exploration for, development, mining and  processing of mineral deposits involves significant risks which even a  combination of careful evaluation, experience and knowledge may not  eliminate. While the discovery of an ore body may result in substantial  rewards, few properties which are explored are ultimately developed into  producing mines. Major expenses may be required to establish ore reserves, to  develop metallurgical processes and to construct mining and processing  facilities at a particular site. It is impossible to ensure that the current  exploration programs planned by the Mining Companies will result in commercial  mining operations. Whether a mineral deposit will be commercially viable  depends on a number of factors, including the particular attributes of the  deposit, such as size, grade and proximity to infrastructure, as well as  metal prices which are highly cyclical and government regulations, including  regulations relating to prices, taxes, royalties, land tenure, land use,  importing and exporting of minerals and environmental protection. The exact  effect of these factors cannot be accurately predicted, but the combination  of these factors may result in one or more of the Mining Operations not  receiving an adequate return on invested capital. Mining operations generally  involve a high degree of risk. The Mining Operations are subject to most of  the hazards and risks normally encountered in the exploration, development  and production of ore, including unusual and unexpected geology formations,  rock bursts, cave-ins, pit-wall failures, flooding and other acts of God  which could shut down mining operations temporarily or permanently, and other  conditions involved in the drilling and removal of material, any of which  could result in damage to, or destruction of, mines and other producing  facilities, damage to life or property, environmental damage and possible legal  liability. Commodity Prices for Other Metals Produced from the Mining  Operations The price of metals has fluctuated widely in recent years, and  future serious price declines could cause continued development of and  commercial production from the Mining Operations to be impracticable.  Depending upon the price of other metals produced from the mines which  generate cash flow to the owners, cash flow from mining operations may not be  sufficient and such owners could be forced to discontinue production and may  lose their interest in, or may be forced to sell, some of their properties.  Future production from the Mining Operations is dependent on metal prices  that are adequate to make these properties and projects economically viable.  In addition to adversely affecting the mineral reserve estimates and  financial conditions, declining commodity prices can impact operations by  requiring a reassessment of the feasibility of a particular project. Such a  reassessment may be the result of a management decision or may be required  under financing arrangements related to a particular project. Even if the  project is ultimately determined to be economically viable, the need to  conduct such a reassessment may cause substantial delays or may interrupt  operations until the reassessment can be completed. Environmental Risks and  Hazards All phases of the Mining Operations are subject to environmental  regulation in the various jurisdictions in which they operate. Environmental  legislation is evolving in a manner which will require stricter standards and  enforcement, increased fines and penalties for non-compliance, more stringent  environmental assessments of proposed projects and heightened degree of  responsibility for companies and their officers, directors and employees.  There is no assurance that future changes in environmental - 21 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | regulation, if  any, will not adversely affect the Mining Operations. Environmental hazards  may exist on the properties which are unknown to the Mining Operations at  present which have been caused by previous or existing owners or operators of  the properties. One or more of the Mining Companies may become liable for  such environmental hazards caused by previous owners or operators of the  properties. Failure to comply with applicable laws, regulations and  permitting requirements may result in enforcement actions thereunder,  including orders issued by regulatory or judicial authorities causing  operations to cease or be curtailed, and may include corrective measures  requiring capital expenditures, installation of additional equipment or  remedial actions. Parties engaged in mining operations or in the exploration  or development of mineral properties may be required to compensate those  suffering loss or damage by reason of the mining activities and may have  civil or criminal fines or penalties imposed for violations of applicable  laws or regulations. Government Regulation, Permits and Licenses The  exploration and development activities related to the Mining Operations are  subject to various federal, provincial and local laws governing prospecting,  development, production, taxes, labour standards and occupational health,  mine safety, toxic substance and other matters. Exploration, development and  mining activities are also subject to various federal, provincial and local  laws and regulations relating to the protection of the environment. These  laws mandate, among other things, the maintenance of air and water quality  standards and land reclamation. These laws also place limitations on the  generation, transportation, storage and disposal of solid and hazardous  waste. Although the Company is not aware that the Mining Operations are not  currently carried out in accordance with all applicable rules and  regulations, no assurance can be given that new rules and regulations will  not be enacted or that existing rules and regulations will not be applied in  a manner which could limit or curtail production or development, mining and  milling or that more stringent implementation thereof could have a  substantial adverse impact on the Mining Operations. Government approvals,  licences and permits are currently, and will in the future be, required in  connection with the Mining Operations. To the extent such approvals are  required and not obtained, the Mining Operations may be curtailed or  prohibited from proceeding with planned operations, which could have an  impact on the business and financial condition of the Company. Failure to  comply with applicable laws, regulations and permitting requirements may  result in enforcement actions thereunder, including orders issued by  regulatory or judicial authorities causing operations to cease or be  curtailed. Amendments to current laws, regulations and permits governing  operations and activities of mining companies, or more stringent implementation  thereof, could have a material adverse impact on the Mining Operations and  cause reduction in levels of production or require abandonment or delays in  operations at the Mining Operations. Permitting The Mining Operations are  subject to receiving and maintaining permits from appropriate governmental  authorities. Although the Company believes that, other than as discussed  elsewhere herein, the owners and operators of the Mining Operations currently  have all required permits for their respective operations as currently  conducted, there is no assurance that delays will not occur in connection  with obtaining all necessary renewals of such permits for the existing  operations, additional permits for any possible future changes to operations  or additional permits associated with new legislation. Prior to any  development on any of the properties, permits from appropriate governmental  authorities may be required. There can be no assurance that the owners or  operators of the Mining Operations will continue to hold all permits  necessary to develop or continue operating at any particular property.  Failure to comply with applicable laws, regulations and permitting  requirements may result in enforcement actions thereunder, including orders  issued by regulatory or judicial authorities causing operations to cease or  be curtailed, and may include corrective measures requiring capital  expenditures, - 22 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | installation of  additional equipment or remedial actions. Parties engaged in mining  operations may be required to compensate those suffering loss or damage by  reason of the mining activities and may be liable for civil or criminal fines  or penalties imposed for violations of applicable laws or regulations.  Amendments to current laws, regulations and permitting requirements, or more  stringent application of existing laws, may have a material adverse impact on  the owners or operators of the Mining Operations, resulting in increased  capital expenditures or production costs, reduced levels of production at  producing properties or abandonment or delays in development of properties.  Uncertainty of Mineral Resource and Mineral Reserve Estimates The figures for  mineral resources and mineral reserves presented in this AIF and derived from  the technical reports filed in respect of the Aurizona Mine, the Santa Elena  Mine, the Black Fox Mine, the Ming Mine, the Bachelor Lake Mine and the  Entrée JV Project are estimates only and no assurance can be given that the  anticipated tonnage and grades will be achieved or that the expected level of  recovery will be realized. The ore grade actually recovered may differ from  the estimated grades of the mineral resources and mineral reserves. Such  figures have been determined based upon assumed metal prices and operating  costs. Replacement of Depleted Mineral Reserves The Mining Companies must  continually replace mineral reserves depleted by production to maintain  production levels over the long-term. Mineral reserves can be replaced by  expanding known ore bodies, locating new deposits or making acquisitions.  Exploration is highly speculative in nature. Once a site with mineralization  is discovered, it may take several years from the initial phases of drilling  until production is possible, during which time the economic feasibility of  production may change. Substantial expenditures are required to establish  proven and probable mineral reserves and to construct mining and processing  facilities. As a result, there is no assurance that current or future  exploration programs will be successful. There is a risk that depletion of  mineral reserves will not be offset by discoveries or acquisitions.  Competition The Mining Companies each face competition from a number of large  established companies with substantial capabilities, and greater financial and  technical resources. The Mining Companies compete with these other mining  companies for the acquisition of prospective, explored, developing and  developed mining and mineral properties, as well as for the recruitment and  retention of qualified directors, professional management, employees and  contractors. Dependence on Good Relations with Employees Production at the  Mining Operations depends on the efforts of its employees. There is intense  competition for geologists and persons with mining expertise. The ability of  the Mining Companies to hire and retain geologists and persons with mining  expertise is key to the Mining Operations. Further, relations with employees  may be affected by changes in the scheme of labour relations that may be  introduced by the relevant governmental authorities in the jurisdictions in  which the Mining Operations are conducted. Changes in such legislation or  otherwise in the Mining Companies’ relationships with their employees may  result in strikes, lockouts or other work stoppages, any of which could have  a material adverse effect on the Mining Operations, results of operations and  financial condition. Uninsured Risks The mining industry is subject to  significant risks that could result in damage to, or destruction of, mineral  properties or producing facilities, personal injury or death, environmental  damage, delays in mining, monetary losses and possible legal liability. Where  each of the Mining Companies considers it practical to do so, it maintains  insurance in amounts that it believes to be reasonable, including insurance -  23 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | for workers’  compensation, theft, general liability, all risk property, automobile,  directors and officers liability and fiduciary liability and others. Such  insurance, however, contains exclusions and limitations on coverage.  Accordingly, the Mining Companies’ insurance policies may not provide  coverage for all losses related to their business (and specifically do not  cover environmental liabilities and losses). The occurrence of losses,  liabilities or damage not covered by such insurance policies could have a  material adverse effect on the Mining Companies’ profitability, results of  operations and financial condition. Land Title Although title to the Mining  Operations has been reviewed by or on behalf of the Company, no assurances  can be given that there are no title defects affecting the Mining Operations.  The Mining Companies may not have conducted surveys of the claims in which  they hold direct or indirect interests; therefore, the precise area and location  of such claims may be in doubt. It is possible that the Mining Operations may  be subject to prior unregistered liens, agreements, transfers or claims,  including native land claims, and title may be affected by, among other  things, undetected defects. In addition, the Mining Companies may be unable  to operate the Mining Operations as permitted or to enforce its rights with  respect to the Mining Operations. Off-take Agreements Rambler is required by  contract to sell all concentrate produced from the Ming Mine to a third party  processor whose facilities are used to process the concentrate mined from the  property. Access to the facilities is regulated by an off-take agreement  agreed to between Rambler and the third party processor. The off-take agreement  establishes the price paid for the metals. The third party processor and the  Company may need to enter into an agreement or agreements that are similar  (as to payment terms) to the payment terms contained in the off-take  agreement between Rambler and the third party processor. Such a form of  agreement will streamline the payment process as between the third party  processor and Rambler, and the third party processor and the Company. If  Rambler (on behalf of the Company) and the third party processor are unable  to negotiate such an agreement, Rambler and the Company will be obliged to  accept payments “in kind” from the third party processor under the existing  off-take agreement. International Interests The operations at the Aurizona  Mine, Serra Pelada Mine, Coringa Project and Cuiú Cuiú Project are conducted  in Brazil, the operations at the Santa Elena Mine are conducted in Mexico,  the operations at the Summit Mine, the Mt. Hamilton Project and the Ann Mason  Project are conducted in the United States, the operations at the Deflector  Mine are conducted in Australia, the operations at the Entrée JV Project are  conducted in Mongolia and the operations at the Ming Mine, Bachelor Lake  Mine, Bracemac-McLeod Mine and the Black Fox Mine are conducted in Canada,  and as such the operations are all exposed to various levels of political,  economic and other risks and uncertainties. These risks and uncertainties  include, but are not limited to, terrorism, hostage taking, military  repression, crime, political instability, currency controls, extreme  fluctuations in currency exchange rates, high rates of inflation, labour  unrest, the risks of war or civil unrest, expropriation and nationalization,  renegotiation or nullification of existing concessions, licenses, permits,  approvals and contracts, illegal mining, changes in taxation policies,  restrictions on foreign exchange and repatriation, and changing political  conditions and governmental regulations relating to foreign investment and  the mining business. Changes, if any, in mining or investment policies or  shifts in political attitude in Brazil, Mexico, the United States, Australia,  Mongolia or Canada may adversely affect the operations or profitability of  the Mining Operations in these countries. Operations may be affected in  varying degrees by government regulations with respect to, but not limited  to, restrictions on production, price controls, export controls, currency  remittance, income taxes, expropriation of property, foreign investment,  maintenance of claims, environmental legislation, land use, land claims of  local people, water use, mine safety and the rewarding of contracts to local  contractors or requiring foreign contractors to employ citizens of, or  purchase supplies from, a particular jurisdiction. Failure to comply strictly  with applicable laws, regulations and local - 24 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | practices  relating to mineral right applications and tenure, could result in loss,  reduction or expropriation of entitlements, or the imposition of additional  local or foreign parties as joint venture partners with carried or other  interests. The occurrence of these various factors and uncertainties cannot  be accurately predicted and could have an adverse effect on the Mining  Operations. Construction Risk Some of the Mining Operations are currently at  the construction stage of their project development. Development of the  projects are subject to numerous risks, including, but not limited to, delays  in obtaining equipment, material and services essential to developing the  projects in a timely manner; changes in environmental or other government  regulations; currency exchange rates; labour shortages; and fluctuation in  metal prices. There can be no assurance that the Mining Operations will have  the financial, technical and operational resources to complete the  development of the Mining Operations in accordance with current expectations  or at all. Indigenous Peoples Various international and national laws, codes,  resolutions, conventions, guidelines, and other materials relate to the  rights of indigenous peoples. The Company holds royalty or streaming  interests on operations located in some areas presently or previously  inhabited or used by indigenous peoples. Many of these materials impose  obligations on government to respect the rights of indigenous people. Some  mandate that government consult with indigenous people regarding government  actions which may affect indigenous people, including actions to approve or  grant mining rights or permits. The obligations of government and private  parties under the various international and national materials pertaining to  indigenous people continue to evolve and be defined. The Mining Companies’  current or future operations are subject to a risk that one or more groups of  indigenous people may oppose continued operation, further development, or new  development on those projects or operations on which the Company holds a  royalty or streaming interest. Such opposition may be directed through legal  or administrative proceedings or protests, roadblocks or other forms of  public expression against the Company or the owner/operator’s activities.  Opposition by indigenous people to such activities may require modification  of or preclude operation or development of projects or may require the  entering into of agreements with indigenous people. Claims and protests of  indigenous people may disrupt or delay activities of the owners/operators of  the Company’s royalty/stream assets. MINERAL PROPERTIES The Company is in the  mining industry and will have 100% of its operating revenue from the sale of  gold and other precious metals that it has agreed to purchase from other  mining companies, including pursuant to the Aurizona Gold Stream, the Santa  Elena Gold Stream, the Summit Gold Stream, the Ming Gold Stream, the Black  Fox Gold Stream, the Bachelor Lake Gold Stream, the Donner Gold Stream, the  Colossus Gold Stream, the Mutiny Gold Stream and the Entrée Gold Stream (all  as described above) and from payments which it expects to receive pursuant to  its NSR royalty agreements on the Mt. Hamilton, Coringa, Cuiú Cuiú and Ann  Mason projects. The Company intends to sell the gold and other precious  metals which it acquires at the worldwide market price. CIM Standards  Definitions The estimated Mineral Reserves and Mineral Resources for the Aurizona  Mine, the Santa Elena Mine, the Ming Mine, the Black Fox Mine, the Bachelor  Lake Mine and the Entrée JV Project have been estimated in accordance with  the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) —  Definitions adopted by CIM Council on November 27, 2010 (the “CIM  Standards”). - 25 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The term  “Mineral Resource” is a concentration or occurrence of diamonds, natura,  solid, inorganic material, or natural solid fossilized organic material  including base and precious metals, coal, and industrial minerals in or on  the Earth’s crust in such form and quantity and of such a grade or quality  that it has reasonable prospects for economic extraction. The location,  quantity, grade, geological characteristics and continuity of a Mineral Resource  are known, estimated or interpreted from specific geological evidence and  knowledge. Mineral Resources are sub-divided, in order of increasing  geological confidence, into Inferred, Indicated and Measured categories. The  term “Inferred Mineral Resource” is that part of a Mineral Resource for which  quantity and grade or quality can be estimated on the basis of geological  evidence and limited sampling and reasonably assumed, but not verified,  geological and grade continuity. The estimate is based on limited information  and sampling gathered through appropriate techniques from locations such as  outcrops, trenches, pits, workings and drill holes. The term “Indicated  Mineral Resource” is that part of a Mineral Resource for which quantity,  grade or quality, densities, shape and physical characteristics, can be  estimated with a level of confidence sufficient to allow the appropriate  application of technical and economic parameters, to support mine planning  and evaluation of the economic viability of the deposit. The estimate is  based on detailed and reliable exploration and testing information gathered  through appropriate techniques from locations such as outcrops, trenches,  pits, workings and drill holes that are spaced closely enough for geological  and grade continuity to be reasonably assumed. The term “Measured Mineral  Resource” is that part of a Mineral Resource for which quantity, grade or  quality, densities, shape and physical characteristics are so well  established that they can be estimated with confidence sufficient to allow  the appropriate application of technical and economic parameters, to support  production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and testing  information gathered through appropriate techniques from locations such as  outcrops, trenches, pits, workings and drill holes that are spaced closely  enough to confirm both geological and grade continuity. The term “Mineral  Reserve” is the economically mineable part of a Measured or Indicated Mineral  Resource demonstrated by at least a Preliminary Feasibility Study. This study  must include adequate information on mining, processing, metallurgical,  economic and other relevant factors that demonstrate, at the time of  reporting, that economic extraction can be justified. A Mineral Reserve  includes diluting materials and allowances for losses that may occur when the  material is mined. The term “Probable Mineral Reserve” is the economically  mineable part of an Indicated Mineral Resource and, in some circumstances, a  Measured Mineral Resource demonstrated by at least a Preliminary Feasibility  Study. This study must include adequate information on mining, processing,  metallurgical, economic and other relevant factors that demonstrate, at the  time of reporting, that economic extraction can be justified. The term  “Proven Mineral Reserve” is the economically mineable part of a Measured  Mineral Resource demonstrated by at least a Preliminary Feasibility Study.  This study must include adequate information on mining, processing,  metallurgical, economic and other relevant factors that demonstrate, at the  time of reporting, that economic extraction is justified. - 26 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Cautionary Note  to United States Investors Concerning Estimates of Measured, Indicated and  Inferred Mineral Resources This section and elsewhere in this AIF use the  terms “Measured”, “Indicated” and “Inferred” Mineral Resources. United States  investors are advised that while such terms are recognized and required by  Canadian regulations, the United States Securities and Exchange Commission  (the “SEC”) does not recognize them. “Inferred Mineral Resources” have a  great amount of uncertainty as to their existence, and as to their economic  and legal feasibility. It cannot be assumed that all or any part of an  Inferred Mineral Resource will ever be upgraded to a higher category. Under  Canadian rules, estimates of Inferred Mineral Resources may not form the  basis of feasibility or other economic studies. United States investors are  cautioned not to assume that all or any part of Measured or Indicated Mineral  Resources will ever be converted into Mineral Reserves. United States  investors are also cautioned not to assume that all or any part of an  Inferred Mineral Resource exists, or is economically or legally mineable.  Aurizona Mine, Brazil A technical report was prepared in accordance with NI  43-101 entitled “NI 43-101 Technical Report, Mineração Aurizona S.A.,  Aurizona Mine” dated January 23, 2012 (the “Aurizona Report”). The following  description of the Aurizona Mine has been summarized, in part, from the  Aurizona Report and readers should consult the Aurizona Report to obtain  further particulars regarding the Aurizona Mine. The Aurizona Report is  available for review under Luna’s profile on the SEDAR website located at  www.sedar.com. Information that updates the information in the Aurizona  Report has been provided by Luna. The Aurizona Mine is owned by Mineração  Aurizona S.A. (“Mineração Aurizona”), which is in turn wholly-owned by  Aurizona Goldfields Corporation (“Aurizona Goldfields”), a wholly-owned  subsidiary of Luna. On December 21, 2006, Luna entered into a share purchase  agreement with Eldorado Gold (“Eldorado”), Brascan Recursos Naturais S.A. and  Brascan Natural Resources S.A. (collectively, “Brascan”) pursuant to which it  acquired 100% of the issued shares of Aurizona Goldfields. Project  Description and Location The Aurizona Mine is located in the municipality of  Godofredo Viana (population 10,500) in the state of Maranhão. The area is on  the northern coast of Brazil, 220 kilometres northwest of the state capital  city of São Luís. The mineral licenses for the Aurizona Mine are 100% held by  Luna. At the time of the Aurizona Report, the property included a mining  license (Portaria de Lavra) totalling 9,981 hectares and three exploration  licenses totalling approximately 5,427 hectares. The mining license is  subject to a government royalty of 1%, which is applied to gross gold sales  less costs incurred in selling, transportation and insurance. The exploration  licenses are subject to annual payments to the Brazilian government and  completion of a work report and are subject to an annual exploration tax  according to the claim size and time held. There are no other royalties on  gold production from the property. The Aurizona Mine contains the Piaba and  Tatajuba gold deposits and over ten near mine exploration targets. The Piaba  resource, reserve and associated mine facilities described in the Aurizona  Report are completely contained within Brazilian Mines Department (“DNPM”)  Mining License 800.256/78. The Tatajuba resource described in the Aurizona  Report is completely contained within exploration license 806.042/03. The  other near mine exploration targets are located within DNPM Mining Permit  800.256/78 and DNPM Exploration Permits 860.042/03, 806.195/07 and  806.111/96. - 27 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The Aurizona  coastal region is Federal Government land administered by the Serviço do  Patrimônio da União, an institution within the Ministry of Economy.  Nevertheless the region has been occupied for many years by squatters and  garimpeiros. In September 2007, Mineração Aurizona completed a detailed  survey of the title situation of land occupiers and garimpeiros, which  included a register of the recognized occupiers, a ground survey of the area  occupied, and an inventory of any improvements or assets on the lands. In  October 2007, Mineração Aurizona started a buyout program of the plots  considered necessary for the project that were not already owned. By December  31, 2011, 1,011.5 hectares of the surface rights required for the project had  been acquired. As the plots are acquired, the Mineração Aurizona property  fence is adjusted and sign-posted as required by law. Mineração Aurizona has  almost completed infrastructure development and the development of various  management plans. The social and environmental plans have been developed. The  Aurizona region has a long tradition as a gold producer, almost solely from  garimpeiros. An inspection conducted in 1989 by the Ministry of Mines and  Energy and the State Secretariat for the Environment for Maranhão verified  the uncontrolled exploitation of the area by prospectors and concluded the  area was contaminated. During the Environmental Impact Study/Environmental  Impact Assessment process, levels of mercury were measured. In August 2009,  several soil, sediments, and water mercury assays were performed on areas  potentially impacted by mining activities by garimpeiros in the Aurizona  region. Mercury was detected in soil and sediment samples; however, the  values were lower than reference values required for contaminated areas  intervention, the record of which is chronicled in environmental resolution  Conama Number 420/2009. Accessibility, Climate, Local Resources,  Infrastructure and Physiography The Aurizona Mine is on the Atlantic coast of  Brazil within three kilometres of an ocean inlet. All year road access is  available from the state capital cities of Belém, Pará (400 kilometres), and  São Luís, Maranhão (320 kilometres), the latter requiring a ro-ro ferry  transfer from São Luís island to the mainland. The main federal highway  connecting both capitals, BR316, has been resurfaced in both states and is in  good condition. State highway MA206 connects BR316 with the town of Godofredo  Viana, a distance of 110 kilometres, from which the property is accessed by  16 kilometres of a newly surfaced 8 metre wide laterite road. Mineração  Aurizona, in partnership with local authorities, has upgraded the landing  strip at Godofredo Viana. Travel time between Aurizona and São Luis or Belém  is approximately one hour by light aircraft. The coastline is characterized  by the occurrence of mangrove swamps and has an elevation of two metres to  three metres above mean sea level in and on the edges of saline waterways.  The vegetation consists of grasses in the low-lying areas with denser  tropical vegetation consisting of larger shrubs, vines, and hardwood tropical  trees on the low rounded hills. The elevation in the project area varies from  0 to 90 metres above mean sea level. The isthmus that joins the Aurizona  Peninsula to the mainland consists of low-lying flats that are subject to  mild flooding at high neap tides. This does not affect project access. The  climate is tropical, often humid, with annual rainfalls of up to 3,000  millimetres. The rainy season occurs from mid-December to mid-July, with the  heaviest rains from January through April. The area is close to the equator  and has relatively steady temperatures, ranging from an average low of 24  degrees Celsius to an average high of 31 degrees Celsius. The Aurizona Mine  location benefits from a local population of inexpensive labour and abundant  water. The principal facilities in support of the processing plant are a  tailings storage facility, a gold room, assay laboratory and three 2.5  kilovolt diesel generators, as well as office space. There is a plant  maintenance workshop that currently exists as well as a two bay heavy  equipment workshop. These temporary workshops will be replaced by Luna with a  permanent workshop in late 2012 or 2013. There is currently a man-camp  located at Aurizona with an infirmary, offices, lodging facilities and  kitchen/dining - 28 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | area for  serving meals to the current staff of more than 800 employees including short  term contractors. Power is controlled by Companhía Energética do Maranhão  (“CEMAR”). Luna is only assured of three megawatts of power off-peak and none  during the three hour evening peak. As a result, three 2.5 kilovolt diesel  generators act as back-up for power outages and during peak load periods. It  is predicted that CEMAR will have sufficient capacity for continual  operations in 2012. Water in the camp area is drawn from an existing cased  well which has a flow rate of four cubic metres per hour. Potable water also  comes from the municipal water treatment plant. Process water comes from the  tailings dam, old pit workings and recirculation of solution recovered during  the thickening process. The life of mine demand is estimated at 382 cubic  metres per hour. The tailings from the carbon-in-leach process report to a  thickener, which concentrates the solids and recovers a large part of the  water as thickener overflow. An estimated 190 cubic metres per hour of  thickener supernatant, with a residual cyanide concentration of 80 milligrams  per litre, is recycled to process, and the tailings pulp sent to the  neutralization process before final discharge to the tailings dam. The  make-up water supply for the grinding process of 176 cubic metres per hour  comes from the supernatant of the tailings dam. History The Aurizona region  has a history of gold production dating back to the Jesuits in the 17th  Century. Garimpeiros have been active in the region, on a discontinuous basis  since that time. In 1978, Brascan, through subsidiary companies, started  exploration programs in the alluvium that lasted through 1985. In 1988, a  subsidiary of Brascan, Mineração Aurizona Ltd., received a license to mine  within DNPM area 800.256/78. In 1991, an application for a five-year  suspension of mining operations was applied for with the purpose of carrying  out an evaluation of the primary gold resources. In 1991, a joint venture  between Cesbra, a Brascan subsidiary, and Unamgen Mineração e Metalurgia S.A.  (“Unamgen”), an exploration subsidiary of Gencor Ltd. (“Gencor”), was formed.  Unamgen assumed the position of operator of the joint venture company,  Mineração Aurizona S.A. Exploration from 1991 to 1993 consisted of an  airborne magnetic and radiometric heliborne survey, photogrammetry survey,  soil geochemical surveys, geologic mapping and sampling of garimpeiro pits  and follow-up ground geophysical surveys consisting of induced polarization,  electromagnetic, magnetic, and gamma spectrometry. The Piaba deposit was  drill tested with auger, reverse circulation (“RC”), and diamond drilling.  Auger drilling consisted of shallow drilling to an average depth of eight  metres to verify gold anomalies. Unamgen drilled 142 diamond drillholes and  67 RC holes, initially on 50 metre spaced sections, later infilled to 25  metres. In 1994, following preliminary process tests, more comprehensive test  works were carried out in Brazil at the Metais de Goías S/A metallurgical  process facility in Goiania, and at the laboratory of Paulo Abib Engenharia  S.A. The emphasis at that time was on gravity concentration techniques. An  economic viability study and environmental impact assessment were completed.  This work terminated in a positive economic evaluation of working the Piaba  deposit using mining equipment from Cesbra’s tin operations in Rondonia, a  gravity-only process plant and diesel powered electricity generation. At the  same time, a technical study report and an environmental impact assessment to  mine the weathered part of the Piaba deposit were submitted to government  agencies and public audiences were held. Unamgen terminated its joint venture  with Cesbra in 1995. In 1996, Gencor agreed to sell its gold assets in Brazil  to Eldorado and in the process introduced Eldorado to Cesbra. This resulted in  a new project joint venture with Unamgen, as a subsidiary of Eldorado, as the  operator. In 1997, an exploration program commenced that included 61 diamond  drillholes and 26 rotary circulation drillholes of the extensions of the  Piaba deposit along strike to the east and west, scout drilling at some of  the nearby targets and evaluation of targets. Regional exploration was  conducted involving reconnaissance-scale mapping, sampling of garimpeiro pits  and evaluation of specific regional targets via soil sampling. Airborne  magnetic and radiometric surveys were completed. - 29 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | In 1999,  Brascan commissioned a gravity pilot plant to test the Saprolite and tailings  at Piaba. The pilot plant testwork was completed in February 2000. The  property was on care and maintenance from 2000 until March 2007, when Luna  commenced a new exploration program at Aurizona focused on the Piaba and  Tatajuba deposits. Historic production from the Aurizona properties has been  by garimpeiros mining in small pits and cannot be quantified. Luna’s  production for the period 2010 – 2011 is detailed herein under “Mining  Operations”. Geological Setting Regional Geology The Aurizona Mine is located  within the São Luís Craton (“SLC”), defined as the Precambrian continental  crust at the border between the states of Pará and Maranhão in northern  Brazil. The SLC extends approximately 400 kilometres east-west and 120  kilometres north-south and consists of a metavolcano-sedimentary succession  (“Aurizona Group”), subordinate volcanic rocks and several granitoid suites  (“Tromaí Intrusive Suite”) which are covered by Phanerozoic sedimentary basin  deposits and recent coastal sediments. Collectively the Aurizona Group and  Tromaí Intrusive Suite are referred to as the Granite Greenstone Terrain of  Northwest Maranhão. The SLC and the Palaeoproterozoic basement rocks of the Neoproterozoic  Gurupi Belt in northern Brazil are part of an orogen having an early  accretionary phase at 2,240 to 2,150 million years and a late collisional  phase. Despite the extent of the SLC, outcrop is limited to discontinuous  erosive and tectonic windows within the sedimentary cover. The western limit  of the SLC is defined by the Tracuatuea Intrusive Suite and the eastern limit  is placed approximately 30 kilometres east of the state capital of Maranhão,  São Luís. The southern boundary is defined by the regionally important north  by northwest-south by southeast trending sinistral strike-slip Tentugal Shear  Zone, which contains the gold deposits of the Gurupi Gold Belt. The northern  contact is not well defined due to the Phanerozoic coastal basins. Local Geology  The Aurizona Mine area is underlain by east by northeast trending greenstone  volcano sediments and acid intrusives of the Aurizona Group and Tromai  Intrusive Suite. There is a strong structural control on the gold  mineralization in the project area which can be seen by the close association  of magnetic lineaments and the gold deposits and the satellite near mine  exploration targets. Mineralization is hosted within district scale shear  zones and generally at or close to contacts with a volcano sedimentary unit  which generally forms the footwall to the mineralization. The Piaba deposit  is a 3.3 kilometre long, east by northeast trending, orogenic gold deposit  hosted in greenstone belt rocks of the Aurizona Group located within the east  by northeast trending Aurizona Shear Zone (“ASZ”). The ASZ has been traced  for several kilometres and also hosts the Tatajuba gold deposit, the  principal near mine deposit at Aurizona, located 2.4 kilometres west by  southwest of Piaba. The footwall of the Piaba deposit is a distinctive  volcano sedimentary unit which dips steeply to the north. The principal  hanging wall lithologies are felsic intrusives, predominantly tonalite and  quartz porphyrys and dacite volcanics intruded by minor dikes. Metamorphic  grade is greenschist faces (chlorite zone). The host units are intensely  overprinted by several hydrothermal and mineralizing events including  sericitization, chloritization, graphitization, carbonatization and  silicification which frequently mask the host protolith. Gold mineralization  preferentially occurs within the tonalite and quartz porphyry units due to  the fact that they are more brittle and fractured more easily than the  volcanics and thus provided greater permeability for mineralizing gold  fluids. Piaba is a large, low-grade, deeply weathered (average depth of  oxidation is 60 metres) tabular-shaped gold deposit dipping north by  northwest. Zones (shoots) of high-grade gold mineralization controlled by  oblique sheer zones occur within the lower-grade deposit. These high-grade  zones are controlled by structures oblique to the main orebody strike.  Drilling to date has been focused on defining the strike and depth extent of  the main orebody. However, future drilling will also target the high-grade  lodes at depth. - 30 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The widest  portion of the Piaba deposit is located at a bend in the ASZ. Analysis of  structural fabrics and textures in drill core shows limited shear fabrics  (confined to graphitic slip planes) which indicate that the maximum depth of  current drilling has mainly tested the brittle and brittle-ductile transition  zones of the Piaba deposit. The deposit is currently open at depth on all  drill sections within the 3.3 kilometre strike. The Tatajuba and near mine  exploration targets are hosted by similar lithological units and structural  settings as the Piaba deposit. Property Geology The Piaba deposit represents  an east by northeast trending mineralized envelope of low-grade gold  mineralization within a major east by northeast trending shear zone in the  Aurizona Group. The mineralized envelope displays several flexures along its  length though it is not significantly faulted. There is a clearcut  stratigraphic and structural footwall to the south of the deposit defined by  a sub-vertical to steeply north-dipping volcano-sedimentary package. Graded  bedding, erosional channels and truncated trough bedding within the laminated  sediment footwall indicate the movement is up to the north (normal). Shearing  occurs locally along the footwall contact. Exploration In January 2010, Luna  retained Reconsult Geofísica Ltda. to reprocess and interpret the historic  airborne magnetic and radiometric survey data collected by Unamgen in 1991  and 1996. Both surveys were reprocessed and merged using Geosoft Oasis Montaj  7.1.1, followed by interpretation and integration with existing geological  maps and databases in order to improve understanding of geologic controls on  gold mineralization in the Aurizona Mine. The data quality of the surveys is  excellent and no survey correction or decorrugation was required. Due to the  deep tropical weathering in the area the radiometric data shows mainly cover  sequences and drainage patterns. However, the magnetic database provided  important information on the structural control on the Piaba and Tatajuba  deposits and near mine targets at Aurizona. Luna has completed soil sampling  and reconnaissance-scale mapping programs covering much of the Aurizona Mine  area with the objective of defining the surface gold anomalies associated  with the near mine targets. These programs are supervised by trained mining  technicians who also map the soil and laterite profiles during sampling. Luna  also conducts rock grab sampling concomitantly. The soil sampling programs  have identified the following near mine targets at Aurizona: Boa Esperança,  Tatajuba Extensions, Ferradura, Conceição, São Lourenço, Pirocaua SE, Micote,  Genipapo, Barriguda, Agenor and Pico. Luna has completed several auger drill  grids at Aurizona. Initially the auger drill programs were focused on condemnation  exploration programs in areas intended for mine areas and infrastructure.  These were completed in 2009. Auger drilling is now focused on the systematic  testing of the near mine targets associated with structural lineaments and in  the shallow drilling of the Piaba and Tatajuba deposits. Luna conducted  diamond drilling in 2007 and 2008 on the Piaba and Tatajuba deposits. Between  May 2009 and November 2011, Luna completed a diamond drill program at the  Piaba deposit totalling 153 holes. The drill program was designed to  systematically test for down-dip extensions to mineralization well beneath  the limit of the lower resource boundary. Luna has conducted detailed  geological studies at the Piaba and Tatajuba deposits including relogging of  all drill core and RC chips, petrographic analysis of select lithologies and  field mapping. Core logging was done using a dedicated core logging software  called GeoticLOG. This work has significantly improved understanding of  deposit geology and ore controls. A new geologic model was finalized for  Piaba in 2011 and updates are made as holes are drilled and new data  received. Luna plans to drill test certain near mine exploration targets and  to conduct a deep drill program into the Piaba structure in addition to  completing ground geophysical surveys and auger drill programs. The  exploration programs conducted by Luna and its predecessors are appropriate  for a gold deposits occurring in a relatively narrow structures. The Aurizona  property has few rock outcrops and geophysical surveys were used to identify  structural trends and to refine the geological interpretation of - 31 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | the area.  Airborne magnetic and radiometric surveys were used to identify structural  trends and ground electro-resistivity was used in locating the footwall of  the structure. Because of the lack of outcrop, mapping is most useful in the  garimpeiro pits. The historic drilling includes diamond core and reverse  circulation. Luna is using predominantly diamond core drilling in the  resource areas. The holes are oriented perpendicular to the strike of the  structure and angled to intersect the structure at angles between 40 degrees  and 20 degrees. Mineralization Piaba is a large low-grade gold deposit within  a major shear zone containing second and possibly third order structures  which control high-grade ore shoots attaining values of 30 grams per tonne of  gold and higher. Mineralization occurs within the volcanic sequence though  preferentially occurs within tonalite and quartz porphyry intrusions, due to  their competency contrast with the volcanics. The widest portion of the  deposit is located at a bend in the ASZ which is an area where increased  extension likely occurred. Mineralization is strongly associated with quartz  veining. The alteration assemblage is composed of quartz, chlorite, carbonate  (ankerite and calcite), graphite, alkali feldspar, sericite, pyrite and minor  amounts of tourmaline. Mineralization and alteration are strong to intense  particularly within the centre of the deposit. Metamorphic grade is chlorite  zone greenschist facies. Quartz occurs in vein form and in silicification  fronts. Chlorite occurs as matrix replacive and in veinlets and its intensity  is likely linked to the occurrence of mafic wall rocks. Ankerite and  carbonate occur as matrix replacement and in veinlets and commonly as  accessory minerals in quartz veins. Tourmaline occurs solely in quartz veins.  Both tourmaline and calcite appear to increase with depth. Pyrite occurs in  quartz veins although it predominantly forms a matrix replacement,  particularly at deeper levels. Minor pyrrhotite occurs at deeper levels.  Graphite alteration is locally moderate to strong and is closely associated  with gold mineralization. The graphite may have been sourced from the  footwall at deeper levels in the ASZ early in the deposit formation and  subsequently acted as a reductant trap for gold mineralizing fluids. Graphite  introduction also occurred along oblique shears. No significant base metals  occur at Piaba. Drilling Luna has conducted drilling programs on the Piaba  and Tatajuba deposits since its acquisition of the property in January 2007.  Prior to drill mobilization, the Exploration Manager obtains all required  permits. A field visit to the planned drill sites is conducted to document  and photograph the area, vegetation type, proximity to any preservation areas  and access. All drilling is carried out with diamond drill rigs with HQ (63.5  millimetres) core tools. The drill hole locations, orientation, and final  depth were checked by the Senior Project Mining Technician prior to start of  drilling each hole. Azimuth and dip of each drill hole are checked by the  Senior Project Mining Technician at regular intervals during drilling to  monitor any deviation which may occur. The drill company is informed of the  strict requirement to collect quality core samples. Onsite supervision is  maintained and site inspection visits are carried out at regular intervals to  ensure that the contractor is working within the contractual parameters. All  holes outside the mine area are sealed and marked with a concrete plinth and  metal marker showing hole azimuth and dip and are surveyed by the company  surveyor. Approximately one metre of casing is left in the top of holes to  permanently mark the collar and to allow for down-hole surveys which are  carried out on all inclined holes using a Devico, a miniature multishot  instrument with a 30 centimetre diameter, or similar instrument. This unit is  lowered to the bottom of the hole following completion and readings are taken  on 50 metre intervals. The core boxes are labelled and arrows drawn so that  the core is systematically laid in the box. A wooden marker or aluminum tag  is placed in the core box after each run and the metres down hole is written  on the marker. Transfer of the core from the core barrel to the box is done  as carefully as possible so that no core is allowed to fall on the ground. A  plastic or rubber mallet is used to loosen core from the core tube. As soon  as a core box is full a lid is properly secured. Regular inspections are  carried out to ensure that core boxes are clean, sturdy and suitable for core  storage. Intervals of ground core and any other irregularities are documented  to address potential inaccuracies in depth labelling of the core boxes. - 32  - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Sampling and  Analysis Sample interval selection is the responsibility of the geologist  responsible for core logging. The sample interval is a nominal 2.0 metre in  barren hanging wall rocks which is reduced 1 metre or less within the  mineralization. Sample intervals are selected on the basis of lithology,  mineralogy, weathering, structures and veins. Sample intervals are marked on  the core box. The geologist marks the core using red and yellow crayons in  two parallel lines separated by 0.3 centimetres. The red line is marked on  the right side of the core, the yellow line on the left. An arrow is marked  pointing down hole on the left side of the core. Core is marked respecting  any foliation (perpendicular) and in a manner which best produces as similar  core halves as possible. An electric saw is used to cut hard drill core.  Saprolite and soft rock which would suffer washing during cutting is cut  manually with a large knife or machete. The saw is washed between each sample  interval. When approved by the geologist, the core is sent for sampling. Core  is consistently sampled on one side (right – red line). The remaining core  half is stored in the box for future reference. The core logging geologist  checks the sample intervals with the sampler. Samples are placed in  pre-labelled thick polythene bags and closed with sealed ties. All samples  are double bagged. A sample ticket is placed inside the bag. The sample bags  are then placed in cloth sacks which are sewn shut, addressed and compiled  into batches. The sample sequence, including the internal control samples  (blanks, certified reference material and duplicates) are recorded on a  sampling log. When the drill core has been sampled it is stored in the core  shed for future reference. The core recovery is good to excellent, averaging  over 95%. Soil samples are collected at a nominal depth of 0.50 metres on a  100 metres x 25 metres north south orientated grid which is surveyed using a  total station. Several types of ancillary data are also recorded. Samples are  assayed for gold via fire assay (30 grams) and a suite of 35 elements using  inductively coupled plasma atomic emission spectroscopy (“ICP-AES”) at ALS  Chemex Laboratory Group (“ALS Chemex”), Belo Horizonte (preparation) and ALS  Chemex, Lima (assay and induced couple plasma (“ICP”)). Luna operates a  laboratory Quality Assurance/Quality control (“QA/QC”) program for soil  samples which involves the insertion of blanks, certified reference materials  (“CRM”) and sample duplicates at the rate of 6% of each sample per batch. The  soil sampling programs have identified the following near mine targets at  Aurizona: Boa Esperança, Tatajuba Extensions, Ferradura, Conceição, São  Lourenço, Pirocaua SE, Mocote, Genipapo, Barriguda, Agenor and Pico. Soil  sampling has also been completed over the LDW area located on the western  side of the Tromai River estuary and several new gold in soil anomalies have  been defined in this area. Luna initially used ACME Analytical Laboratories  Ltd (“Acme”) as its primary lab for sample preparation (Maraba, Pará) and  analysis (Vancouver, Canada). Acme is accredited under the general ISO  9001:2000 regulations, but does not have ISO 17025 laboratory accreditation.  During this time Luna used ALS Chemex in Belo Horizonte as its secondary  laboratory. Since January 2008, Luna has been using ALS Chemex in Belo  Horizonte and Goiania as its primary preparation laboratory and ALS Chemex in  Lima Peru and Perth Australia as its primary assay laboratory. From September  2011 to December 2011, Luna also used Acme Labs in Goiania and Santiago,  Chile as a primary lab due to backlogs at ALS Chemex. ALS Chemex in Lima has  ISO 17025 accreditation and ALS Chemex Vancouver has ISO 17025 accreditation.  For both laboratories Luna has a policy of a minimum of 80% passing 10 mesh for  all drill core samples and 85% passing 200 mesh for all drill core pulps.  After January 3, 2008, a 1 kilogram split is pulverized to 85% passing 200  mesh (Acme – 0.50 kilogram split) to better address any coarse gold  associated with high-grade quartz veins. For drill samples prepped by Acme,  approximately 125 gram aliquot of each sample was shipped to Acme in  Vancouver, Canada and Santiago Chile via international courier for assay. All  drill samples assayed by Acme were analyzed in sequential order. Lower  detection limit for this package is 0.01 grams per tonne of gold. Over limit  samples, greater than 10 grams per tonne gold, were automatically analyzed  via gravimetric gold analysis. For all drill samples prepped by ALS Chemex,  approximately 150 gram aliquot of each sample is shipped to ALS Chemex in  Lima, Peru or Perth, Australia for assay. In 2008, ALS Chemex assayed samples  in Belo Horizonte. All drill samples assayed by ALS Chemex are analyzed in  sequential order. The lower detection limit for this package is 0.005 grams  per tonne of gold. Over limit samples greater than 10 grams per tonne of gold  are automatically assayed via an ore grade package.- 33 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | All reject and  pulp samples are returned to Luna on a regular basis. These samples are  checked for consistency and to ensure that return QA/QC samples correspond  with the originals. They are sealed in new sample bags and stored for future  reference. QA/QC is conducted to ensure high quality drill data. The  Exploration Manager is responsible for all the activities related to QA/QC  including: preparation and validation of standards and blanks or purchase of  standards; selection and validation of primary and secondary laboratories;  drafting of laboratory contract; preparation of logic table of failures;  supervision on the insertion of control materials; supervision of core  sampling and batch assembly; lab audit(s); validation of batches and  uploading to diamond drill hole database; corrective actions when necessary;  record keeping; submission of samples for check assays at secondary lab;  submission of coarse crush replicates and core duplicates; submission of  coarse rejects for particle size analysis; variance studies; and QA/QC  report. The laboratory is instructed to prepare and analyze all samples in numerical  order. This is adhered to and is backed-up by unannounced site visits to the  sample preparation laboratories by Luna technical personnel. These site  visits are documented in audit reports. Internal control samples were  inserted randomly within the drill core sequence by the core logging  geologist. The location of the control samples is noted on the sample log and  GeoticLOG database. Luna utilized a system of random insertion which makes  identification of sample controls by the laboratory more difficult. Internal  control samples have the same numbering system as the drill core samples. The  analyses of the blanks and SRM’s indicate that Acme and ALS Chemex perform at  an acceptable level. The historic data was not available in digital format,  but all the paper lab certificates had been preserved in excellent quality.  Luna prepared the database from the historic data as a double entry (two  people independently entered the data and then checked the resulting  databases). Assays from Luna’s drilling program is received in digital format  and entered directly into the database, thus eliminating transcription  errors. SRK received the database for the 2009 drilling in December 2009 and  added the data to its existing database. SRK checked approximately 20% of the  2009 data against the original assay certificates and found no errors. In  2010, Luna performed another detailed audit of the database. SRK compared 30  assay certificates against the drill hole database and found no error. It is  author of the Aurizona Report’s opinion that the database has been suitably  verified and is suitable for use in resource estimation. Security of Samples  Drill core sample security from the drill site to the analytical laboratory  is a vital component of the drilling program. Luna’s procedure involves  direct drill management, secure transportation methods, secure sampling and  logging areas and secure sample storage facilities. Core is not left  unattended and all core and sample storage facilities are locked and  monitored when not in use. Drill samples are accompanied from project to the  analytical laboratory by Luna personnel. Core is secured from outside  inspection and interference or accidental internal interference. Chain of  custody is strictly maintained during transportation, sample collection,  shipping and preparation to avoid tampering or inappropriate release of  privileged information. Assay results are maintained confidential and only  released to those on a need to know basis. - 34 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Mineral  Resource and Mineral Reserve Estimates The following table sets forth the  estimated consolidated Mineral Resources for the Aurizona Mine, including the  Piaba and Tatajuba deposits, inclusive of Mineral Reserves, as at December 4,  2011: Deposit Classification Tonnes (000s) Gold Grade (grams per tonne)  Contained Gold (ounces) Piaba Pit Constrained(1) Measured 10,782 1.13 391,000  Indicated 62,939 1.28 2,596,000 Measured and Indicated 73,721 1.26 2,987,000  Inferred 2,469 1.47 117,000 Piaba Pit Underground(2) Measured - - - Indicated  2,738 1.29 113,000 Measured and Indicated 2,738 1.29 113,000 Inferred 10,901  1.56 547,000 Tatajuba(3) Measured - - - Indicated 1,554 1.31 66,000 Measured  and Indicated 1,554 1.31 66,000 Inferred 1,859 0.94 56,000 Total Measured  10,782 1.13 391,000 Indicated 67,231 1.28 2,775,000 Measured and Indicated  78,013 1.26 3,166,000 Inferred 15,229 1.47 720,000 Note: Luna has not updated  its Mineral Reserves estimate for the Aurizona Mine based on the new Mineral  Resources set out in the table above. For greater clarity, Luna’s Mineral  Reserves estimate effective as of July 13, 2010 previously disclosed by the  Company is based on an earlier Mineral Resource estimate which did not  include the additional drilling data. (1) Piaba pit constrained resources are  reported at a cut-off grade of 0.30 g/t Au inside a pit optimization shell  based on a gold price of $1,500 per ounce. (2) Piaba underground resources  are reported at a cut-off grade of 0.75 g/t Au outside the pit optimization  shell. The cut-off grade has been calculated at a gold price of $1,500 per  ounce. (3) Tatajuba database consists of 4,740 meters in 45 diamond drill  holes (2008). The Tatajuba resources are not constrained by a pit  optimization shell and are reported at a cutoff grade of 0.30 g/t Au. (4)  25g/t Au capping at Piaba and 10 g/t Au capping at Tatajuba. Block dimensions  are 10m x 10m in the xy plane and 3m on the z axis. Piaba database consists  of 69,578 meters consisting of 335 diamond drill holes and 142 reverse  circulation holes and 374 auger drill holes. (5) All Mineral Resources have  been estimated in accordance with the CIM Standards and NI 43-101. (6)  Mineral resources that are not mineral reserves do not have a demonstrated  economic viability. (7) The Mineral Resource estimates set out in the above  table have been reviewed and verified by Leah Mach, C.P.G., M.Sc., Principal  Resource Geologist of SRK Consulting (US) (“SRK”), who is a qualified person  under NI 43-101. Mining Operations Mining operations at the Piaba deposit are  characterized by a moderately low strip ratio pit with a combination of hard  and soft rock mining, which will be challenged by periods of heavy rainfall.  Mining operations are carried out using a combination of three mine  contractors and Luna equipment. Drilling and blasting is carried out by a  local contractor. Luna staff are responsible for the mining of ore, waste and  ancillary operations. In addition, Luna staff provide oversight for grade  control, mine planning and environmental compliance. The environmental impact  studies were completed in 1995 and submitted to regulatory authorities for  review and approval. SEMA-MA issued Aurizona with an Operating License (“LO”)  on July 11, 2007 to initiate the mining and processing of gold within the  limits of DNPM Mining License 800.256/1978, an - 35 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | area comprising  9,981.47hectares. The LO, No. 259/2007, was renewed and a new LO, No.  108/2010 was issued in March 2010 valid until March 2012. The renewal process  for this license was initiated in November 2011. The LO was conditional upon  Aurizona filing a conceptual closure plan, an update to the impacted areas  and revised project description. This was submitted in October 2007. In 2009,  2010 and 2011, updates to clearing and operating licenses and a license for  effluent dilution or pumping water from the tailings dam were issued and  additional licenses for control of substances were issued by the army and  police. Gold markets are global and mature and there are no restrictions on  gold sales outside of Brazil. Luna currently produces high-grade doré gold  product that is transported by air to Umicore Refinery and then to London for  sale. The Aurizona Mine is an open pit mine with a gravity and  carbon-in-leach milling operation expected to average over 60,000 ounces of  gold production annually over the expected mine life of 11 years. During  2011, a total of 1,286,584 tonnes of ore were processed at an average gold  grade of 1.29 Au g/t, resulting in an adjusted production of 41,898 ounces of  gold. This represents an overall gold recovery of 78.6%. Metallurgical  studies have indicated that ultimate gold extractions of about 90% are  achievable from saprolite ore and about 93% from fresh and transition ore.  The process plant is not achieving these anticipated gold recoveries and Luna  has budged for the installation of a carbon regeneration kiln in 2012 to  address this issue. Luna’s production for the period 2010 – 2011 is shown  below: Description 2010 2011 Total Dry Ore (Tonnes) Au g/t Contained Ounces  Recovery % Recovered Ounces 747,329 1.15 27,642 59 15,759 1,275,652 1.30  53,313 78 43,055 2,023,001 1.22 80,955 78 58,814 Exploration and Development  Luna has recently completed a large drill program at the Piaba deposit that  has converted Inferred Mineral Resources to Indicated or Measured Mineral  Resources, in addition to increasing the total Mineral Resource. Luna plans  to drill test certain near mine exploration targets and to conduct a deep  drill program into the Piaba structure in addition to completing ground  geophysical surveys. Aurizona Mine Milestones Current activities at the  Aurizona Mine include • In January 2013, Luna reported that the Aurizona Mine  produced 21,547 ounces of gold during the fourth quarter of 2012. Luna’s  total gold production for 2012 from the Aurizona Mine was 74,269 ounces. •  Luna approved a planned Phase 1 expansion program at Aurizona at a total cost  estimate of $49.7 million to increase that facility’s annual production  capacity to a targeted 125,000 ounces of gold. The expansion project is  expected to reach completion in the fourth quarter of 2013. Commissioning and  installation of a new carbon reactivation kiln, intense leach reactor and  electro-winning cells is expected to occur during the first half of 2013. -  36 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Santa Elena  Mine, Sonora, Mexico A technical report was prepared in accordance with NI  43-101 entitled “NI-43-101 Technical Report, Reserve Update for the Santa  Elena Open Pit and Preliminary Assessment for the Santa Elena and Cruz de  Mayo Expansion Project, Sonora, Mexico” dated April 1, 2011 and amended May  11, 2011 (the “Santa Elena Report”). The following description of the Santa  Elena Mine has been summarized, in part, from the Santa Elena Report and  readers should consult the Santa Elena Report to obtain further particulars  regarding the Santa Elena Mine. The Santa Elena Report is available for  review under SilverCrest’s profile on the SEDAR website located at  www.sedar.com. Information that updates the information in the Santa Elena  Report has been provided by SilverCrest. Project Description and Location The  Santa Elena Mine is located in Sonora, Mexico, approximately 150 kilometres  northeast of the state capital city of Hermosillo and seven kilometres east  of Banámichi. The Santa Elena Mine consists of six contiguous concessions  (the “Santa Elena Concessions”) covering approximately 3,160 hectares  registered in the name of Nusantara de México, S.A. de C.V. (“Nusantara”), a  wholly owned subsidiary of SilverCrest. On December 8, 2005, Nusantara  entered into an option agreement with Tungsteno de Baviacora (“Tungsteno”) to  acquire a 100% interest in the Santa Elena Mine through staged option  payments over 5 years for a total cost of $4 million paid in cash and  SilverCrest shares. Payments were completed in August of 2009 with  SilverCrest owning 100% of the Santa Elena Mine with no underlying royalties.  SilverCrest has maintained all of the necessary permits for exploration and  facilities at the Santa Elena Mine. In 2009, the Santa Elena Mine received  its Manifestacion de Impacto Ambiental (“MIA”) and operating permit from  Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT). Taxes based on  the surface area of the concession are approximately $10,000 per year and  have been paid to date. All mining concessions in Mexico are valid for a  period of 50 years. A mining concession in Mexico does not confer any  ownership of surface rights. The Santa Elena Concessions are located on Ejido  land, and on November 12, 2007, an agreement with the surface owners was  signed which allows SilverCrest access and authorization to complete mining  exploration activities for 20 years for a maximum of 841 hectares.  Accessibility, Climate, Local Resources, Infrastructure and Physiography The  Santa Elena Mine can be accessed year round by paved highways, secondary  roads and gravel maintained roads. The Santa Elena Mine is located on the  western edge of the northtrending Sierra Madre Occidental mountain range  geographically adjacent to the Sonora River Valley. Property elevations range  from 800 metres above sea level to 1,000 metres above sea level. The property  is located on the range front at a low elevation in relation to the mountains  immediately east and west, respectively. Vegetation is scarce during the dry  season. During the wet season, various blooming cactus, trees and grasses are  abundant in drainage areas. The climate is typical Sonoran desert. Average  rainfall is estimated at 300 millimetres per annum. There are two wet  seasons, July to September and October to May. The summer rains are short  with heavy thunderstorms whereas the winter rains are longer and lighter.  Seasonal temperatures vary from 10 degrees Celsius to 40 degrees Celsius.  Summer afternoon thunderstorms are common and can temporarily impact the  local electrical service. Flash flooding is common in the area. Water for the  Santa Elena Mine is available from local groundwater sources. Water rights  have been purchased for the local source and the nearby Sonora River  approximately seven kilometres west of the Santa Elena Mine. A small amount  of electrical line power is available from nearby sources that currently  supply municipalities and agriculture but is insufficient for the Santa Elena  Mine operation. Additional power for production is provided by onsite diesel  generators. - 37 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The Santa Elena  Mine facilities consist of a main access road, a 2,500 tonnes per day ore  open pit mine, a waste dump with the estimated capacity of 35 million tonnes,  a 3-stage crusher, a lined and certified leach pad, a lined and certified  barren and pregnant solution pond, a lined and certified emergency pond  designed for 100 year event, Merrill Crowe plant and refinery, an on-site  laboratory for production and exploration work, an administration office, a  diesel generator, and all required piping, power and security. Northern  Mexico has a significant workforce of trained mining and processing  personnel. The communities of Cananea, located approximately 100 kilometres  north and Hermosillo, located 150 kilometres southwest of the Santa Elena  Mine, are both considered exploration and mining centres and can provide  services and supplies to the Santa Elena Mine. Alternatively, Tucson, Arizona  is approximately a 4 hour drive north from the Santa Elena Mine. History  Although minor amounts of historic production are evident at the Santa Elena  Mine, the documentation in support of this work is sparse, not detailed and  cannot be relied upon for future projections of economic viability.  Consolidated Fields operated the Santa Elena Mine from the late 19th century  until the onset of the Mexican revolution in 1910. It is estimated that the  most extensive underground development occurred during this period. The  recent commencement of open cut mining has made the underground workings  unsafe to enter. SilverCrest estimates that approximately 25,000 tonnes of  the original tailings from Consolidated Fields’ operations remain onsite.  During the 1960’s, Industrias Peñoles S.A de C.V. drilled two or three holes  on the Santa Elena Mine. During the early 1980’s, Tungsteno mined 45,000  tonnes grading 3.5 grams per tonne of gold and 60 grams per tonne of silver  from an open cut at the Santa Elena Mine. Since 2003, Tungsteno has  periodically surface mined high silica/low fluorine material from the Santa  Elena Mine. During 2003, Tungsteno, conducted an exploration program at the  Santa Elena Mine consisting of 117 surface and underground samples. This data  is considered unreliable and has not been used for the purposes of the Santa  Elena Report. In late 2003, Nevada Pacific Gold Inc. completed a brief  surface and underground sampling program with the collection of 119 samples.  A report was completed and provided to the owner which was subsequently  misplaced. Only the ALS Chemex assay sheets and a rough location map were  available for review. Sample lengths are unclear. In early 2004, Fronteer  Development Group (“Fronteer”) completed an extensive surface and underground  mapping and sampling program. A total of 145 channel samples (89 underground  and 56 surfaces) were collected and analyzed by ALS Chemex of Hermosillo,  Mexico. This data has been used by SilverCrest for exploration purposes only  and has not been used in the Santa Elena Report. - 38 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Geological  Setting Regional Geology The State of Sonora is dominated by three  physiographic provinces, which trend north-south and parallel the Sierra  Madre Occidental. The property is located in the Basin and Range Province.  The Late Proterozoic rifted continental margin of the North American plate  lies approximately 120 kilometres west and was the depositional site of a thick  sequence of shallow marine shelf carbonate and siliclastic rocks, which is  overlain by volcanic and volcaniclastic formations. A large crustal-scale  shear zone termed the Mojave Sonora Megashear is thought to be the result of  reactivation of the North American Plate margin. A thick succession of  shallow marine siliclastic and carbonate sediments was deposited in the  northwest trending rift-basin during Late Jurassic time. These sediments  filling the rift basin were overlain by intermediate to felsic rocks during  the Late Cretaceous to Middle Tertiary time. The northwest trending shear and  associated faults appear to be an important control on mineralization in the  region. The structural separation along the faults localized the conduits for  mineral bearing solutions. The heat source for the mineralizing solutions was  likely from the plutonic rocks which are common in Sonora. These intrusives  are considered batholithic and calcalkaline, volcanic-arc plutons which are  Middle Jurassic to Tertiary in age. There are several major copper porphyries  hosted by these intrusions located at Cananea, Nacozari and La Caridad. The  Santa Elena Mine The primary rock types observed on the Santa Elena Mine are  the tertiary andesite and rhyolite flows. These units have been uplifted and  strike north-south with a dip of 10 degrees to 45 degrees east. All the  volcanic units in the immediate area of the Santa Elena Mine deposit exhibit  propylitic to silicic alteration. Within the main mineralized structure,  widespread argillic alteration and silicification proximal to quartz veining  is present. Within the andesite beds, chloritic alteration increases away  from the mineralized zone. The main mineralized zone is associated with an  east-west structure cross-cutting the volcanic units. The structure is  approximately 1.2 kilometres in length with a width from one metre to 35  metres averaging approximately 15 metres. The structure dips from 40 degrees  to 60 degrees to the south and has been drill-tested to a down-dip depth of  approximately 600 metres from surface. Splaying and cross-cutting northwest  trending structures appear to influence mineralization at intersections and  along a northwest trend. Andesite and granodoritic dikes have been identified  at the Santa Elena Mine deposit. The heat source for mineralization is  unknown but an intrusive at depth is postulated. The main structure is  infilled with quartz veining, quartz veinlets and stockwork, banded quartz,  vuggy quartz and black calcite. Breccias are found locally at areas of fault intersections.  Adularia has been identified in a few hand-specimens. Iron oxides including  limonite, jarosite, goethite and hematite are associated with mineralization.  Results of induced polarization, resistivity and magnetometer surveys by  Pacific Geophysical Ltd. in 2007 showed that the main zone is a resistivity  high (silica) and induced polarization low (minor sulphides) which can be  traced for approximately 1.2 kilometres along strike of the zone. Exploration  During 2006 and the first half of 2007, SilverCrest completed an extensive  exploration program. The exploration work included surface mapping and  channel sampling, underground mapping, underground channel sampling and core  drilling. A total of 289 samples were collected and analyzed by ALS-Chemex in  Hermosillo, Mexico and North Vancouver, British Columbia. This program  focused on the identification of mineralization in the footwall (north) of  the main mineralized zone. Selective sampling shows some anomalous lead, zinc  and copper suggesting a possible mineralized intrusive (porphyry) at depth.  Initial results from the 2007 geophysical program indicate deep-seated  induced polarization highs. Several areas of additional mineralization were  identified for follow up exploration work. Independent review of the  exploration activities and reported significant intercepts have been  previously conducted for the Santa Elena Mine. No additional exploration has  been completed since this independent review. The authors of the Santa Elena  Report have read the previous reviews and are of the opinion that the  previous sampling was supervised by professionals and in general appears to  meet accepted industry standards for use in the preliminary assessment. - 39  - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Mineralization  Mineralization occurs as a series of replacements, stockworks and  hydrothermal breccias typical of other high level low-sulphidation deposits  found in the Sierra Madres. These deposits form in predominantly felsic  sub-aerial volcanic complexes in extensional and strike-slip structural regimes.  Samples previously collected by various parties including SilverCrest show a  geochemical signature of gold + silver + antimony + lead + zinc + barium  +calcium +manganese which is consistent with a high level low-sulphidation  system. The mineralization is the result of ascending structurally controlled  low-sulphidation silica-rich fluids into a near-surface environment. Mineral  deposition takes place as the fluids undergo cooling by fluid mixing, boiling  and decompression. Brecciation of the mineralized zone appears to be due to  explosive venting from an assumed intrusive at depth followed by deposition  of the mineralization by ascending fluids. The Santa Elena Mine is estimated  to contain silver and gold with minor lead, zinc and copper. Underground workings  have confirmed mineralization along 400 metres of this strike length over an  average width of 20 metres. The structure consists of multiple banded quartz  veins and stockwork with associated adularia, fluorite, calcite and minor  sulphides. Bonanza ore shoots (greater than 500 grams per tonne of silver and  30 grams per tonne of gold) appear to be present but require more definition  to determine their full extent. The deepest core hole intersected the  mineralized zone at approximately 400 vertical metres and shows minor  disseminated sulphides and rhodonite suggesting possible primary sulphides  with oxidation. Metal zonation appears to exist with higher grades and  thicker mineralized widths near the epithermal boiling zone which daylights  in the open cut area and plunges approximately 15 degrees to the east  coinciding with volcanic bedding dips. Zonation also appears to correspond to  northwest-trending cross-cutting structures that intersect the main zone and  form high grade shoots. Vertical zonation shows gold content decreasing with  depth and silver content increasing. The andesite in the hanging-wall shows  disseminated pyrite averaging 5%. Calcite is found in close proximity to  pyrite and averages about the same. Some select locations in the hanging-wall  show greater than 30% of finely disseminated pyrite with greater than 30% of  disseminated and veinlets of calcite. Hydrothermal breccias exist in the  hanging-wall andesites proximal to the Main Zone with drill holes  intercepting up to 200 metres of breccia with a pyrite/calcite matrix. Minor  sulphides have been observed only in a few locations within the mineralized  zone. Alteration within the deposit is widespread and pervasive, with the  most significant being silicification, kaolinization, and chloritization.  Kaolin and alunite has formed primarily along structures and contacts, which  are deeply weathered and oxidized. Limonite within the oxide zone consists of  a brick-red colour after pyrite, brown goethite and local yellow jarosite.  Manganese occurs locally as pyrolusite and minor psilomelane. Gangue minerals  consist of quartz, calcite, chlorite and fluorite. Analysis shows calcium  content of up to 15%. Drilling During 2006, a core drill program consisting  of 19 holes totalling 2,572 metres was completed by Major Drilling de Mexico  (“Major”). Core holes (NQ size) were drilled on 100 metre sections along the  east-west trending strike of the mineralized zone. All holes but two were  drilled north at angles from negative 45 to negative 70 degrees. Periodic  down hole surveys were completed to test down-hole deviation. Most of the  holes were short and showed little to no change in orientation. Of the 19  core holes, 17 were drilled perpendicular to the mineralized structure at 45  to 70 degrees. At this drill angle, most of the intercepts are considered to  be at or near true thickness of mineralization. Several old underground  workings (voids) were intercepted with little to no recovery. Overall,  recovery of mineralized intercepts averaged 75%. SilverCrest completed a core  drill program in 2007 consisting of 21 additional holes totalling 1,951.4  metres. Drilling was completed by Cabo Drilling de Mexico. During 2008, a  drilling program consisting of an additional 48 core holes (9,939 metres), 4  geotechnical core holes (1,163 metres) and 21 reverse circulation drill holes  (4,308 metres) was completed by Cabo Drilling de Mexico and Intercore - 40 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Drilling de  Mexico of Guadalajara. Core holes (HQ and NQ size) were drilled on an  estimated 40 to 100 metre sections along the east-west trending strike of the  mineralized zone. All holes were drilled north at angles from negative 45 to  negative 70 degrees. Periodic down-the-hole surveys were completed to test  down-hole deviation. Most of the holes were short and showed little to no  change in orientation. Of the core holes, all were drilled perpendicular to  the mineralized structure at 45 to 70 degrees. SilverCrest completed a  pre-production in-fill drilling program in 2009 consisting of 11 in-fill  reverse circulation drill holes (577 metres). As of December 2009, a total of  20,510 metres of drilling has been completed of which 15,625 was core  drilling. Reverse circulation drilling was completed as pre-collars for  coring and condemnation drilling in the proposed waste dump and leach pad  areas. Sampling and Analysis During the 2005 to 2008 core drilling programs  core was collected in plastic core boxes and labelled for hole identification  and location. Each day, the core boxes were collected and delivered to the  core laydown area located on the property. The core was measured for further  identification and recovery and then geologically logged. After identifying  the mineralized zone, core was selected for splitting in half with a  hydraulic hand splitter. Sampling intervals were determined geologically.  Once split, the core was placed in a plastic bag with a label and marked with  the sample number. The remaining core was stored on the property in an  enclosed area at the camp site or in the yard (under cover) at the company  house in Cumpas. The authors of the Santa Elena Report are of the opinion  that the sample preparation, analysis and security are acceptable, were  supervised by professionals and in general meet accepted industry standards.  The surface sampling conducted by SilverCrest in 2006 consisted of continuous  channel sampling along exposed road cuts and outcrops. Sample locations were  marked in the field with flagging and paint with subsequent survey of  selective control points for sampling coordinates. The 2006 underground verification  channel sampling program consisted of semi-continuous horizontal sampling of  sample locations identified by Fronteer. The 2008 reverse circulation  drilling program consisted of collecting chips, placing the chips in plastic  boxes at two metre intervals and labelling them for interval and hole  identification. All surveying, including drill hole collars, was completed by  GPS or a registered surveyor. Eagle Mapping of Vancouver, British Columbia  completed an aerial flight in 2007 with detailed (one to two metre)  contouring of the Santa Elena Mine. All drill pads and holes were validated  using the new surface topography. The drill collars were marked in the field  with a concrete cap. A similar process was used in the 2009 reverse  circulation drilling program. Security of Samples Gravimetric analysis was  completed for over limit assays on gold and silver. Internal standards and  checks on the laboratory analyses were completed by both ALS Chemex and Acme.  SilverCrest did not insert standards or blanks in the field. Security for the  SilverCrest samples was completed using typical tagging and tracking of  samples up to delivery to the laboratory. Although reliant on internal  laboratory control procedures the authors of the Santa Elena Report are of  the opinion that the data was processed and verified properly and is suitable  for estimating the resources and the sample preparation, analysis and  security are acceptable, were supervised by professionals and in general meet  accepted industry standards. Data Verification During April 2006, Scott  Wilson Roscoe Postle Associates (“SWRPA”) collected select samples for  verification, including an underground continuous channel sample and quarter  splits of drill core. The samples were put into sealed tamper proof plastic  bags and sent to ALS Chemex in Hermosillo with a regular shipment of core  samples. Overall, the grade comparisons are considered to be within  acceptable ranges. - 41 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | In May 2006,  SilverCrest completed an underground sampling program designed to verify the  sampling results of Fronteer. SilverCrest collected 15 underground channel  samples to validate the Fronteer samples used in the resource estimation.  Although there was variation in the data, SWRPA considered it acceptable at  this stage of property development to use the Fronteer data in the resource  estimate. The authors of the Santa Elena Report are of the opinion that the  sampling was supervised by professionals and in general appears to meet  accepted industry standards. In addition to the underground sampling by  SilverCrest, SilverCrest completed silver geochemical analysis on 289 surface  samples for fire assay AA finish and fire assay gravimetric analysis. Results  of this study show an overall 20.3% increase in silver grade using silver  gravimetric assays. AA silver results were used in the resource estimation  and are considered conservative for grade estimation. Further work is  required on silver gravimetric (or four acid digest) versus fire-AA finish  values to help define the actual silver grade. For QA/QC, duplicate analyses  on 16 of 298 samples were completed at Acme in Vancouver on ALS-Chemex pulps  from core sampling and preparation. Although the Acme results have a higher  detection limit, the limited results on the duplicate pulps show consistent  correlation of grades between laboratories. During Phase II drilling  approximately every 20th sample was duplicated in a different laboratory for  QA/QC purposes. The comparison for 2008 drill sample results show average  gold and silver results to be similar and within acceptable limits for QA/QC.  The authors of the Santa Elena Report are of the opinion that the data meet  accepted industry standards and are suitable for use in estimating resources.  Gravimetric analyses were completed for over limit assays on gold and silver.  Typical internal standards and checks on the labs were completed by both ALS  Chemex and Acme during analysis of the Santa Elena Mine samples. SilverCrest  did not insert standards or blanks in the field. Security for the SilverCrest  samples was completed using typical tagging and tracking of samples up to  delivery to the laboratory. The authors of the Santa Elena Report are of the  opinion that the data, was processed and verified properly by previous  parties, meets accepted industry standards and is suitable for use in  estimating resources. The authors have not collected independent samples or  conducted any detailed geological field investigations as no significant new  data has been added to the database since the prior studies. The authors have  reviewed the original analytical certificates for the 2007 to 2008 Santa  Elena drilling with the current drill hole database, including: randomly  selected samples which represent approximately 5% of the sample population,  and 85 samples representing the 97th percentile of data, and 85 sample  records representing the 97th percentile of silver and gold grade within the  database. No discernable inconsistencies were found. Mineral Resource and  Mineral Reserve Estimates On January 23, 2012, SilverCrest announced an  updated Mineral Reserve and Mineral Resource estimate. The following table  sets forth the estimated Mineral Reserves and Mineral Resources for the Santa  Elena Mine (gold only, excludes silver grades for Sandstorm reporting  purposes): Probable Mineral Reserves and Indicated and Inferred Mineral  Resources (1 to 3) Category Tonnes (000s) Gold Grade (grams per tonne)  Contained Gold (ounces) Open Pit Reserves (4) Probable 3,459 1.96 217,800  Underground Resources (5) Indicated 991 1.83 58,330 Inferred 1,879 1.53  92,470 - 42 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | (1) All Mineral  Reserves and Mineral Resources have been estimated in accordance with NI  43-101. (2) The Mineral Reserve and Mineral Resource estimates set out in the  table above have been reviewed and verified by Nathan Eric Fier, C.P.G.,  P.Eng., Chief Operating Officer of SilverCrest, who is a qualified person  under NI 43-101. (3) Mineral Reserves and Mineral Resources are reported as  of January 2012. (4) Based on $1,000 per ounce of gold and $18 per ounce of  silver, cut-off grade of 0.38 grams per tonne gold equivalent with applied  metallurgical recoveries. Ag:Au is 55:1. Estimated 1,336,000 ore tonnes were  mined at Santa Elena in 2010 and 2011 grading 1.41 grams per tonne gold and  46.51 grams per tonne silver and subtracted from Probable Mineral Reserves.  All numbers are rounded. Excludes potential metal inventory for leach pad re-  treatment during Expansion. (5) Based on $1,000 per ounce of gold and $18 per  ounce of silver, cut-off grade is 1.77 grams per tonne gold equivalent with  applied metallurgical recoveries. Ag:Au is 55:1. Mining Operations Santa  Elena Mine Open Pit Mining The Santa Elena Mine is a conventional open pit  and on September 9, 2010, the Santa Elena Mine poured its first gold and  silver dore ounces. The pit is currently designed for a mine life of 6.5  years. The Santa Elena Mine phase I open pit heap leach was constructed in  2009. The operation is currently in the commissioning phase until production  ramps up to a steady state. The design pit will be considered a “dry pit” for  most of the mine life. All drilling, blasting and mining is completed by a  local Mexican mine contractor. In 2013, a large waste strip is required. The  phase I heap leach pad has been constructed to accommodate about 3.5 years of  production or 3.5 million tonnes. The phase II heap leach pad is to be  constructed in 2013 depending on the results of a pre-feasibility study for  the Expansion Project. The plan for open pit closure will be to transform the  land back to its near original condition for best future land use. The open  pit is not required to be backfilled but is required to be stable and fenced  to prevent accidents. Santa Elena Mine Underground Mining The two underground  mining methods proposed for resource extraction are mechanized cut & fill  with hydraulic backfill, and long hold stoping. The underground operation  will require additional power and water beyond that which is currently  supplied. Additional offices, maintenance and storage areas will be required.  Pump staging areas, crib room and refuel area will be included as part of the  underground development. The nominal daily production rate is 1,500 tonnes  per day over 350 operating days per year producing 525 kilotonnes of ore  annually. The rate is dependent on the material from the other sources and  has been matched to the mill capacity of 3,000 tonnes per day. A total of 2.8  million metric tonnes of ore is mined over four and a half years, at an  average diluted grade of 1.51 grams per tonne of gold and 88.6 grams per tonne  of silver. Full production from underground is achieved in year one after a  12 month pre-production development period. Ore will be available  immediately, but production may take some time to be able to provide a steady  1,500 tonnes per day. All mine waste will be stored underground as backfill.  Limited amounts of material may be used for construction or road maintenance  material on surface. Environmental Conditions Environmental studies have been  conducted on the existing open pit excavation occurring at the Santa Elena  Mine. Santa Elena Mine Milestones Current activities at the Santa Elena Mine  include: • SilverCrest declared commercial production on July 13, 2011.  During its second year of production in 2012, the Santa Elena Mine produced  579,609 ounces of silver and 33,004 ounces of gold - 43 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | In January  2013, SilverCrest announced the results of further drilling at the Santa  Elena Mine and that 94 of a planned 100 holes had been completed to  re-categorize Indicated and Inferred Resources to Probable Reserves and  expand current underground Resources. The 94 holes totalled approximately  33,000 metres of drilling in their program to assist with their underground  resource conversion to reserves and resource expansion program. Assay values  in this series of holes ranged from 0.7 to 42.6 grams per tonne gold and 51.1  to 2,840.0 grams per tonne silver. Mineralized intervals ranged from 2.8  metres to 28.2 metres. All mineralized drill intercepts were near true  thicknesses. Revised Santa Elena Resources and Reserves, along with the  results of a Pre-Feasibility Study for their three year expansion plan (the  “Expansion Plan”) are expected in Q1 2013. The Expansion Plan is underway to  double metals production at the Santa Elena Mine (open pit, underground, and  treatment of heap leach spent ore through the mill). • The Expansion Plan  includes the installation of a conventional milling and processing facility  at the Santa Elena Mine. It is contemplated that this facility will utilize  mill feed from the Santa Elena open pit, the Santa Elena underground, Cruz de  Mayo satellite deposit and re-treatment of the material on the heap leach  pads to recover residual silver and gold values. • The Phase II leach pad  construction was completed on schedule and on budget in Q3 2012, adding two  years of capacity. The pad was loaded with material from high grade benches  so that the return on metal was almost immediate. This also segregates the  high grade ore which will be reclaimed first once the conventional mill is  operational. • Underground decline development progressed to approximately  1,050 metres in length. Ming Mine, Canada A technical report was prepared in  accordance with NI 43-101 entitled “Ming Copper-Gold Mine Project, NI 43-101  Technical Report Prepared for Rambler Metals and Mining Canada Ltd.” dated  October 13, 2010 (the “Ming Report”). The following description of the Ming  Mine has been summarized, in part, from the Ming Report and readers should  consult the Ming Report to obtain further particulars regarding the Ming  Mine. The Ming Report is available for review under Rambler’s profile on the  SEDAR website located at www.sedar.com. Information that updates the  information in the Ming Report has been provided by Rambler. The Ming Mine is  owned by Rambler Metals and Mining Canada Ltd. (“Rambler Canada”), which is  wholly-owned by Rambler. Project Description and Location The Ming Mine site  (the “Ming Property”) is located approximately 17 kilometres by road east of  the town of Baie Verte, on the north coast of Newfoundland. The site is  approximately 360 kilometres by air northwest of St. John’s and 165  kilometres by road northeast of Deer Lake. The Ming Property contains the  former producing Ming and Ming West mines, which were last operated in 1982  and 1996, respectively. The Ming and Ming West mines exploited relatively  narrow zones of high-grade copper and gold mineralization. The Ming Property  is a mineral land assembly consisting of one map-staked mineral license  014692M and two mining leases (141L and 188L) totalling 1,580.4 hectares  registered in the name of Rambler Canada. All of these mineral lands are  contiguous and in some cases overlapping and are located in the area of the  former Ming and Ming West Mines. In early 2008 the mineral license 014692M  replaced the original licenses 09997M, 11872M and 11504M by grouping as  requested by Rambler. All lands are in good standing with the Newfoundland  government and Rambler is up to date with respect to lease payments (for  leases) and required exploration expenditure for licenses. There are no  serious environmental liabilities associated with the property and there are  no tailings dump areas. In 2005, a number of programs were undertaken on the  property to assist in remediation of the legacy of past - 44 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | operators. Two  open vent raises have been temporarily capped with timbers, backfilled and  fenced. Both the Ming and Ming West pits have been surrounded with fencing.  The access to the two mines, including two adits and one shaft, are all  located within the outside property boundaries, as are the known mineralized  zones. Rambler purchased the Nugget Pond gold processing facility, which is  located 40 kilometres from the Ming Mine and approximately 6 kilometres west  of the community of Snooks Arm in the provincial district of Baie Verte-White  Bay. The gold concentrator will be adapted to process base metals sulphides  from the Ming Mine through the addition of a copper flotation circuit as well  as processing tailings through the existing gold hydromet for improved gold  recovery. The modification will diversify the existing facility and allow for  a range of processing capabilities. The surface facilities are concentrated  in a 10 hectare area. The ground surface is mostly rocky with moderate forest  coverage, moderately rough terrain and elevations ranging from 90 to 140  metres above sea level. There are no serious environmental liabilities  associated with the Nugget Pond property. The site however does contain a  fully permitted tailings facility with adequate storage capacity for the life  of the project. The Goodyear’s Cove port, situated in at the head of Halls  Bay, Newfoundland, is located approximately 1.4 kilometres west of the  community of South Brook in Green Bay district. All surface facilities are  concentrated in a one hectare area. Ground surface is rocky and moderately  flat with sparse vegetation and elevations rising a maximum of 12 metres  above sea level. There are no serious environmental liabilities associated  with the port property. The proposed site is a “brownfield site”, partially  located on the property of the larger former Consolidated Rambler Mines  complex. The Newfoundland and Labrador Department of Natural Resources has  undertaken the task of rehabilitating the former site and these operations  are ongoing. Several federal and provincial reviews, authorizations, and  approvals are required for the Ming Mine, mill site, and Goodyear’s Cove and  additional permits may be required for development and operation of the Ming  Mine and the mill. Accessibility, Climate, Local Resources, Infrastructure,  and Physiography Access to the Baie Verte Peninsula is provided via Route 410  exiting the Trans Canada Highway (“TCH”). The mine site is accessed via the  La Scie Highway and the Ming’s Bight Road. The north-south trending Ming’s  Bight Road transects the western half of the property. The Ming and Ming West  facilities are located adjacent to this road. A gravel road exits Route 414  and extends northwards for a short distance to the Boundary Shaft. Several  old trails and drill roads, as well as recent logging roads provide limited  access to the interior of the property. A new cut exploration grid transects  the area of the mining leases. The town of Baie Vert (population 1,000), is  home to several mining and exploration service providers, medical facilities,  and construction facilities. As well, Baie Verte and the nearby communities  have an experienced mining work force. Access to the Nugget Pond site is via  the La Scie highway to Snooks Arm and the site can be reached by gravel road  running generally west for a distance of approximately five kilometres to the  mill. Access to the Goodyear’s Cove port is via the TCH. A gravel access road  runs north for approximately 500 metres to the site. The climate in this area  is northern temperate, allowing a twelve month operating period. Mean summer  temperatures are 16 degrees Celsius and mean winter temperatures are negative  8 degree Celsius. Lakes and ponds freeze over in early December but are ice  free in mid-April. Annual precipitation exceeds 1,000 millimetres. Shipping  may be interrupted for brief periods in late winter-early spring when the  Labrador current moves pack ice and icebergs south from Greenland. The Ming  Mine lies at an elevation of approximately 150 metres above sea level. Topography  is gently rolling, rising to a series of northwest trending ridges with  elevations near 180 metres to 190 metres above sea level in the north near  Three Corner Pond. Outcrop exposure ranges from 0.5% to 5% owing to a  persistent blanket of overburden averaging about two metres in thickness. The  Ming Property is dominated by mature black spruce and hardwood, though forest  fires have affected some areas. Small bogs and ponds associated with low  lying depressions are common and constitute parts of the South Brook and  England’s Pond watersheds that flow northward to the coast.- 45 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | The Ming Mine  is connected to the provincial electrical power grid and is well equipped  with mine related infrastructure, though much of it is in a rundown  condition. The disturbed site covers less than ten hectares and includes the  following road and yard area; waste water treatment facility; maintenance  garage; surface electrical sub-station; core storage building; temporary  office/dry; mine portal; boundary shaft; Ming and Ming West open pits; and  vent raises. The mill site and tailings compound area from previous  operations is located 1.5 kilometres to the south of the Ming Mine facility.  Its entire footprint is now under Exempt Mineral Lands and controlled by the  Government of Newfoundland and Labrador. The former mill and support  buildings have suffered neglect and vandalism over the past years and have  recently been demolished by the provincial government. All liabilities  associated with the former site rest solely with the provincial government.  The Nugget Pond facility is a fully permitted gold hydrometallurgical mill  with a nominal throughput rate of 500 million tonnes per day. All existing  infrastructure has been well maintained over the years and no serious  environmental liabilities are associated with property. The Nugget Pond  property covers approximately ten hectares and includes, among other things,  an assay lab, office building, sewage treatment plant, cold storage, mill  building, including crusher, ore bin, thickener and leach tanks, and ore  stockpile area and fuel storage and dispensing facilities. The area lies on  the east side of the Baie Verte Peninsula which is an undulating plateau. The  coast line of the Betts Cove-Tilt Cove area is bounded by shear cliffs rising  rather abruptly to the plateau level about 150 meters above sea level. History  In 1907, a shaft was sunk to a depth of 65 feet and a fifty foot crosscut was  driven. The main mine sulphide zone was found in 1935. In 1940, the  Newfoundland government drilled 18 diamond drill holes totalling 5,000 feet.  The Ming Property was optioned in 1944 by Rambler Mines Corp and was  subsequently optioned in 1945 to Gold Mines which drilled 681 feet in  thirty-one diamond drill holes, and then to Falconbridge Nickel Mines Ltd. in  1951, which drilled 14,300 feet. An airborne electromagnetic survey was flown  in 1955 to 1956. The Ming Property reverted to the crown when the Undeveloped  Mineral Act was invoked by the Newfoundland Minister of Mines in 1960, and  was then granted to Consolidated Rambler Mines Ltd. Mine development  commenced at the main mine in 1961, and proceeded through four deposits to  1982. Total production from all deposits was 4.7 million short-tons averaging  2.17 percent copper with some zinc, gold and silver. The Ming Mine was  discovered in 1970 by a helicopter-borne anthropogenic ecotope mapping  system. A large low-grade copper deposit was later discovered 300 feet to 500  feet below the orebody during mining operations, and delineated by thirty-six  diamond drill holes. Mining ceased at the Ming Mine in 1982 because of low  copper prices, and because the deposit crossed over into land held by BP  Selco. In 1987, the Ming Property again reverted to the crown under the  Undeveloped Mineral Act, and proposals were solicited by the government for  exploration and development. Inco Ltd. purchased the Rambler Mill facilities  from Consolidated Rambler Mines Ltd., but in 1988, the Ming Property was  awarded to the Rambler Joint Venture Group. Exploration consisted of ground  geophysics and soil geochemistry, resulting in discovery of the Ming West deposit.  Forty-eight diamond drill holes (25,534 feet) were completed and induced  polarisation resistivity, mise-a-la-masse, and point array surveys were  conducted over the deposit. Borehole time-domain electromagnetic surveys were  carried out in a number of drill holes along the down-plunge extent of the  mineralization. Negotiations were initiated with Inco Ltd. for the purchase  of the Rambler Mill, which was instead sold to International Corona  Corporation (“Corona”), who held the former BP Selco property containing the  extension of the Ming Property deposit. The Ming Property again reverted to  the crown in 1993. In 1993, Corona, which had been taken over by Homestake  Mining Company decided to dispose of the Rambler Mill, in an asset  rationalization decision. Ming Minerals Inc. (“Ming Minerals”) was then  formed to acquire the Rambler Mill facility from Homestake. The assets were  acquired in March 1993, along with the mineral rights to the former BP Selco  property (“Rambler North”). - 46 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Ming Minerals,  with the mill facility and the mineral rights to the Rambler North property,  had positioned itself to acquire the mineral rights to the Rambler properties  when the government released them. With the exception of the Ming Mine area,  the government released the Ming Property for ground staking in early 1994  and Ming Minerals acquired the ground in a staking rush. Subsequently, the  government solicited proposals for the exploration and development of the  Ming Mine area. Ming Minerals’ proposal was accepted in June 1994. With the  acceptance of the Ming Minerals’ proposal, this is the first time that all  the key properties in the area have been held by one owner. Historically,  exploration and development have been obstructed by the division of mineral  rights holdings. Ming Minerals’ arranged financing for Ming West production  through Ming Financial Corp. which earned a 70% interest in the project by  expending $2.2 million in investment capital that carried the mining and  milling facility through to production in October 1995. Access to the Ming  West deposit was achieved by drifting from the Ming decline. Production began  in mid-October 1995, with the first concentrate shipment in late December  1995. The Ming West deposit was mined in 1995 to 1996, producing 142,173 tons  of ore at 3.98% copper, 0.17 ounces per tonne of gold, and 0.44 ounces per  tonne of silver from the upper part of the deposit. Production ceased in 1996  due to the exhaustion of easily accessible near surface reserves and a drop  in the copper price. No other mining operations on the Ming Property have  been undertaken since the closure of the Ming West mining operation. In 1997,  Canamera Geological Ltd. (“Canamera”) was commissioned to do a feasibility  study on the Rambler Property for Ming Minerals. Canamera reported a  remaining mineral resource inventory on the property. Canamera concluded that  the outlined mineral resource would not support an economically feasible  operation and the property then lay dormant until acquisition by Altius  Minerals Corporation (“Altius”) from Ming Minerals. Under the terms of an  option to purchase agreement with Ming Minerals, Altius conducted exploration  from 2001 to 2004. In 2001, a lithogeochemical program was initiated to  chemically fingerprint rocks of the hanging wall and footwall to the sulphide  deposits. Rambler lithologies are strongly metamorphosed and deformed, and  locally strongly altered, commonly precluding visual recognition of their  stratigraphic context with respect to the massive sulphide horizon. Eight  historic drill holes representing a thick stratigraphic interval were  re-logged and sampled in detail. Altius conducted diamond drilling programs  in both 2003 and 2004. Two holes were drilled in a Junior Company Exploration  Assistance Program assisted drilling program conducted down plunge from the  former Ming Mine in 2003, with associated down hole transient electromagnetic  surveys. These successfully proved the existence of ore grade and width  copper-gold massive sulphide mineralization 500 metres beyond the limits of  the previous mining operation. During 2004, Altius continued the program of  deep drilling with the objective of testing the down plunge extensions of the  Lower Footwall Zone (“LFZ”), a large Volcanogenic Massive Sulphide (“VMS”)  style stringer system, which occurs structurally below portions of the Ming  Massive Sulphides. Altius drilled two NQ size diamond drill holes (RM04-03  and RM04-04) with associated down hole transient electromagnetic surveys.  These effectively confirmed the presence and grades within the LFZ and  extended the mineralization a further 250 metres down plunge. Early in 2005,  Altius completed an agreement to sell its interest in the Ming Property to  Rambler for 30% of the outstanding shares of Rambler. - 47 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The Nugget Pond  Site Surface exploration programs conducted from 1987 to 1990 accounted for a  total of 22,000 metres of drilling involving 106 holes. Richmont Mines Inc.  (“Richmont”) acquired a 60 percent stake in the Nugget Pond deposit in 1995  and later bought the remaining 40 percent in January 1996. In April 1997,  after a ten month construction phase, the mill was commissioned and  commercial production at the Nugget Pond site began. By that time the Nugget  Pond mine site included a fully operational gold mine, office, assay lab,  hydromet mill, shop, and three cold storage warehouses. Processing of the  Nugget Pond deposit continued until mid-2001. At that time, the ore body was  exhausted. However, prior to the depletion, Richmont were already in the  process of developing the Hammerdown deposit in the King’s point area, which  was then exhausted by 2004, at that time the Nugget Pond plant then entered  into a care and maintenance program. In 2006, Crew Gold Corporation was  operating the Nugget Pond gold treatment plant and associated facilities for  processing of the Nalunaq ore body located in Greenland. Crew acquired the  plant and its surface rights from New Island Resources who in turn acquired  the Nugget Pond plant and licenses and mining licenses from Richmont under an  option agreement dated October 28, 2005 subsequently exercised. Operations  recommenced on February 27, 2007 after considerable rehabilitation and  pre-commissioning repair work. Due to high transportation costs, this  campaign ended in June 2009. At that time, Crew Gold (Canada) Ltd.  immediately entered into a toll milling agreement with Anaconda Mining Inc.  The agreement was cancelled in December 2009 because of circumstances beyond  their control. The plant initiated the care and maintenance program. Geological  Setting Regional Geology The island of Newfoundland presents a cross section  through the northern portion of the Appalachian Orogen. Four major  tectonostratigraphic zones, based upon Pre-Carboniferous geology, have been  identified and termed from west to east as the Humber, Dunnage, Gander, and  Avalon Zones. The Humber Zone represents the continental margin of Laurentia  and consists of Precambrian crystalline rocks overlain by Paleozoic shelf  facies rocks while the Avalon Zone represents part of Gondwana and consists  of late Precambrian plutonic, volcanic and sedimentary rocks overlain by  Paleozoic platformal sedimentary units. The Gander Zone represents mainly  sedimentary rocks believed to be deposited near the eastern continental  margin of the Iapetus Ocean. The Dunnage Zone represents the vestiges of the  Iapetus Ocean. Rocks within the Dunnage Zone consist of volcanic and  sedimentary rocks of back-arc and island-arc affinity and of ophiolitic rocks  created during the opening and subsequent closure of Iapetus. The Dunnage  Zone also includes post-accretion, epicontinental volcanism and molasse  sedimentation of largely Silurian age and a variety of intrusive rocks,  largely of Devonian age. The Baie Verte area is located along the western  margin of the predominantly volcanic, Lower Paleozoic, Central Mobile Belt of  Newfoundland. The Baie Verte lineament is usually steeply dipping and  north-easterly trending. The Baie Verte lineament turns eastward and is  dissipated into a series of southerly dipping thrust faults. The sulphide  deposits in the region are grouped into ophiolitic volcanic hosted and arc  volcanic hosted environments. The latter environment usually contains  polymetallic deposits hosted by mafic and felsic volcanic sequences. Those in  mafic dominated sequences tend to be copper-rich, but with increasing amounts  of felsic volcanic, the mineralization becomes increasingly associated with  zinc and lead, silver and gold are found as accessory elements in both  environments. Local Geology -48 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The Baie Verte  Peninsula is underlain by two distinct structural and lithological belts,  separated by a major arcuate, structural zone, referred to as the Baie Verte  Line. Rocks to the west of the Baie Verte Line belong to the Fleur de Lys  Belt of the Humber Tectonostratigraphic Zone. Rocks lying to the east of the  Baie Verte Line belong to the Baie Verte Belt of the Dunnage  Tectonostratigraphic Zone. The Baie Verte Belt is comprised of four main  lithological elements: 1. Cambro-Ordovician ophiolitic sequences of the  Advocate, Point Rousse and Betts Cove Complexes, and the Pacquet Harbour  Group. 2. Ordovician volcanic cover sequences of the Snooks Arm and Flat  Water Pond Groups. 3. Silurian terrestrial volcanic and sedimentary rocks of  the Micmac Lake and Cape St. John Groups. 4. Siluro-Devonian intrusive rocks,  namely the Burlington Granodiorite and Cape Brule Porphyry. The Point Rousse  Complex and the Pacquet Harbour Group are the main geological elements. The  Point Rousse Complex includes a dismembered ophiolite sequence of mafic and  ultramafic rocks conformably underlying a cover sequence of mafic volcanic  and volcaniclastics rocks. The maximum outcrop thickness across the complex  is about 7.5 kilometres. The Pacquet Harbour Group is an incomplete Early Ordovician  ophiolite consisting dominantly of a moderately to steeply north dipping  sequence of variably deformed and metamorphosed mafic volcanic rocks, lesser  felsic volcanic rocks, mixed mafic and felsic volcaniclastics rocks, and  shallow level intrusive rocks. The base and top of the group is not exposed  and the true thickness is unknown. The maximum outcrop width across the group  is approximately 15 kilometres, though this does not represent the true  thickness of the sequence. All of the rocks in the area are lower greenschist  of lower metamorphic grade with the exception of rocks proximal to the  Burlington Granodiorite. Rocks proximal to this intrusion are highly deformed  and show amphibolites to upper greenschist facies metamorphism. In the area,  the Pacquet Harbour Group is further subdivided into two stratigraphic  sequences juxtaposed along a prominent east-west to northwest-southeast  trending low angle (25 to 30 degrees) thrust fault termed the Rambler Brook  Fault. One sequence, named the Uncles’ Sequence, located approximately six  kilometres to the southwest from the Ming Property, is dominated by mafic  volcanic with lesser felsic and intermediate volcanic rocks. The Uncles’  Sequence is host to the Big Rambler Pond Mine. A second sequence, named the Rambler  Sequence, contains a felsic volcaniclastics pile structurally overlain by a  sequence of mafic to intermediate flows and volcaniclastics which in turn  grades upward into a metasedimentary succession. The felsic pile attains a  maximum thickness of approximately 5,000 feet just south of the Rambler area  and pinches out further southward. Along the flank of the pile the felsic  volcaniclastics pinch out or grade laterally to mixed felsic/intermediate and  mixed felsic/mafic volcaniclastics rocks. The Rambler Sequence is host to the  Main, East, Ming, Ming Footwall, and Ming West massive (± stringer) sulphide  deposits. Property Geology Two major lithological packages occur in the  vicinity of the Ming Mine, the Hanging Wall Sequence and the underlying  Mineralized Sequence. The Hanging Wall Sequence consists mainly of basaltic  flows with lesser volcaniclastics and volcanogenic sediments, including minor  magnetic iron formation. The underlying Mineralized Sequence consists  dominantly of altered and locally mineralized, quartz-phyric felsic volcanic  rocks with minor quantities of altered basalt. Both the Hanging Wall and  Mineralized Sequences are cut by significant volumes of gabbroic sills and  dykes. Banded, pyritic massive sulphides on the Ming Massive Sulphide Horizon  occur directly below the sheared contact separating the Hanging Wall and  Mineralized Sequences. More than one horizon of massive sulphide has been  intersected in several holes; in these instances the massive sulphide zones -  49 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | are separated by  altered, pyritized felsic volcanic or by gabbroic intrusives. Altered felsic  volcanic proximal to the massive sulphides generally carry higher gold  contents compared to other altered felsic volcanics. A zone of sericitized  and somewhat pyritized felsic volcanic, nominally 100 metres thick, separates  the mineralization on the Ming Massive Sulphide Horizon from that in the LFZ.  The LFZ consists of nebulous zones of disseminated and stringer  pyrrhotite-chalcopyrite cutting altered felsic (and lesser mafic) volcanic  rocks. Alteration is dominantly sericitic in less mineralized sections and  distinctly chloritic in the zones of best copper mineralization. The overall  sulphide content is relatively low for a VMS stringer system and the  chalcopyrite:pyrrhotite ratio is anomalously high, at approximately one to  one. The gold to copper ratio in the LFZ is generally lower than that in the  massive sulphides of the Ming Massive Sulphide Horizon. The LFZ material that  was test milled from the 1800 level was believed to have a head grade of 0.4  grams per tonnes of gold. If true, this suggests that gold to copper ratios  in the LFZ decrease downplunge from this area toward the area of more recent  drilling. Exploration Exploration drilling has occurred at the Ming Mine for a  period of thirty years from 1977 to 2008. Up to December 31, 2008 the total  Rambler drill dataset comprised of 291 drill holes for a total of 114,885  metres. This total drill dataset comprises of three components: 1. Historical  underground drilling (1977 to 1981): 38 holes for 7,206 metres; 2. Rambler  surface drilling (2003 to 2008): 86 holes for 85,416 metres; and 3. Rambler  underground drilling (2007 to 2008): 177 holes for 22,263 metres. During two  campaigns, in 2005 and 2006, Crone Geophysics and Exploration Ltd. conducted  Borehole Pulse Electromagnetic surveys on eleven drill holes on the Ming  Property. Some of the holes had no significant responses while others had  interpreted pointing vectors to more conductive and/or thicker accumulations  of sulphides and significant off-hole conductivity was detected in certain  holes. The 2005 to 2006 drilling plus the Borehole Transient electromagnetic  geophysical program has suggested that the bulk of the mineral potential in  the Ming Mine area lies within a 750 metres strike length on the Ming Horizon  and within the underlying LFZ. Within this favourable section, mineralization  on the Ming Horizon has been traced from surface down plunge for a distance  of more than two kilometres to a depth of 1,080 metres below surface, and is  still open down plunge. Mineralization within the MFZ has been traced down  plunge more than 500 metres beyond the previous deepest intersections and  also remains open down plunge. During 2008, a bench scale locked cycle test  program was developed to identify a commercially viable concentrator  flowsheet, reagent scheme and design basis for process equipment sizing. Bulk  samples were taken from the 1600 level and 1807 zone were used to develop the  reagent scheme and define the floatation process flowsheet. The 1600 samples  representing a worst case scenario. Also in 2008, detailed mineralogical  descriptions were completed on select thin sections from the core. This new  zone has returned significant intersections of gold and will be an integral part  of Rambler’s five year business model currently underway by CSI Consulting  Inc. The purpose was to evaluate massive sulphides from the 1806 Zone to  determine the sulphide mineralogy, the residence and location of any gold  within the lens. Two important facts derived were: 1. In all cases gold is  spatially associated with grain margins and not in the cores of mineral  grains, suggesting the potential for liberation. This association provides  Rambler the opportunity to improve gold recovery with further testing of the  gold rich 1806 zone. 2. The geological, mineralogical, and chemical  attributes of the massive sulfides from the 1806 Zone are similar to other  gold and copper rich VMS systems, but the geological setting, ore mineralogy,  and deformation style is most similar to the deposits of the Bousquet LaRonde  district in Quebec, one of the most important gold districts in Canada. - 50  - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Quantec  Geoscience Ltd. (“Quantec”) was commissioned by Rambler in July 2008 to  perform a geophysical survey to aid in the exploration program to provide  sub-surface resistivity and chargeability mapping both along strike and down  plunge of the historically producing ore bodies. A total of seventy-seven  separate anomalies of varying significance were identified on the nine survey  profiles completed by Quantec. Two of these anomalies are deemed high  priority and are represented by multi-parameter anomalies with low  resistivity and high chargeability indicative of highly conductive zones  similar to the Ming ore bodies. Twenty-eight others were deemed second  priority and represented by varying degrees of chargeability and resistivity.  Thirty-five were classified as third priority, while twelve were deemed low  priority anomalies. During 2009 Rambler drill tested the high priority target  located below the main mineralized Ming Horizon. The two drill holes drilled  in 2009 did not explain the large anomalous area of low resistivity and high  conductivity. Further interpretation was done by Mira Geoscience (“Mira”) in  two phases. The scope of the Mira Phase I work was to evaluate the integrity  and usefulness of the original Titan data to resolve massive sulphide or  stringer type accumulations similar to those already known in the Ming  deposit. In their review and assessment process, Mira completed physical  property analysis, three-dimensional (“3D”) sensitivity forward modeling  analysis and also constrained two-dimensional (“2D”) inversions on several of  the Titan lines. The Phase I assessment by Mira concluded that mineralized  zones in the Rambler Camp have a two to five percent signal and can be  detected yet might not be resolved in a 2D inversion. The Phase II work by  Mira was designed to complete 3D inversions of the 9 Titan spreads and better  define areas of anomalous resistivity and chargeability. The Phase II  interpretation concluded that the Titan survey did detect the Rambler mine  close to surface in the conductivity inversion result. The results of the  Mira Phase II interpretation were very encouraging. Areas of lower resistivity  occur below the Ming West zone and the Main Ming zone. Areas of interest lie  to the east of the Main Ming mineralized corridor. The areas below the more  massive Ming horizons may represent footwall stringer zones. The zone to the  east of the main mineralized corridor is not associated with any known  mineralization and certainly requires follow-up. In the northeast end of the  survey grid the stratigraphy appears to have been uplifted possibly due to  the influence of the Scrape Thrust Fault which transects the area.  Mineralization Polymetallic sulphide deposits at Rambler contain copper, zinc  and minor lead, gold and silver with traces of other metals. Sulphide  mineralization in the Rambler area can be classified into various types. This  classification is primarily based on distinct hydrothermal alteration  assemblages, sulphide mineralogy and associated textural features. The  various mineralization types are: 1. Stratiform volcanogenic massive  sulphide; 2. Disseminated stringers of sulphides in the LFZ; 3. Epigenetic,  usually shear-hosted mineralization often found overprinting overprinting  volcanic massive sulphide and LFZ mineralization. At the Ming Mine, the  volcanic massive sulphide is locally up to three metres thick with a strike  length of at least 100 metres, plunging thirty to thirty five degrees  northeast to a vertical depth of at least 1,000 metres. The volcanic massive  sulphide comprises of massive pyrite ore, banded ore, massive  chalcopyrite-pyrrhotite ore and breccia ore. Massive pyrite ore is less than  seventy percent pyrite with chalcopyrite and minor amounts of galena,  sphalerite and silicate minerals. Banded ore consists of alternating bands of  pyrite and chalcopyrite-quartz-actinolite-biotite. Massive  chalcopyrite-pyrrhotite ore occurs as lens and layers with up to eighty  percent chalcopyrite. Minor amounts of arsenopyrite, galena, tetrahedrite,  native gold, tennantite and cubanite occur locally. There is up to ten  percent disseminated pyrite in the immediate footwall. The LFZ comprises mainly  of quartz-chlorite schist, which hosts disseminated and stringer pyrite and  chalcopyrite with minor sphalerite, galena, pyrrhotite and arsenopyrite. It  seems probable that the LFZ with disseminated sulphides grade into lesser  mineralized zones laterally. - 51 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The 1806 Zone  is a base and precious metal enriched sulfide zone with gold-silver  enrichment similar to many world class gold rich volcanic massive sulphide  systems. The ore mineralogy of the deposit is dominated by various sulfide,  sulfosalt, native metal, and oxide phases. Massive sulfide distal from dyke  margins, despite being deformed and recrystallized, are likely representative  of the primary volcanic massive sulphide bearing assemblage given typical  volcanic massive sulphide related mineral assemblages that dominates the  sulfides (e.g. pyrite-chalcopyrite-sphalerite-galena). These massive sulfides  are dominated by variable amounts of sulfide (pyrite, chalcopyrite,  sphalerite, galena, and arsenopyrite), sulfosalts (tetrahedrite, boulangerite,  stannite, mawsonite, tennantite) and gold. Massive sulfide that has been  recrystallized and contact metamorphism in proximity to mafic dykes are  characterized by buckshot textures with abundant pyrrhotite rich sulfides  with pyrite porphyroblasts, and lesser sphalerite, chalcopyrite, galena,  sulfosalts, and magnetite. Notably, these buckshot ore samples are rich in  iridescent bismuthinite and have a very minor amount of arsenopyrite, much  lower than in the primary volcanic massive sulphide bearing sulphides. In all  cases within this zone, gold is spatially associated with arsenopyrite and  sulfosalt phases and the gold is spatially associated with grain margins and  not in the cores of mineral grains, suggesting the potential for liberation.  Drilling From the period 1977 to 2009 a total of 114,885 metres of surface  and underground exploration drilling has been completed at the Ming Mine.  Consolidated Rambler Mines Limited (“CRML”) drilled unsurveyed diamond drill  holes from underground platforms from 1977 to 1981. During the period 2003 to  2005, Rambler drilled a series of widely spaced diamond drill holes to  delineate down-plunge extensions of the LFZ as well as the Ming Massive  Sulphide horizon. This phase of drilling produced NQ diameter core and was  characterized by a detailed downhole Reflex survey performed after completion  of each drill hole. Between 2005 and 2009, Rambler conducted a multi-phase  diamond drilling program consisting of surface drilling, directional drilling  and underground delineation drilling. During 2005, a widely spaced drill hole  program was designed to further test the plunge and strike extension of both  the Ming Massive Sulphide Horizon and LFZ Zones. Based on the results of this  program in 2006 and using directional drilling technology Rambler continued  to evaluate the mineralization with predictable 50 metre spaced drill holes.  The surface directional drilling program continued until the completion of  the mine dewatering program in July 2008 which allowed exploration to  continue from underground. Rambler’s drilling programs have confirmed the  continuity of mineralized ore zones both down-plunge and across strike where  historic mining operations ceased in the early 1980’s. Based on the existence  of significant mineralization a number of engineering studies have been  completed to evaluate to properties economic viability. Rambler completed  detailed directional NQ diameter surface core drilling of the Ming Massive  Sulphide and LFZ targets for the period January 2006 to March 2008. A total  of 167 underground diamond drill holes were completed over this period for a  total of 22,263 meters of drill core. In total, 291 drill holes with LFZ  and/or Ming Massive Sulphide intersection have been drilled to December 31,  2008 (which is the temporary shutdown date for drilling on the Ming Property  for the purposes of the Ming Report) yielding some 114,885 meters of diamond  drill core. The Ming ore body plunges 30 to 35 degrees to the northeast to a  vertical depth of at least 1,000 metres. Diamond drill holes were designed to  intersect the LFZ and/or Ming Massive Sulphide at the best possible angle and  this is easily achievable with directional drilling. Underground drilling  angles were somewhat of a challenge due to the spatial limitations associated  with drilling underground. Underground drill holes planned to test the 1806  gold zone are on average 50 percent true thickness due to restricted  underground drilling locations. CRML drilled a total of thirty-eight  underground diamond drill holes from existing underground locations for a  total of 7,206 metres. No downhole drill survey records exist for this drill  program, consequently an element of uncertainty exists for the 3D location of  this data. These holes were drilled at approximately thirty to forty metre  spacing along underground sections. Rambler has drilled a total of 88 -52 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | surface drill  holes for a total of 85,416 metres drilled from 2003 to 2009. Prior to  January 2006, the main priority of diamond drilling was definition drilling  of the Ming horizon massive sulphide and therefore a wide-spaced drilling  array was utilized. These holes were characterized by downhole reflex  surveys. From January 2006 to April 2008, further definition warranted a  closer spaced surface drill program to define the Ming Massive Sulphide as  well as the mineralized LFZ, with the latter being the priority, with spacing  between twenty five to forty meters. Commencing November 2007 and concluding  December 2008, Rambler contributed a total of 167 underground holes for a total  of 22,263 metres of drilled core. Rambler’s underground drill program was  initially designed to test the mineralized footwall zone from appropriate  underground platforms in sync with the mine dewatering program, on fifty  metre drill centers. Infill drilling on twenty-five metre spacing was  completed on the higher grade footwall zones in order to satisfy measured  classification resource requirements. These Ming Massive Sulphide drill holes  were characterized by maximum intersection spacings of 25 metres. All  underground holes are characterized by down hole reflex surveys. Sampling and  Analysis All diamond drill core is descriptively digitally logged on site and  is inspected and recorded for lost core, fracture density and digital  photographs are taken. The core is aligned and marked for sampling and split  in half longitudinally, using a diamond saw blade. One half of the core is  preserved in core boxes as a core library for future reference. The other  half of the sample is bagged, tagged, sealed and delivered by Rambler  personnel to Eastern Analytical Laboratory (“Eastern”), in Springdale,  Newfoundland. Sample rejects and pulps are picked up by Rambler personnel at  Eastern and rejects are stored at the Rambler site. Sample pulps are sent to  Activation Laboratories (“ActLabs”) of Ancaster, Ontario for further  analysis. Assays returned from Eastern are used as a quick method for the  purposes of defining exploration targets and drill hole planning, while  assays returned from ActLabs are the final results used for resource  calculations. Mineralized core is typically divided into one metre lengths or  shorter based on geological and/or structural contacts. Unmineralized core is  divided into 1.5 metre lengths. Wing samples are inserted when appropriate.  Core recovery is estimated to be 98 to 99 percent resulting in samples which  are an accurate representation of one half of the core that is sent for  assay. Underground mine sampling at Rambler during 2008 consisted of chip,  channel, grab and muck sampling which are used for grade estimation of  existing pillars and rounds as well as grade estimates on new development  completed at the Ming Mine. Survey points are taken at the beginning and end  of each chip/channel sample to record all sample locations. The procedure for  chip and channel sampling generally involved dividing samples based on  lithology with sample widths not exceeding one metre. Samples are marked out  perpendicular to the local orientation of geology and chipped or channelled  accordingly. Grabs are samples taken by a geologist, at random, where it was  felt that there may be potential for grade. Mucks are samples that are taken  unbiased from a pile of muck that has been dumped in a designated area on  surface or underground. All of the procedures are completed by Rambler  personnel, who also determine the specific gravity of samples. The specific  gravity database consists of 8,188 records. From 2006 to 2007, specific  gravity measurements were taken on all drill core samples, and in 2008 on  samples from every second drill hole and it is believed the database is  representative of the six modeled zones at the Ming Mine. The QA/QC program  and procedures in use guarantees that exploration data collected adheres to  NI 43-101 quality criteria and requirements. Rambler maintains written field  procedures and has had independent verifications of aspects such as drilling,  surveying, sampling and assaying, database management and database integrity.  Analytical control measures in use at Rambler involve both internal and external  laboratory measures implemented to ensure that data received from outside  sources are accurate and reliable. Rambler makes use of the database  management program DHLogger which is very effective and efficient at managing  assay data as well as tracking and reporting. A representative number of  assay certificates were compared to digital assay database for the purposes  of this report and no discrepancies were found. -53 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Check assays  for the Rambler property are routinely conducted by both ActLabs and Eastern.  It is reported that to date five batches of samples have been rerun by  ActLabs, which did so on their own initiative because of failure to produce  the proper values on their own internal standards. A series of nine certified  copper and gold external standards have been inserted by Rambler staff.  Control sampling procedures applied by Rambler and the associated assay  laboratories include: validation of the assay results in the database  compared with the original assay certificates; taking replicates core samples  from a second split of the pulverized sample at the laboratory; duplicate  analyses of selected samples; sieve tests to verify the grinding of the pulp  required for assaying; insertion of routine blank samples to check for  possible contamination during the preparation and assaying process;  application of appropriate grade certified control samples (standards); and a  check assaying program with an umpire laboratory. Rambler has submitted a  total of 11,357 samples at both Eastern and ActLabs. A total of 186 blanks  were inserted into the sample stream and the laboratories performed  satisfactorily against these blanks. Security of Samples Ming core is  securely stored in an enclosed locked core handling area. Drill core is  delivered to the core shed at the end of each drilling shift. The drill core  is logged, marked for sampling, sawed, bagged and uniquely tagged. Samples  are dropped off at Eastern by Rambler staff, where there are dried, crushed  and pulped. Samples are crushed to approximately minus 10 mesh and split  using a rifle splitter to approximately 300 grams. A ring mill is used to  pulverize the sample split to 98 percent passing minus 150 mesh. Blanks  samples are inserted after every sample estimated to contain greater than two  percent copper grade. Duplicate samples and standard samples are inserted  alternately one per ten samples. Eastern applies a fire assay method followed  by acid digestion and analyses by atomic absorption finish for copper, lead,  zinc, nickel and cobalt analyses. The results received from Eastern are used  for initial grade estimates. Sample pulps and rejects are picked up at  Eastern by Rambler staff and returned directly to the project site. Sample  pulps are checked, packed and sent by courier to ActLabs for final analyses.  Sample rejects are securely stored at the Rambler site. Mineral Resource and  Mineral Reserve Estimates The following table sets forth the estimated  Mineral Resources for the Ming Mine (gold only): Measured, Indicated and  Inferred Mineral Resources (1 to 8) (Inclusive of Mineral Reserves) Category  Tonnes (000s) Gold Grade (grams per tonne) Contained Gold (ounces) Measured  1,283 2.47 102,074 Indicated 9,389 0.35 107,068 Measured and Indicated 10,672  0.61 209,142 Inferred 1,847 1.83 108,421 (1) Mineral Resources are reported  as of August 9, 2010. (2) Mineral Resources that are not Mineral Reserves do  not have demonstrated economic viability. (3) The Mineral Resource estimates  have been reviewed and verified by Larry Pilgrim, P.Geo., Chief Geologist of Rambler,  who is a qualified person under NI 43-101. (4) An underground cut-off was set  at $70 per tonne for all longhole mining methods. (5) Cut-off reserves are  based on 15% dilution, 90% mining recovery, copper recovery of 92.4%, and  gold recovery of 66.4%. (6) Cut-off grades of 1.0% copper for the massive  sulphides, 1.25 grams per tonne of gold for the 1806 zone, and 1.25% copper  for the stringer sulphides. (7) Mineral Resources are estimated using  long-term prices of $1,000 per ounce of gold. (8) Numbers have been rounded.  The following table sets forth the estimated Mineral Reserves for the Ming  Mine (gold only): - 54 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Proven and  Probable Mineral Reserves (1 to 4) Category Tonnes (000s) Gold Grade (grams  per tonne) Contained Gold (ounces) Proven 652 3.24 67,612 Probable 572 2.61  47,938 Dilution (all sources) 274 0.00 0 Proven and Probable 1,498 2.40  115,549 (1) Mineral Reserves are reported as of August 9, 2010. (2) The  Mineral Reserves have been reviewed and verified by Larry Pilgrim, P.Geo.,  Chief Geologist of Rambler, who is a qualified person under NI 43-101. (3)  Cut-off grade of 1.25 grams per tonne gold. (4) Numbers have been rounded.  Mining Operations The Ming Mine development consists of three sites: the mine  site, the ore processing site and the concentrate shipping site, and includes  existing and proposed infrastructure. The four main ore zones to be mined run  parallel to the Ming Massives orebody which was mined by a previous owner.  All the zones are relatively shallow dipping having very consistent plunge  angles. The overall characteristics of the 1807, 1806, and the Ming South  Up-Plunge zones are very similar. These zones are dipping from 22 degrees to  43 degrees from horizontal. True thicknesses in the ore vary from 3 metres up  to 25 metres. Ore widths vary from 40 metres up to 100 metres throughout  these zones. The Ming South Down-Plunge zone is more massive in nature and  the ore is presently modeled in large pods. The longhole method of mining was  chosen to be the most advantageous. The shallow dip of the ore in certain  areas will provide challenges for drilling and blasting however these are  considered to be manageable by limiting stope heights. Construction of the  proposed above-ground improvements at the Mine Site is expected to be completed  over an eight month construction timetable. While waste rock brought to  surface will be eventually returned and stored underground and all tailings  will be stored in a permitted impound, both will require long term effects  monitoring program. Since the property is considered a brownfield,  consideration will need to be given to the effects of previous owners.  Exploration and Development A key focus in mineral exploration is to complete  advanced exploration over existing brownfield mine sites and near mine site  properties. The potential of finding new ore zones within the shadow of a  headframe is not only highly prospective geologically, but it also makes more  economic sense to make new discoveries near existing mining infrastructure.  This is the plan that Rambler intends to follow in the near future. The Titan  24 survey has proven effective in detecting mineralization and alteration  associated with volcanic massive sulphide deposits and discriminates large  targets with greater tonnage potential from smaller targets. After full  evaluation of all of the anomalies generated by the survey a drill program  will be designed in 2010 to test those that are determined to be of the  highest potential for new discoveries. Rambler is also presently compiling  all historical and more recent exploration data over the Ming Property in a  geospatial environment so that all data sets and known rock properties can be  seamlessly integrated. In this sense, the Rambler Property can be fully  evaluated using geochemistry, geophysics and geology to better define future  drill targets and increase the chance of success. Ming Mine Milestones  Current activities at the Ming Mine include: - 55 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | Rambler  completed the construction and commissioning of the copper concentrator in  the second quarter of 2012. They also finalized construction of the 9,500 wet  metric tonne concentrate storage facility at the Goodyear’s Cove Port.  Rambler completed a preliminary economic assessment to include all lower  footwall zone mineralization and evaluating the potential for an expansion of  the Ming Mine. Rambler declared commercial production as of November 1, 2012.  During 2012, Rambler purchased 3% of the combined 4.5% royalty encumbrances  on the Ming Mine held by various parties, thus reducing the remaining net  smelter return royalties on the Ming Mine to 1.5%. Rambler reports that  milling recoveries have been steady, averaging 90% copper and 65% for gold.  In September 2012, operations were shut down for 10 days to complete a number  of maintenance items and to commence preparing the plant for the winter  season. During this shutdown period, Rambler completed the piping required to  run floatation tailings back to the hydromet (CIP circuit) to improve overall  gold recovery to 85%, allowing for a gold doré to be poured along with the  production of copper concentrate. Results of these investigations are  pending. 1. Black Fox Mine, Canada A technical report was prepared in  accordance with NI 43-101 entitled “Black Fox Project, National Instrument  43-101 Technical Report Prepared for Brigus Gold Corp.” dated January 6, 2011  (the “Black Fox Report”). The following description of the Black Fox Mine has  been summarized, in part, from the Black Fox Report and readers should  consult the Black Fox Report to obtain further particulars regarding the  Black Fox Mine which is available for review under Brigus’ profile on the  SEDAR website located at www.sedar.com. Information that updates the  information in the Black Fox Report has been provided by Brigus. Project  Description and Location The Black Fox property (the “Black Fox Property”) is  located 10 kilometres east of Matheson, Ontario, along Hwy 101 east and  approximately 655 kilometres north of Toronto, Ontario. It is located in the  Hislop and Beatty townships, District of Cochrane, in the Larder Lake Mining  District 90. The Black Fox Property includes approximately 1,761.41 hectares  of land. All of the claims for the Black Fox Property are current and the  required claim fees and work commitments have been completed. All of the  claim corners have been surveyed. Brigus owns: (i) 12 claims with the surface  and mineral rights, (ii) 15 claims with surface rights, and (iii) one claim  with mineral rights, and leases (i) three claims with surface and mineral  rights, (ii) one with mineral rights and (iii) 22 other mining claims. A  closure plan has been developed for the development of the project in  compliance with legislation and directives from all pertinent regulatory  bodies. The Black Fox Mine is currently permitted under the following  approvals: • Certificate of Approval for Industrial Sewage Works  4-0125-96-006; • Amended Certificate of Approval – Air – (mine heaters and  generators) 3505-56R2JP; • Amended Certificate of Approval – Air –  (laboratory) 3505-56R2JP; and • Permit to Take Water – (mine dewatering)  00-P-6025. - 56 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Upon obtaining  the Black Fox Property, Brigus has undertaken to clarify historical permits  and obtain new permits required by new or amended legislation. Accessibility,  Climate, Local Resources, Infrastructure and Physiography The Black Fox  Property is located ten kilometres east of Matheson, Ontario and 65  kilometres east of Timmins, Ontario, Canada. Access is via Highway 101 East,  which crosses the Black Fox claim block at the properties center from east to  west. The mine site and its facilities are located on the south side of  Highway 101 East. Supplies and services are available in Matheson or Timmins  and can be delivered with a 12-hour turnaround. The primary industries are  forestry and mining and the Black Fox Property is located in a  well-established mining camp. Mining and exploration personnel as well as  equipment can be found locally for projects in the area. The property is also  contacted by two other roads: Hislop 2 Road to the east and Hislop 6 Conc to  the south. Access to the mine and mill sites, including the pit and tailings  impoundments, is limited. Security gates and guardhouses are positioned on the  main access roads at the entry points to the project areas. Entry is  controlled by a guardhouse operated 24 hours per day, 365 days per year. The  security team’s responsibilities include maintaining a constant, 24/7  presence at the site access guardhouse, performing roving patrols around the  site, and performing plant security and loss protection. Temperature ranges  from 20 degrees Celsius to 33 degrees Celsius during the summer months and  -30 degrees Celsius to 10 degrees Celsius during the cooler winter months of  October to May. The average precipitation is 873.4 millimetres per year and  ranges between 44.5 millimetres in February to 100.1 millimetres in July.  Rapid melting of accumulated snowfall can produce local flooding on the Black  Fox Property for short periods during the spring months. Average monthly wind  speeds for the region are 11 to 15 kilometres per hour. Past operations at  the property have not been affected by weather. The surface at the Black Fox  Property is mainly agricultural land with secondary growth of poplar and  willow shrub. The Black Fox Property is predominantly agricultural land with  a mature willow shrub, poplar, black spruce, and white birch forest located  to the south and eastern borders of the property. The region is characterized  by outwash deposits from continental glaciation including raised beaches,  flat clay pans and eskers. Relief includes rock knobs and ridges. Surface  waters include lakes, rivers, and their associated habitats. Lakes include  Froome Lake located 0.7 kilometres west of the mine, Leach Lake located 1.4  kilometres northwest of the mine and Lawler Lake located 1.7 kilometres  south. Two other lakes, Salve located 5.2 kilometres north and Nickel located  5.9 kilometres north, form the headwaters of the Salve Creek. Salve Lake is  designated as a Forest Reserve and Recommended Conservation Reserve. The  property is located on the Salve Creek and Pike River watersheds, which are  both tributaries of the Black River. The Black River flows north into to the  Abitibi River which in turn flows into the Moose River. The Moose River  ultimately flows into James Bay. The Black Fox property has low to moderate  topography with elevation ranging from 295 to 330 metres above mean sea  level. The infrastructure of the Black Fox Property consists of Highway 101  East, which is adjacent to the project site and facilities. The existing  surface site facilities consist of established infrastructure, including a  fresh water well, offices, an approved mine treatment system, hydropower  lines and waste rock and ore storage pad areas. The plant is being fed from  an existing 27 kilovolt power line to the plant site. Power will be  distributed at the plant site from this 27 kilovolt power line, a 5 mega volt  ampere (“MVA”), 4,160 volt (“V”), 3 phase, 60 hertz distribution transformer  will be installed. The system is being upgraded to adequately handle the new  loads. Fresh water is being supplied from a fresh water well. Fire water will  be pumped from the maintenance facility which will source water from the mine  polishing pond. The underground mine water is currently being pumped at the  rate of 25 to 35 cubic metres per hour. Mine run off is anticipated to  average above 16 cubic metres per hour. Underground mine water reports to the  mine holding pond for recycling and or discharge through the Black Fox water  treatment facility. Excess water will be treated - 57 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | during the  spring and summer months for discharge to the environment through the water  treatment system. Firewater will be fed by an electric firewater pump with a  diesel backup pump in the event of a power failure. Firewater will be  delivered to the maintenance shop via buried distribution piping, while the  administration complex is supplied with fire extinguishers. The fresh water  discharge connection is at an elevation above the tank bottom and ensures the  remaining volume will be available for firewater purposes. Municipal fire  department is located within 10 kilometres of the Black Fox Property. History  The Black Fox Property was first explored by Dominion Gulf in 1952 and then  by Hollinger in 1962. In 1988, Glimmer Mine Inc. (“Glimmer”) put together the  property package using a combination of crown and private lands. In 1989,  Noranda Exploration Company Ltd. (“Noranda”) entered into a joint venture  agreement with Glimmer. As a result of this agreement, Noranda held a 60%  interest in the property. During their ownership, Noranda merged with Hemlo  Gold Mines Inc. (“Hemlo”). Exall purchased the property from Hemlo in April  1996, obtaining approximately 60% interest in the property with Glimmer  retaining 40%. Apollo Gold Corporation (“Apollo Gold”) acquired a 100%  ownership in the fall of 2002 and renamed the property “Black Fox”. In June  2010 Apollo and Linear Gold Corporation (“Linear”) merged to form Brigus. The  first drilling on the property was done by Dominion Gulf in 1952. Hollinger  next tested the area in 1962 near the diabase dikes located in the  easternmost part of the property. Between 1989 and 1994, Noranda, and later  Hemlo, completed eight surface diamond drill programs with a total of 28,014  metres of drilling in 143 drillholes. The result of these drilling programs  was the definition of an intensive grouping of ore zones in two areas of the  property. These ore zones were all within 250 metres of the surface. Some  high-grade intercepts, including abundant visible gold, were recovered during  the drilling program. Between 1995 and 1999, Exall completed another 142  surface diamond drillholes, as well as 708 underground diamond drillholes  with mine development. Eight hundred and ninety-six (896) diamond drillholes  were completed by Apollo Gold between 2002 and 2008. Noranda first performed  detailed geological mapping of the property and much of the surrounding area  in 1989. A total field magnetic survey over most of the property was  conducted along with a complete inductive source resistivity survey and a  conventional induced polarity (“IP”) survey over portions of the property at  that time. Additional IP surveys were completed in 1997 by Glimmer. Ore mined  from the Black Fox Mine was custom milled from 1997 through September 1999 at  the St. Andrew Goldfields Stock Mill located 34 kilometres from the mine.  From October 1999 through May 2001, ore was milled at Kinross Gold  Corporation’s Macassa facility in Kirkland Lake, subsequent to mineral tests  carried out by Lakefield Research and other metallurgical laboratories. These  mills used cyanidation of the whole ore to process the ore. Test work has  indicated that gravity pre-concentration may improve gold recovery. Black Fox  was formally owned and operated by Exall. The previously estimated ore  reserves were 3.1 million tonnes (“Mt”) with a grade of 4.6 grams per tonne  gold (449 100 ounces of gold) all from open pit mining. The open pit total  waste is 47.2 Mt of waste rock and overburden material with an equivalent  overall strip ratio of 15.4 waste to one ore. The underground ore resources  (below 9,815 metres) were 1.6 million tonnes with a grade of 8.1 grams per  tonne gold. Exall mined portions of the deposit from the bottom of the crown  pillar to the 225 metre level (measured vertically 225 metres below the  surface) using conventional underground mining methods including jumbo  drills, diesel load haul dump (“LHD’s”) loaders and haul trucks in a random  room and pillar method. - 58 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Geological  Setting The Black Fox Property is located east of the city of Timmins in  northeastern Ontario located on the Destor-Porcupine Fault Zone (“DPFZ”). The  DPFZ has a strike length of about 200 kilometres, and many of Ontario’s gold  mines are located on or near the DPFZ. The Black Fox Property is located  within Precambrian age metavolcanics and metasedimentary rocks of the Abitibi  Greenstone Belt. The area hosts five main rock groups, most of which have tectonic  contacts of varying intensity. These include: • Blake River Group • Kinojevis  Group • Stoughton-Roquemaure Group (Black Fox Host Units) • Hunter Mine Group  • Porcupine Group The Blake River Group consists of calc-alkalic basalt,  andesite, dacite and rhyolite flows and tuffs. It is the youngest of the  volcano-sedimentary rocks and stratigraphically overlies the Kinojevis Group.  The Kinojevis Group is a sequence of iron rich tholeiitic volcanic rocks that  occur on both sides of the Blake River synclinorium. The Stoughton-Roquemaure  Group stratigraphically underlies the Kinojevis Group and is a mixture of  ultramafic to basaltic komatiite lavas and magnesium-rich tholeiitic basalts  that host the Black Fox gold zones. This is underlain by calc-alkalic rocks  of the Hunter Mine Group. The Hunter Mine Group consists primarily of  calcalkalic pyroclastic and flow rocks in the dacite-rhyolite compositional  range. The Porcupine Group of wacke, siltstone and argillite sediments are  the youngest in the region. They are separated from the above mentioned  volcanic groups by a major fault contact interpreted to have once been a  thrust fault. This group lies predominantly north of the Black Fox Property.  Pre- to syn-kinematic granitic rocks occur throughout the section,  cross-cutting all older lithologic units. The Black Fox Property is situated  within a deeply rooted ductile shear zone accompanied by large-scale  isoclinal folds. The mineralization is situated on the southern limb of a  regional anticline and on the northern limb of the Blake River Syncline. At  Black Fox, the axial plane of the syncline strikes roughly northwest to  southeast. The DPFZ hosts gold mineralization comparable to the Cadillac  Break to the South and Casa Berardi Fault Zones located to the North. These  regional fault fabrics typically strike east to southeast and dip to the  south. They are deeply rooted structures that likely penetrate to the mantle,  as indicated by the associated ultramafics of the DPFZ and the syenites of  the Ross Mine Syenitic Belt (“RMSB”). Zones of intense hydrothermal  alteration measured in thousands of feet are locally associated with these  belts. These types of deep-rooted faults are considered to be the main  channel way for the upward migration of deep fluids. The main structural  feature on the Black Fox Property is the intersection of the DPFZ with the  RMSB. Most of the Black Fox Property is rather flat and lacking in outcrops.  Pleistocene overburden averages 20 metres thick and is composed of lacustrine  clay, gravel and till. The main bedrock types consist of variably sheared,  faulted, carbonatized and mineralized sequences of komatiitic ultramafic  volcanics, belonging to the Stoughton-Roquemaure Group. These strike  northwest-southeast across the property, dipping 45 degrees southwest,  parallel to the DPFZ. Numerous syenitic and feldspar ± quartz porphyry sills  and dykes of various ages occur, primarily within the main ankerite  alteration zone. They are commonly massive to brecciated, silicified and  pyritic with occasional sericite and hematite alteration and a more common  black chlorite alteration at the contacts. Fragments of these dykes  frequently occur within the more strongly deformed green carbonate zones and  they can contain very high gold grades. Surface, underground and exploration  drilling has delineated five major rock types in the vicinity of the Black  Fox mineralization. These include: Mafic volcanic units; Metasediments; Green  carbonate schist; Ultramafic volcanics; and Felsic intrusive units. - 59 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The mafic  volcanic units are further subdivided into massive mafic volcanics (“MV”),  pillowed mafic volcanics (“PMV”) and bleached mafic volcanic flows (“BMV”).  The MV and PMV are fine grained typically hosting a significant degree of  chlorite alteration. These units occur primarily within the hanging wall of  the deposit. In the hanging wall, they are fractured and contain minor  amounts of quartz-calcite veins. Where they occur in the footwall, they lack  carbonate veining and have more prevalent quartz and chlorite alteration. The  BMV, also known as the “Flow Zones”, is a medium to fined grained, bleached  mafic volcanic rock, which is generally located just above the footwall of  the mineralization. This unit has weak chlorite and sericite alteration and  is associated with fine grained disseminated pyrite. Stronger sericite and  pyrite alteration is found near the upper contact of the BMV. Pyrite in this  unit is associated with gold. The BMV dips 45 degrees to 55 degrees southwest  and is moderately foliated. The metasedimentary rocks overlie the BMV and  also occur as lens of greywacke (“SED”) within the green carbonate schists  (“CGR”) as described below. At the top of the BMV, the greywacke layers are  interbedded with siltstone. This unit is discontinuous, varies from 0.05  metres to 1 metre thick and displays graded bedding with stratigraphic tops  to the southwest. The CGR, ranges from 15 metres to 75 metres thick and is  continuous along strike and dip across the property. It is characterized by  intense ductile and brittle deformation shown by multiple generations of  foliation and veining. The CGR host a quartzankerite-fuchsite-leucoxene  alteration assemblage accompanied by varying levels of retrograde chlorite  alteration. This unit contains numerous small bodies and blocks of felsic  dikes and sills with a syenitic composition. A complex stockwork of  quartzankerite veins cross cut the main CGR fuchsite assemblage and the  felsic material. The lapilli sized fragments have been deformed to their  current elliptical shape, elongate parallel to foliation. Mineralogy,  microscopic texture and structures suggest that the CGR is an ultramafic  pyroclastic rock, which has undergone intense ductile deformation. Medium to  coarse-grained pyrite is a minor component and is estimated at approximately  1%. Gold occurs as fine-grained free gold located along chlorite slips, as  disseminated grains in quartz veins and associated with the felsic dikes. The  ultramafic volcanic rocks are divided into five units. These include;  chlorite-talc ultramafic (“CUV”), talc ultramafic (“TUV”), grey carbonate  (“CGY”), silicified grey carbonate (“SUV”) and ankerite ultramafic (“AUV”).  Generally, the ultramafic volcanics occur stratigraphically above the CGR.  The CUV is massive, brecciated in places and often magnetic ultramafic rock.  This unit does not display pervasive carbonate alteration and carbonate is  restricted to late veins and fractures. Tremolite is present, the two primary  mineral assemblages are tremolite-talc-chlorite and talc-chlorite-carbonate.  Locally, the CUV occurs within the mineralized envelope as a non-brecciated  unit and the CUV is not of major economic significance. The TUV is fine  grained, marbled with quartz-ankerite fragments and massive ultramafic  volcanic rock. It tends to be strongly foliated proximal to shear zones,  ranging from 0.3 m to 15 m thick. It is most often associated with the  stockwork CGY. The CGY is composed of a fine grained, massive matrix composed  primarily of magnesite-quartz. Relic outlines of pyroxene and preserved black  chromite grains are visible in hand specimen. This unit contains several  generations of quartz veining. The CGY is 0.5 metre to 2 metre thick,  generally occurs above the CGR and is bound by talc ultramafic shear zones.  The AUV is fine–medium grained rock composed of a quartzankerite-  calcite-chlorite assemblage cross cut by quartz-ankerite veining.  Chloritization varies throughout this unit with matrix ankerite and calcite  alternating downward through the package. Visible gold occurs in highly chloritized  area as well as in association with the quartz-ankerite stockwork. The AUV  generally occurs above the CGR and is one of the dominant rock types at the  Black Fox Property. Many types of felsic intrusive (“FI”) have been  recognized within a number of different lithologies at the Black Fox  Property. Most of the felsic intrusives are fine to medium grained, massive  and moderately fractured, but some coarser grained porphyritic bodies have  also been observed. - 60 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | They are often  cross cut by quartz-ankerite stockwork and most are strongly affected by  sericite and albite alteration. Varying amounts of fine-grained disseminated  pyrite are a strong indication of gold mineralization. Gold occurs as free  gold associated with quartz veins. Syenitic pods have been observed in the  CGR. These are coarse grained and contain a relatively high concentration of  pyrite, at 5 to 15% they typically have an average gold grade of 15 grams per  tonne. Mineralization Gold mineralization at Black Fox occurs mainly within an  ankerite alteration zone 1 kilometre along strike and 20 metres to 100 metres  wide. This alteration envelope occurs primarily within komatiitic ultramafics  and lesser mafic volcanics within the outer boundaries of the DPFZ. In some  areas, the auriferous zones are concordant, which follow lithological  contacts and have been subsequently deformed to slightly discordant zones  that are associated with syenitic sills. Other auriferous zones occur in  quartz veins and stockworks discordant to lithology. The three main styles of  gold mineralization observed at the Black Fox Property are: • Low-sulfide  mineralization associated with abundant quartz veining and quartz stockwork  within strong ankerite-fuchsite altered ultramafic volcanic rocks. •  Mineralization hosted within mafic volcanic units associated with greater  than 5% pyrite and minor to moderate quartz veining. • Mineralization hosted  by silicified felsic dikes. The first style is low sulfide mineralization  occurring within quartz-rich portions of the AUV and CGR rock types. This  includes the green carbonate alteration of the “Main Zone”. The typical host  is the ankerite-fuchsite altered ultramafic volcanic rocks, commonly found  throughout the DPFZ. Quartz veining and quartz stockwork show multiple phases  of veining and structural episodes. Visible gold is common in high-grade  areas. The second style of mineralization is hosted within mafic volcanic  units coded as BMV or MV. This style is referred to as the “Flow Zones”. It  is typically associated with greater than 5% fine-grained pyrite, minor to  moderate quartz veining and a strong bleaching may be present. The quartz  veins are typically parallel to foliation, and visible gold is  characteristically absent. This style of mineralization is common in the  footwall portion of the DPFZ. It has been tested mainly by the eastern part  of the 235 Level underground drilling. The third style of mineralization is  hosted in silicified felsic bodies. These include both quartz-feldspar  porphyries and finer grained units which are possibly syenitic in origin.  Mineralization in the felsic units is associated with increased  silicification, pyrite and some quartz veining all associated with a fracture  foliation. In the middle and hanging wall portions of the DPFZ, felsic-hosted  mineralization can be correlated from hole to hole over short distances. In  the footwall portions, blocks and lenses of felsic material are encountered  which do not correlate from hole to hole. There have been 15 separate  mineralized structures identified within the ankerite envelope. The two main  gold-bearing zones of their classification are the A1 at the hanging wall  contact and the C0 located at the footwall contact. The other smaller zones  located between these two generally have less continuity and width and  represent parallel, mineralized shears and faults. Previous underground  mining indicates that sub-horizontal, mineralized bodies located within the  “Main Zone”, can be up to 15 metres thick and very high grade. This suggests  that zones of dilation were produced during episodes of structural movements.  The majority of the other mineralized zones and quartz veins are one to five  metres in width. At least three generations of structurally controlled quartz  veining have been identified in the underground workings. Quartz veins and  stockwork zones within the main mineralized envelope are concentrated along  shear/fault zones. These structures parallel the main mineralized envelope  suggesting they are responsible for the location and formation of the mineralization.  The presence of sigmoidal vein structures, multiple quartz injections and  re-sheared vein material with chloritic slips indicate complex and repeated  structural movements during a cyclic brittle-ductile deformation period. In -  61 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | the quartz stockwork  zones, gold mineralization can be erratic possibly related to certain vein  sets carrying gold, whereas others are barren. Exploration During the spring  of 2003, Brigus contracted with Quantec Geophysical, Inc., Toronto, Ontario,  to complete an IP survey covering the entire property. Lines were spaced  every 200 metres with 100 metre dipole spacing. This survey has shown many  chargeability and resistivity anomalies along both the DPFZ and the northwest  projection of the Ross Fault. The Ross Fault is the host for the Ross Mine,  located approximately 7,500 metres southeast of the Black Fox mine. In  addition to these, a number of north-south trending anomalies were found. The  intersections of these trends are considered to be prime exploration targets.  It appears that the data from the earlier Noranda magnetic survey will also  be valuable in defining exploration targets. In 2010 Brigus contracted Scott  Hogg & Associates Ltd. of Toronto, Ontario to carry out a helicopter  towed aeromagnetic gradient survey at a 75 metre line spacing and contracted  Quentec Geosciences Ltd. of Toronto, Ontario to conduct a Titan Deep IP  geophysical survey at a 200 metre line spacing. The magnetic survey covered  the entire Black Fox Property and the IP survey filled in areas that were not  surveyed by the Quantec IP survey conducted in 2004. The results of both  surveys are in the process of being interpreted. Drilling The initial portion  of the Brigus surface drilling program concentrated on finding new ore zones  below the Black Fox Property known resources, along strike and adjacent to  the known zones. The targets were the intersection of secondary faults with  the DPFZ and also dilation zones within it. The mineralization is so tightly  controlled by structures that a hole a few metres away could miss a  high-grade zone. Fans were spaced approximately 25 metres along strike and  the intersections of the holes with the DPFZ were planned to be approximately  25 metres apart. The result of this program was the identification of a number  of small, high-grade ore shoots that generally plunge at a 20 to 40 degree  angle to the southeast or southwest, along the DPFZ. This is consistent with  the intersection of two 45 to 70 degree dipping faults or with a zone of  dilation along a fault that has both horizontal and vertical movement. Many  of these ore shoots are still open with depth. A near-surface portion of  high-grade mineralization was drilled on 12.5 metre spacing to improve the  definition of this higher-grade mineralization. There was no surface or  underground exploration drilling in 2008, 2009 and 2010 conducted on the  Black Fox deposit by Brigus, except for the completion of 11 NQ-sized  condemnation surface diamond drill holes. The condemnation holes have an  average depth of 231 metres and total to 2,544 metres. The last Brigus  exploration drilling in 2007 continued from previous campaigns on 12.5 to 25  metre fence lines. The two main emphases included infill delineation of  existing mineralization and to explore for areas of new mineralization. In  2004, a 1,250 metre long exploratory underground drift (4 metre x 4 metre)  was developed in the hanging wall down to 235 metre below the surface, to  establish drill stations for an underground drilling program. The underground  drilling program consisted of 78,650 metre of diamond drilling from 396 core  holes. Surface drilling continued and by the end of 2007, Brigus had  completed 896 diamond drill holes on the property, totalling 225,334 metres.  The Brigus drilling consisted of 500 surface drill holes for a total of  146,684 metres and 396 underground drill holes for a total of 78,650 metres.  Norex Drilling International from Porcupine, Ontario, has completed most of  the surface drilling at Black Fox for Brigus. The holes are typically NQ  diameter core unless conditions require a reduction in core size. In general,  ground conditions have been very good with average core recovery  approximately 95%. The following sections document drilling, chain of custody  and logging procedures employed by Brigus. Although no records are available  to document the procedure used by the prior operators, there is no reason to  suspect they did not follow standard industry practices of the time. - 62 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The core is  removed from the wire line inner barrel and placed in wooden core boxes. Each  box can hold up to six metres of NQ core. The depth at the end of the core  run, along with the length of the run and the amount of core actually  recovered, is written on wooden blocks, which are placed in the box at the  end of the core run. When the box is full, the drillhole number, along with  the beginning and ending depth is written on the outside of the box. A wooden  lid is then placed on the box and the box is sealed with wire. The core is  stacked at the side of the drill until it is picked up by representatives of  Brigus. During this time, the core is under the direct supervision of the  driller. The core samples are picked up by Brigus personnel each morning and  at various times during the day as necessary. It is loaded into a company  truck and taken to the core logging facility on the project site. The core is  then unloaded from the truck, the wire ties are removed and the core is  inspected for any damage that might have occurred during transport. Each box  is then placed in racks within the core logging facility to await logging by  Brigus geologists. When the geologist begins logging a hole, a logging form  is first computer generated with data regarding the hole ID, depth, date  logged, location and the logging geologist. All logging is done  electronically with no handwritten data. This eliminates a separate data  entry step and the subsequent errors that it can introduce. The geologist  moves the boxes of core from the rack to the core logging table. The lids are  removed and placed outside for later reuse. The pieces of core are then  reassembled, within the box, just as it would have come out of the hole. The  core is then measured and that measurement is compared to the core depth  markers placed in the box by the drillers. This is documents core recovery  and provides a check against any lost or missing core not accounted for by  the drillers. All of this data, along with all geological data, are entered  into the computer spreadsheet by the geologist. The core is then digitally  photographed on the logging bench. This digital record is stored in the  computer files for that hole. All of the geological information is backed up  on the server daily. Prior to removing the drill string, the downhole  deflection is measured with a Reflex E-Z Shot digital tool (E-Z Shot).  Measurements are taken approximately every 50 metres down the hole.  Occasionally a spurious reading will be obtained near a particularly strongly  magnetic rock unit. The geologists review all surveys and any such readings  are discarded. As a check, three holes were re-surveyed using a Maxi-bore  gyroscopic tool. The Maxi-bore survey duplicated the E-Z Shot survey very  well. On average, the E-Z Shot gave readings that were within 3.1% on bearing  and 0.4% on dip from the Maxi-bore survey information. All drillholes have  their collars located by a licensed surveyor upon completion. The Brigus  drilling program has targeted two main areas of the mineralization. The first  is the near-surface area where about half of the surface drillholes were  completed. Drilling typically is located along sections oriented 36 degrees  azimuth at inclinations of -45 degrees to -50 degrees to provide an alignment  oriented nearly perpendicular to the DPFZ. The second targeted area of  mineralization is down dip of the previous drilling. At depth, the DPFZ has  the same southeasterly strike, but the dip steepens to an average of -60  degrees. The mineralization still occurs along structural intersections and  at dilation zones along the fault. These appear to rake at about -40 degrees  to the southeast or southwest. In this area, the shoots tend to be smaller,  thinner and less continuous than those encountered near the surface. The  drillholes, which test this area, were collared from both the surface and  underground. Typically, fans were used so that the structure was tested on  12.5 to 25 metre spacing. Eventually, more tightly-spaced drilling from  underground platforms will be required to improve the delineation of the  mineralization. Sampling and Analysis The sampling procedure begins with the  geologist defining each sample interval and designating such with a sample  tag documented in a sample book. They next mark the core with a center line  cut mark and replace the core box lids for transfer to the sawing station. In  the sawing room technicians saw the core sample in half with a diamond saw  and place one half in a bag which is marked with the sample number and  includes a sample tag. The half core that remains in the core box has the lid  replaced and is placed back in the rack by the technician. Blank and standard  samples are inserted approximately every 20 samples and are numbered in  sequence with the core samples. The samples are then stored inside - 63 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | the core  facility until they are picked up by Swastika Laboratories (“Swastika”) from  Swastika, Ontario. The samples are placed into their truck, with each sample  being checked off a list as it is being loaded and then taken directly to the  laboratory where they are unloaded into a secure facility. At the logging area,  once a truck load of split core has accumulated, the boxes are labelled with  hole number and footage on stainless steel tags and then moved to covered  storage racks located outdoors. There have been reported two serious sampling  issues at the Black Fox Mine. Both of which are related to coarse gold and  sample size resulting in analyses that tend to report less gold than is  actually present. The first issue relates to obtaining a large enough sample  to represent the area it will influence. The gold at the Black Fox deposit  appears to be concentrated in small areas causing drill hole samples to  occasionally get too much gold in the sample or more commonly, missing the  area of concentration and get too little gold in the sample. The second issue  relates to the particle size and distribution of the gold. When the particles  are relatively large and not evenly distributed, the core holes can be too  small to obtain a representative sample. This has a similar effect, in some  cased it will overestimate the gold content but more typically underestimate  it. Some samples may even appear to be waste having not encountered any gold  particles that may be located relatively close by. It is likely that holes  several metres in diameter would be required to obtain representative samples  of the deposit. Some areas that were mined when compared with the drilling  present and found many instances of drill indicated waste which were  subsequently stoped. This second issue is accentuated by getting the  representative amount of gold in the sample pulp once the core sample has  been split, crushed, split again and then pulverized. Gold particles up to  0.15 centimetres have been observed and particles of 0.06 centimetres are  very common. With gold this coarse, it is easy to create sub-samples that  contain too many or too few gold particles if the sample size is not based on  the size of the gold particles in the deposit. In order to sample the 0.15  centimetres gold particles that occur at Black Fox, samples of up to 109  kilograms must be processed in their entirety. If the sample contains 0.06  centimetres gold particles, which commonly occur in the deposit, a seven  kilogram sample must be processed in its entirety. These sample sizes are  much larger than the typical 30 gram fire assay sample or even the generally  larger than the 1,000 gram screen metallic assay sample. Once again, the  samples result in a few assays containing too much gold, with far more  containing less than is actually present in the whole sample. Without proper  size samples the database for the deposit likely contains a few samples that  are too high in grade, but far more that are too low in grade. Quality  Control During the development of the SRK Pre-Feasibility Study, Analytical  Solutions (“ASL”) of Toronto Canada was contracted to provide an independent  QA/QC review of historical and current sampling at Black Fox. The following  paragraphs summarize their findings ASL has been contracted to review  documentation related to assay quality control and sampling for the Black Fox  mine. The principal objective was to justify use of the existing assay  database for Resource calculations. The focus of the studies by ASL was to  determine (a) whether there was any evidence of bias in the assay database  and (b) the effect of coarse gold on the reliability of the assays. The Black  Fox Mine assay data includes 128,026 assays. The 50th percentile for the  dataset is 0.06 grams per tonne gold, the 90th percentile is 0.77 grams per  tonne gold and the 95th percentile is 2.23 grams per tonne gold. It is  apparent that only the upper 5% of the samples will influence the Resource  calculation and the focus of the review should be this relatively small  percentage of samples in the database. No evidence has been found by previous  consultants, who have done extensive reviews of procedures and data, of a  bias in the gold assays. A systematic bias over a significant amount of time  would affect a resource calculation but this problem has not been identified.  Concerns have been raised regarding sample representivity of the Black Fox  Mine. Thousands of pulp and reject duplicates confirm that it is difficult to  reproduce assays within an arbitrary ± 10% but the assay reproducibility is  typical of similar deposits and does not represent a material risk. - 64 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Brigus has  implemented a significantly improved check assay program where there is a  check assay on each mineralized interval. In addition to the blank and  standard check samples, Swastika runs its own internal check samples. All of  the samples are run using a 30 gram fire assay. Relatively higher-grade zones  are selected from the fire assay results by Brigus personnel and these  intervals are re-run with a 1,200 gram screened metallic assay. Two of these  samples are selected out of each ore zone at random and the rejects are sent  to SGS Laboratories in Rouyn, Quebec where they are re-prepped and run for a  second screen metallic assay. This is used as the quality check on the first  assay set run by Swastika. All of the assay data is sent to Brigus in digital  format where it is merged with the geological spreadsheet for that hole.  Brigus has completed screen metallic assays on 594 samples. Of these, 512  assays can be compared to normal fire assays. The screen metallic assays are  17% higher in grade than the average of the fire assays from these intervals.  A total of 289 screen metallic assays are higher in grade to the average of  the fire assays, while 223 are equal to or lower in grade. Other assay  methods will find too much gold on occasion, but the majority will find less  than is in the core. Brigus submitted standards and blanks within each set of  samples submitted for assay. Four labs were used with most of the assays  completed by Swastika. Several thousand tests were completed and the blanks  typically agreed. A number of sample standards have been run within each  group of samples. Swastika has reported reasonable ability to accurately  assay the standards. If the blank or standard failed, then the entire batch  (20 samples) would be reassayed, as well as the failed standard or blank. A  total of 8,425 sample pulps have been rerun by the original assayer. These  samples indicate good agreement between the original sample and the rerun  sample. The check was required to be within ± 10%. If not, the pulp would be  reassayed a second time. A total of 2,618 assay intervals have been checked  by a different lab using splits from the sample rejects. The results indicate  that the original sample is higher than the check by about 4%. Of the 2,618  checks, a total of 905 or about 35% have differences of greater than 30%. If  the checks were not within 20%, a second pulp would be prepared from the  rejects. These relative differences are very significant and point out the  need for a more substantial sampling and assaying program. Large composites  averaging about 14 kilograms in weight were made by combining drillhole core  and/or rejects. Typically, nine drillhole intervals were composited into one  minibulk sample, however the range was four to 17 kilograms. A total of 47  composites were made from mostly ore-grade intervals. Twenty-one of the 47  ore-grade composites contained high-grade. Since these tests use a much  larger sample than the assay pulp, one would expect in a coarse gold deposit  that the results of the mini-bulk sample gravity tests would be more reliable  than the 30 gram pulps used for fire assay. The results of the 47 ore-grade  mini-bulk gravity tests indicated a 9% lower grade in the mini-bulk samples  compared to the individual assays. This is the opposite of what would be  expected, and it is likely due to more high-grade material being in the  mini-bulk samples than in the deposit as an average. After the core was  logged, the core samples were split by a diamond saw to obtain the assay lab  sample. The 50% split was bagged at the site and either picked up by assay  lab personnel or shipped to the assay lab. The sample was dried, crushed,  split, pulverized, and blended to obtain fire assay pulps. The labs prepared  15 gram to 30 gram assay ton samples for assay. Most of the assays were  completed by fire assay methods with a gravimetric finish. Data Verification  Site visits were conducted from August 31 to September 2, 2010 and again from  November 17 to 19, 2010. During these site visits, inspections were conducted  of the site, including the open pit, underground and mill location. Seven  drill holes were spot checked by Wardrop Engineering Inc. (“Wardrop”). These  holes were selected to provide a cross section of geographic location,  mineralization intersected and of the various - 65 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | diamond  drilling campaigns. The core was reviewed and compared with the paper drill  logs on November 19, 2010. No issues were identified with the core logging  and transcription. Each of these drill holes were cross checked with the  paper and digital drill logs for the collar coordinates and down hole  surveys. The assays for each of the drillholes were crosschecked with their  assay certificates. No errors were found. Security of Samples Brigus sawed  the core and shipped half of the drill core to either Swastika or SGS  Laboratories. The labs prepared a 30 gram sample for fire assay with a  gravimetric finish. The core was first crushed -10 mesh and a 400 gram split  then pulverized. As a quality check, the coarse reject sample material from  each mineralized zone, over 1.0 gram per tonne gold is sent to the other lab.  The rejects are re-split, pulverized and re-assayed using a 30 gram fire  assay with a gravimetric finish. This procedure provided a check on the  entire assay process, from sample preparation through to the gravimetric  finish. Many of the higher grade samples were run with a screened metallic  fire assay. All check data was subjected to a standard QA/QC analysis.  Swastika sent certificates of analysis and electronic data files directly to  the Brigus office in Matheson, Ontario. Hard copy results and assay  certificate were also faxed to Brigus. The faxed certificates, were marked up  with specific hole intervals and cross checked to the digital file for  errors. After confirmed to be correct, the faxed copies were stamped  complete, and added to the audit file for back referencing. The digital assay  file was cut and pasted directly into the electronic core logs. Once the  results were pasted in, the sample numbers were cross-referenced to ensure no  pasting errors occurred. The completed drilling logs were then saved into a  separate file and were put into a locked folder on the Black Fox database,  which can only be accessed as a read-only file. All editing of these files  must be done through the Administrator (Project Manager). Once the file has  been saved to this folder, the file was sent to Apollo’s offices in the  United States for modeling and reporting purposes. All reported assays are  final assays, and original certificates of analysis are stored in a separate  binder and stored in a fire proof safe at the Black Fox Property. All assay  reporting goes through the Black Fox Property Manager. Since 2008, Brigus has  not completed any further exploration drilling on the Black Fox Property, so  no additional procedures are reported.- 66 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Mineral  Resource and Mineral Reserve Estimates The following table sets forth the  estimated Mineral Resources for the Black Fox Mine: Indicated and Inferred  Mineral Resources (1 to 10) (Inclusive of Mineral Reserves) Category Tonnes  (000s) Gold Grade (grams per tonne) Contained Gold (ounces) Open Pit  Indicated 3,164.2 4.445 452,200 Inferred 667.1 2.61 56,000 Underground  Indicated 2,504.8 7.182 579,200 Inferred 115.2 5.816 21,500 Total Indicated  5,669.0 5.654 1,031,000 Total Inferred 782.3 3.082 78,000 (1) Black Fox  Mineral Reserves are fully included in the Mineral Resources. (2) Black Fox  Mineral Reserves and Mineral Resources are reported as of October 31, 2010.  (3) The Mineral Resources have been reviewed and verified by Howard Bird,  Senior Vice President, Exploration of Brigus, who is a qualified person under  NI 43-101. (4) Cut-off grade for the open-pit reserves and resources is 0.88  grams per tonne gold. (5) Cut-off grade for the underground reserves and  resources is 2.54 grams per tonne gold. (6) Metal prices used for initial  cut-off calculations are $1,150 per ounce for 88% of the gold sold and $500  per ounce of gold sold through the Black Fox Gold Stream. (7) The estimated  underground reserves include 10% unplanned dilution at 0 grams per tonne from  the backfill and 15% planned dilution at one gram per tonne from the walls  for a total dilution of 25%. The estimated open pit reserves include 30%  dilution at 0 grams per tonne and a 95% mining recovery factor for both. The higher  average gold grades for the open pit and underground in the Indicated  Resources compared to the Probable Reserves are the result of no dilution  being applied to Indicated Resources.   (8) The mineral resources were estimated using the ordinary kriging method.  (9) The mineral reserves were estimated from the life of mine plan, which  defined sustaining capital requirements and mine operating costs, to  demonstrate that these reserves can be economically extracted and processed.  Mining losses and dilution were determined based on sub-surface geotechnical  conditions, the mining method and equipment capabilities for each area of the  mine. (10) Contained metal in estimated reserves remains subject to  metallurgical recovery losses. - 67 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The following  table sets forth the estimated Mineral Reserves for the Black Fox Mine:  Proven and Probable Mineral Reserves (1 to 9) Category Tonnes (000s) Gold  Grade (grams per tonne) Contained Gold (ounces) Open Pit Probable 3,159.8  3.228 327,920 Underground Probable 2,936.0 5.933 560,008 Stockpile Proven  352.1 1.630 18,446 Total Proven + Probable 6,447.9 4.372 906,375 (1) Black  Fox Mineral Reserves and Mineral Resources are reported as of October 31,  2010. (2) The Mineral Reserves have been reviewed and verified by Howard Bird,  Senior Vice President, Exploration of Brigus, who is a qualified person under  NI 43-101. (3) Cut-off grade for the open-pit reserves and resources is 0.88  grams per tonne gold. (4) Cut-off grade for the underground reserves and  resources is 2.54 grams per tonne gold. (5) Metal prices used for initial  cut-off calculations are $1,150 per ounce for 88% of the gold sold and $500  per ounce of gold sold through the Black Fox Gold Stream. (6) The estimated  underground reserves include 10% unplanned dilution at 0 grams per tonne from  the backfill and 15% planned dilution at one gram per tonne from the walls  for a total dilution of 25%. The estimated open pit reserves include 30%  dilution at 0 grams per tonne and a 95% mining recovery factor for both. The  higher average gold grades for the open pit and underground in the Indicated  Resources compared to the Probable Reserves are the result of no dilution  being applied to Indicated Resources. (7) The mineral resources were  estimated using the ordinary kriging method. (8) The mineral reserves were  estimated from the life of mine plan, which defined sustaining capital  requirements and mine operating costs, to demonstrate that these reserves can  be economically extracted and processed. Mining losses and dilution were determined  based on sub-surface geotechnical conditions, the mining method and equipment  capabilities for each area of the mine. (9) Contained metal in estimated  reserves remains subject to metallurgical recovery losses. Mining Operations  Open Pit The alluvial till is being mined by a fleet of owner operated  equipment, consisting of two CAT 320CL hydraulic backhoe excavators and  twelve CAT D740 articulated dump trucks. Support equipment consists of two  CAT D6 Low Ground Pressure (“LGP”) dozers. Till material is being dumped in  separate overburden dumps located to the east of the offices. The overburden  is dumped in three metre lifts in cells created by forming up rock bunds from  waste excavation. This method ensures that the free running nature of the  overburden is contained. Rock haul roads are constructed to allow the safe  passage of the trucks. The LGP dozers are used to form up the rock bunds and  dress the overburden. In areas known to contain only waste, the drillhole  spacing and drillhole depth is different from areas containing  mineralization. About 75% of the waste rock mined will be from areas  containing only waste. Blasted waste rock is mined by a 12 cubic metres  Komatsu PC2000 hydraulic backhoe excavator and 91 tonne CAT 777F rigid dump  trucks haul trucks. A 6.5 cubic metres CAT 988H front-end loader is used as a  backup for the excavator and for general duties. The mineralized zones  average 4.75 metre wide, but can be as narrow as one metre. The minimization  of dilution of the ore is a critical element of the mining operation due to  the characteristics of the orebody. For this reason, the ore is mined in 3  metre lifts or benches, so that identification of ore blocks can be carried  out with the most accuracy and the material mined with the minimum of dilution.  The drill cuttings from all blastholes are sampled and assayed in order to  provide the basis for ore grade control. The sampling requirements influence  the spacing of the blastholes which in turn influences the blasthole  diameter. Mining in the mineralized area is accomplished using two, four  cubic metres CAT 385CL hydraulic backhoe excavators to minimize dilution. For  this study, all of the ore was scheduled using the smaller excavator but in  the larger ore zones the 12.0 cubic metres excavator could be used to  decrease the loading times. The 91 tonne rigid haul trucks are also used for  hauling the ore, despite the fact that - 68 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | this will  require 11 to 12 passes. The benefit of this is that the truck fleet is  standardized. The loading of the ore zones is restricted to daytime shifts  only to provide better control in mining the ore. Additional factors have  been added to the equipment requirement calculations to allow for the extra  time and costs that will be encountered during the mining through the  existing underground workings. Mining in the existing underground workings is  scheduled using the smaller four cubic metre excavator. The production rate  for mining in these areas is calculated at 65% of the normal production rate  to allow for the extra time that is expected in these areas. The 91 tonne  haul trucks are used for hauling the ore. As this operation is necessarily  slow in these areas the additional number of passes is offset by less trucks  and standardization of the truck fleet. The loading of the old working areas  is restricted to daytime shifts only for safety concerns. To ensure that the  old workings are safe to work it is necessary to identify the potential area  of old workings from existing survey information. These areas are flagged to  delineate a safe working zone. Holes are drilled, plugged and blasted to  collapse the old workings. Further holes are then drilled to probe the  collapsed old workings to ensure they are safe to work. Underground For ramp  and level development, two-boom electric hydraulic (“EH”) jumbo drills will  be used to drill blastholes. Blastholes will be nominal 1 3/4 inch (45  millimetre) diameter x 12 feet (3.7 metre) average length for development  headings. Single boom EH jumbo will be used in MCF production drilling. Holes  are 1 1/4 inch (32 millimetre) x 11 feet (3.4 metre). Overall explosive  consumption has been based on the use of ANFO and packaged emulsions (13%) at  a powder factor of 1.63 pounds per ton for mine development. It is assumed  that emulsions are not needed in the MCF stopes, resulting in powder factor  of 1.00. During ramp and lateral development, blasted waste rock will be  mucked by an eight cubic yard (LHD) unit and hauled to a remuck bay, or  ideally directly into a 30-tonne truck fitted with an ejector box which will  deliver to an empty stope for backfill. As a last resort, waste must be  hauled to surface when all underground openings suitable for storage have  been filled. Waste that is brought to surface will be piled in a designated  area in the open pit, preferably in close proximity to the ramp portal. It  will be retrieved, backhauled to underground by ore trucks once a stope is  ready for backfilling. The primary backfill material will be the waste rock  produced from underground development. If necessary, supplemental material  will be sourced from the open pit waste dump. A cement binder will be added  to the fill in the sill cut. A slurry tank will be set up in the vicinity of  the stope, equipped with a mixer and a pump. The pump will deliver the slurry  to the stope via a pipeline. The pipeline will fork into two or three  perforated branch lines strung to the back of the stope. The slurry will  spray and percolate the rockfill. Cement slurry will be placed at a ratio of  five parts cement to 95 parts (w/w%) or 5% by weight. Markets Markets for  doré are readily available. Gold markets are mature, global markets with  reputable smelters and refiners located throughout the world. Demand is  presently high with prices for gold showing remarkable increases during  recent times. The 36-month average London PM gold price fix through 2010 is  $1018 per ounce. Black Fox Mine Milestones Current activities and milestones  at the Black Fox Mine include: • Brigus’ total gold production for 2012 was  77,374 ounces. - 69 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The mill  optimization program was completed in 2012 and resulted in increased mill  processing capacity of approximately 10% to 2,200 tonnes per day. • Brigus’  production guidance for 2013 is 90,000 to 100,000 ounces and cash costs are  anticipated to stabilize in the range of $700 - $750 per ounce. • An  underground exploration program at the Black Fox mine commenced in June of  this year, with two rigs. The drilling is being performed from a new  exploration drift at the 9,670 metre level on the East side of the mine, and  has returned excellent gold grades over significant widths. The objective of  the drilling program is to extend the Black Fox orebody and increase the  current gold resource at the mine. The Black Fox orebody remains open at  depth and along strike and includes gold reserves to a maximum depth of 500  metres. Orebodies in the region, along the Destor Porcupine Fault, often  extend to depths of more than 1,000 metres. The ongoing underground drilling  program at the Black Fox mine will drill beyond 500 metres and will continue  into 2013 with the goal of expanding the underground resource. Bachelor Lake  Mine, Canada A technical report was prepared in accordance with NI 43-101  entitled “Technical Report on the Bachelor Lake Gold Project Prepared for  Metanor Resources” dated February 17, 2011 (the “Bachelor Lake Report”). The  following description of the Bachelor Lake Mine has been summarized, in part,  from the Bachelor Lake Report and readers should consult the Bachelor Lake  Report to obtain further particulars regarding the Bachelor Lake Mine. The  Bachelor Lake Report is available for review under Metanor’s profile on the  SEDAR website located at www.sedar.com. Information that updates the  information in the Bachelor Lake Report has been provided by Metanor.  Property Description and, Location The Bachelor Lake Mine is a previously  mined gold property currently under development. The Bachelor Lake Mine is  located in the Le Sueur Township approximately 225 kilometres northeast of  Val d’Or and is composed of five blocks totalling 241 claims and two mining  concessions (total area 7,566.73 hectares) which are 100% owned by Metanor  Resources Inc. (“Metanor”). The Geonova Block is composed of 51 claims and  two mining concessions totalling an area of 1,867.67 hectares. The Hewfran  Block is composed of 38 claims totalling 683.5 hectares. The Hansens Block is  composed of 12 claims totalling 311.33 hectares. The MJL-1 Block is composed  of 76 claims totalling 1,672.12. The MJL-2 Block is composed of 64 claims totalling  3,032.1 hectares. The Bachelor Lake Mine infrastructure is located on mining  concessions which is comprised of surface and underground rights to explore  and extract mineral resources as well as to erect and operate all required  infrastructure to support mineral extraction activities. Surface rights are  sufficient for the proposed mining operations. Mining concessions are renewed  every year. Claims do not comprise surface rights and are renewed every two  years at their expiration date. Since various blocks of claims have been  registered at different periods of time, their expiration dates differ. For  the Bachelor Lake Mine, the total renewal fees to be paid over one cycle of  renewal are $9,984. The total work required to cover one cycle of all claims  renewal total is $342,720. The total excess of work credits total is  $2,028,467. The property was not surveyed with the exception of the two  mining concessions. There are no major environmental issues, land claim  issues, ownership disputes pending. In early 2010, Metanor appointed GENIVAR  to undertake an environmental evaluation for the proposed mine development.  The application for Certificate of Authorization to proceed with a bulk  sample was submitted to the Ministère du Développement Murable, de l’ Environnement  et des Parcs (“MDDEP”) in 2010. All necessary environmental permits to  proceed to commercial production were obtained in July 2012. Metanor is in  the process of obtaining the necessary permits and authorizations from  government and regulatory agencies. The following permits have been obtained  in relation to the Bachelor Lake Mine: A Certificate of Authorization for  mill process; a Modified Certificate of Authorization to process 500,000  tonnes at a rate - 70 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | of 800 tonnes  per day (Barry Project); A Certificate of Authorization for the installation  of a cyanide destruction process (OZONE); A Certificate of Authorization to  increase the mill capacity at 1,200 tonners per day; A Certificate of  Authorization to process a bulk sample of 5,000 tonnes (Bachelor Lake Gold  Mine). The following permits are expected to be obtained in relation to the  Bachelor Lake Mine: A Certificate of Authorization for the extraction of  900,000 tonnes from Bachelor Lake Gold Mine; an Environmental Impact Study;  and a Certificate of Authorization for Land Reclamation Program. The Bachelor  Lake Mine is subject to four royalties. The first royalty is 2% of the  revenue with Con Copper up to a maximum of $1,750,000. The second royalty is  2% of the revenue generated from the Hewfran claims portion of the property  with Teck Cominco. The third royalty is the revenue generated from the  Bachelor claims portion with Halo Resources Inc. (“Halo”). The fourth royalty  is 0.25% of the revenue generated from the Bachelor claims portion with  Wolfden Resources Inc. (“Wolfden”). Accessibility, Climate, Local Resources,  Infrastructure and Physiography The Bachelor Lake Mine is located 3.5  kilometres south east of the village of Desmaraisville. The community is  serviced by bus and truck transport, and is connected to the provincial power  grid and telecommunication systems. A large population of experienced miners  and related tradespersons is available within a 240 kilometre radius of the  mine. The Bachelor Lake Mine is at an elevation of 355 metres above sea level  and is relatively flat. The outcrop exposure is minimal and wetlands cover  the central and southern part of the property. The property is accessible via  Hwy 113 which connects Chibougamau to Val d’Or. The property is located in  the municipality of James Bay, 3.5 kilometres south east of Desmaraisville,  which is accessible by a gravel road. The average daily temperature is  slightly above one degree Celsius. An average precipitation of 929.4  millimetres falls annually of which 703.8 millimetres is rain and 225.6  millimetres is snow. Operations can occur throughout the year. Existing mine  buildings are located atop a rocky hill. East of the mine is the tailings  ponds with an area of approximately 50 hectares and the polishing pond with an  area of five hectares. The surface infrastructure includes, an underground  mine, including hoistroom, compressor room, headframe, and shaft; a tailings  pond, polishing pond, dykes and drainage ditches; a mill including the assay  laboratory, refinery, and crushing room; an administrative office and  warehouse; a garage and fuel tanks; storage for hazardous materials; and an  upgraded security system. A camp facility was built to house workers about  two kilometres from the mine. The housing capacity of the camp will allow for  expansion to meet rising labour needs. There are offices for the management  staff of various departments, a first aid facility, and a security gatehouse  directly on the mine site. Several phases of refurbishing work have been  completed by Metanor during the past few years. The mill was completely  renovated and put into operation in January 2008. The grinding capacity was  increased by the addition of a new ball mill the same year, raising the  throughput to 700 tonnes per day. A rod mill was commissioned in February  2010 increasing grinding capacity to over 1,000 tonnes per day. Major work  has been completed to bring the old tailings ponds into current regulation as  required by the MDDEP. A berm was built to divide the old impoundment into two  sections (tailings pond and decantation pond). Another berm was built on the  west side of the tailings ponds to prevent any spills into the environment.  Observation wells were also installed to sample the water table around the  tailings area. The compressor room and compressors were also completely  overhauled. These compressors are now automated and the output is 3,500 cubic  feet per minute. The site is equipped with automated back-up diesel  generators. The hoisting infrastructure was refurbished in 2009. Currently  the site is fed by four mega volt amps from Hydro Quebec and is sufficient  for the current plan. - 71 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | History The  Bachelor Lake Mine was originally staked by O’Brien Gold Mines Ltd.  (“O’Brien”) in 1946. This discovery was followed by various exploration  works: trenching, geophysical surveys and numerous drill holes. In 1951 the  Quebec Department of Mines performed geological mapping of the Bachelor Lake  Mine. Bachelor Claims During the 1960’s, Sturgeon River Mines Ltd.  (“Sturgeon”) sank a shaft and launched an underground drill program. Surface  and underground exploration was carried out by Quebec Sturgeon River Mines  from 1972 to 1975. In the 1980’s, Bachelor Lake Gold Mine Inc., a subsidiary  of Sturgeon, conducted several underground development work phases and  commercial production commenced in 1982. From 1984 to 1985 Bachelor Lake Gold  Mines Inc. performed humus geochemical survey; with a total of 1,283 samples  being taken. From 1985 to 1987 very low frequency and electromagnetic and health  surveys were carried out. The deepening of the shaft to Level 12 was  completed in 1987, and production ceased in 1989 with a total of 130,341  ounces of refined gold. Ore dilution was excessive and was undoubtedly the  main reason for the financial difficulties. The mine was placed on a care and  maintenance basis, when costs exceeded revenues. Hewfran Claims In 1946,  S-Francis Mining discovered Agar #1 and #2 which was followed by geological  mapping and trenching. In 1948 Batch River Gold Mines discovered two zinc  showings and a gold showing in the northern third of Lots 12-19, RV. This was  followed by numerous geophysical surveys, mapping and trenching. Dome  Exploration did testing for Coniagas-type massive sulphide mineralization.  The extension of Agar #2 showed 34 diamond drill holes totalling 4,066  metres. In 1957 Quebec Bachelor Mining Corp. performed a magnetometric survey  of the north-western part of the Hewfran property. In 1960 a geological  survey was performed by Roxford Mining. An induced polarization survey and  drilling program was performed by Sturgeon River Mines in 1965 and Valdex  Mines (“Valdex”) in 1970 discovering several weak anomalies. Valdex went on  to perform magnetometric and electromagnetic surveys in 1971. Valdex carried  out geophysical surveys searching for Coniagas-type massive sulphides and  Bachelor-type gold. In 1978, Brominco Inc. (“Brominco”) carried out induced  polarization surveys in several parts of the property. In 1983 detailed  mapping was carried out through Kretschmer with a very low frequency  electromagnetic survey and lithogeochemistry covering the north east corner  of the property. Detailed geology, humus surveys and diamond drilling was  carried out by Brominco. In 1986, Aur Resources Inc. (“Aur”) commenced a  program to explore for the extension of the Bachelor Lake Mine, with a major  exploration drilling program from May 1987 to May 1989. In 1988, Aur tested  bulk samples from the Main Zone. Prior Ownership In 1990, a joint venture  agreement was negotiated with Hecla Mining Company of Canada (“Hecla”)  whereby Hecla could earn a 60% interest for placing the property back into  production. After Hecla acquired control of Acadia Mineral Ventures Ltd  (“Acadia”) the Bachelor Lake Mine was assigned to Acadia. Acadia carried out  167.64 metres of underground drifting to establish 2 drill stations. A number  of significant gold intersections were cut. Espalau Mining Corporation  (“Espalau”) acquired the Bachelor Lake Property and from 1994 to 1995  realized surface diamond drilling holes as a follow-up program to a magneto  metric and very low frequency survey. GéoNova Explorations Inc. (“GéoNova”)  acquired a 100% interest in the Bachelor Lake Mine in March of 2001,  including buildings (offices, shops, compressor rooms, headframe, cyanidation  plan and crusher room). -72 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Between 2003  and 2004, Wolfden signed an agreement to acquire a 50% interest from GéoNova  after incurring $3,000,000 in exploration over three years and dewatering was  undertaken. In 2004, Metanor acquired the 100% interest held by GéoNova for  $2.3 million. Halo Resources Inc. (“Halo”) satisfied its commitments to  acquire a 50% undivided ownership in the property in 2005 and the Bachelor  Lake joint venture (“BLJV”) between Halo and Metanor was created. The BLJV  commissioned a 2005 technical report by InnovExplo Inc. (“InnovExplo”).  Metanor acquired 100% of the Bachelor Lake Mine from Halo in November, 2007.  Geological Setting Regional Geology The Bachelor Lake Mine is located within  the Northern Volcanic Zone of the Abitibi sub-province, Superior province.  The Bachelor Lake Mine is situated near the western limit of the  Chibougamau-Chapais greenstone belt. The mafic to felsic volcanic and  volcanoclastic rocks of the Bachelor Lake Mine are part of the basal  mafic-dominated sequence referred to as the Volcanic Cycle I. The Northern  Volcanic Zone of the Abitibi sub-province is interpreted as a diffuse arc  passing laterally into a back-arc environment with numerous felsic and  mafic-felsic edifices and intra-arc sedimentary basins. The Bachelor Lake  Mine lies along a local northeast trend which is deviated from the general  east-west pattern of the Abitibi sub-province due to significant synvolcanic  pluton emplacement and the influence of the major northeast-trending Wedding-Lamarck  fault in the Bachelor Lake area. Rock units typically include mafic,  intermediate and felsic flows and their intrusive equivalents. Post-tectonic  lamprophyre dykes are also present. Local Geology The Bachelor Lake Mine is  underlain by Archean volcanic rocks of the Obatogamau Formation in a poorly  known and poorly explored area of the Abitibi greenstone belt. Based on the  absence of marker horizons and the paucity of outcrops, it is difficult to  establish a well defined rock sequence in the Coniagas-Bachelor Lake area.  The Obatogamau Formation includes mafic, intermediate and felsic flows and  synvolcanic intrusive equivalents which are the host for the volcanogenic  massive sulphide occurrences. A local composite stratigraphic section shows a  typical complex volcano-sedimentary assemblage. This stratigraphic sequence  includes the 280 metre thick Coniagas Mine sequence represented by a  maficdominated volcanoclastic sequence. A significant 500 to 700 metre thick,  lenticular and dome shaped felsic unit composed of massive to brecciaed  rhyolitic to rhyodacitic lava flows occurs up-section. This felsic-dominated  unit corresponds to the Bachelor Lake Mine gold deposit host rocks. Mafic  volcanic and volcanoclastic rocks make up the upper part of the sequence. The  Auger Lake and Bachelor Lake sedimentary rocks remain enigmatic, but probably  mark the top of the sequence. The late emplacement of several plutons, adds  to the complexity of the region. Post-tectonic lamprophyre dykes are also  common at the Bachelor Lake Mine and kimberlitic dykes were documented in the  Desmaraisville area. The local northeast trending sequence deviates from the  general east-west pattern of the Abitibi sub-province due to the presence of  significant pluton emplacement and the influence of the major  northeast-trending Wedding-Lamarck fault. The folded volcanic rock sequence  shows local changes in trend from North 25 degrees to North 65 degrees, with  vertical to steep northwest dips (60 degrees to 77 degrees). Folding and  faulting are responsible for stratigraphic repetition and disruption of the  volcano-sedimentary sequence. Foliation relationships indicate a possible  third phase of deformation. Five post-ore fault system striking North 110  degrees are recognized at the Bachelor Lake Mine and effect the gold-bearing  zones. - 73 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Property  Geology The Bachelor Lake Mine hosts a wide variety of deposit types from  volcanogenic polymetallic type to syn-orogenic to late-orogenic gold  mineralization. On the Bachelor Lake Mine, volcanic hosted massive sulphide  potential is illustrated by the Coniagas Horizon, Zinc Showing #1 and #2,  Area-Opawica showings. The Bachelor Lake Mine gold mineralization is related  to brittle deformational features and dilatational zones (stockwork) and to  brittle-ductile shear zones. The Bachelor Lake gold deposit can be either  classified an “orogenic lode gold deposit” or an “intrusion related gold  deposit”. The gold distribution appears to be controlled by both structural  and lithological features (e.g. the rhyolite being more fractured compared to  the agglomerate). The Bachelor Lake Mine gold mineralization has also been  interpreted to be associated with the late-tectonic granitic to granodioritic  intrusion. Exploration The actual Mineral Resources estimation is based on  data provided by diamond drilling programs of 2004 to 2005 and before. Since  then, Metanor has executed additional diamond drilling at the Bachelor Lake  Gold Mine and in the vicinity of the deposit. From September 2005 to the date  of the Bachelor Lake Report, 50 diamond drill holes totalling 13,424 metres  have been completed. Since February 2006 to the date of the Bachelor Lake  Report, all exploration work has been executed under the supervision of  Metanor. In 2010 a new gold zone was discovered by Metanor approximately 2.5  kilometres to the northwest of the Bachelor Lake Mine mill during an  exploration program. This discovery was made using technology developed by  Diagnos Inc. and was mandated by Metanor to conduct exploration on the  identified targets. A series of samples greater than ten grams per metric  tonne were found two to ten metres from the road leading to the mill, and  this new mineralized zone is comprised of quartz veins in an east-west  orientated shear zone. Metanor completed a diamond drilling program of 20  short holes totalling 1,200 metres to follow the extension of this structure.  At the date of the Bachelor Lake Report, this program was still in progress.  Mineralization The Bachelor Lake Mine hosts several gold and base metal  showings occurring on the surface and hosts six gold-bearing zones, namely  the Main, A, B, C, A West and B West Zones, which were all included in the  2005 resource estimate. Two types of gold-bearing zones have been identified  at Bachelor Lake: silica-flooding and hematite-altered ± stockwork zones,  illustrated by the Main Zone and the B Zone. In both cases, gold is spatially  associated with pyrite and the gold content correlates well with the pyrite  content. Gold mineralization at the Bachelor Lake Mine occurs predominately  within the pyrite (greater than 70%), as grains attached to the pyrite (-18%)  or as free gold enclosed in the gangue (-10%). This was demonstrated in a  polished-thin section examination done on the Hewfran claims. The gold is  fine grained with an average diameter between six to eight millimetres, and  visible gold is more characteristic of the B Zone. Pyrite is usually finely  disseminated (2% to 10%) hosted in strongly altered rocks, often brecciaed  and occasionally injected by quartz/carbonate veins and veinlets. At surface,  traces of gold, chalcopyrite and ilmenite occurrences have been observed.  Gold has been introduced late in the paragenetic sequence as were fluorite  and some of the carbonates. The Main Zone The Main Zone has contributed 90% of  the ore derived from the Bachelor Lake Mine gold mine and is characterized by  pervasive moderate to strong silicification and hematitization with 2 to 10%  pyrite generally associated with hematite alteration. It is cross-cut by  quartz-carbonate veinlets usually less than two centimetres and some local  narrow late siliceous hydraulic breccias are described. Some intense - 74- |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | altered zone  intersections show association with ankeritization. The Main Zone contains  also minor amounts of epidote, chlorite, amethyst, micas, magnetite and base  metal sulphides. A distinctive deep brick red hematite alteration  characterizes the Main Zone. The Main Zone trends North 110 degrees, dipping  at 55 degrees south-west near the surface, steepens to near vertical at Level  12, and changes to 60 degrees to 75 degrees at depth. The Main Zone  alteration envelope increases in width with depth, while ore values are not  uniformly distributed, which results in an anastomosing mineralized pattern.  There is a recurrent presence of a weaker and narrower alteration zone of  three to five metres in the footwall of the Main Zone. This northern branch  is clearly related to the same event, but rarely shows economic interest. The  average width of the Main Zone, above Level 6, was 1.82 metres, and increased  to an average of 2.44 metres below this level. The Main Zone has an average  horizontal width of 2.8 metres and reached a maximum horizontal width of 12.8  metres. This alteration system is recognized over 1,150 metres and was mined  over 335 metres from the western limit of the Bachelor Lake Mine claims to  the western contact of the O’Brien pluton. The new interpretation proved the  Main Zone continuity to be over 488 metres horizontally and 900 metres  vertically. The B Zone The B Zone may represent a potential for additional  resources, but until now limited mining has occurred in this zone. Test  mining has indicated that the B Zone has competent walls and an average  horizontal width of 3.1 metres and reaches a maximum horizontal width of 10.5  metres. The B Zone generally dips steeper than the Main Zone at approximately  75 degrees to 85 degrees to the south, south-west, and is interpreted to be  the result of a younger geological event and formed after the Main Zone  mineralization. It is characterized by a hydraulic glassy to white silica  breccia with angular fragments of the altered unit and cut by quartz veins.  Its alteration is similar to the Main Zone and is represented by strong to  intense silicification and hematitization and generally by moderate  ankeritization. Mineralization is characterized by two percent to seven  percent pyrite generally associated with the late quartz breccias. The  presence of visible gold is often seen in this alteration zone. The A Zone  The A Zone was discovered by drilling from Level 9 and has been traced up to  Level 4. Test mining at the Bachelor Lake Mine, using shrinkage techniques,  has shown an unacceptable level of dilution on this zone. It is a highly  altered and sheared zone which strikes north 60 degrees to 70 degrees and  dips 45 degrees to 50 degrees to the southeast and cross cuts the Main and B  Zones. It has previously been interpreted as a gold-bearing zone as well, but  the last underground drilling campaign demonstrated a poor grade development  of this zone when alone. The best values in the A Zone are related to its  junction with other zones. Significant intersections have been documented  while crossing the Main or B Zones, probably due to gold remobilization. The  last interpretation showed increases in thickness at these junctions. The C  Zone The newly interpreted C Zone has similar characteristics to the Main  Zone, although it seems to be less continuous, and it appears that it can be  a branch of the Main Zone. The C Zone has been documented in the Bachelor  Lake Mine area in the eastern portion of the 2005 interpretation. The A West  and B West Zones The A West and B West Zones have been delineated in the West  Zone area of the Hewfran claims. These zones are interpreted to be the  continuity of the A and B Zones identified at the Bachelor Lake Mine area.  The A West Zone lies within the western extension of the A shear and the  mineralized zone documented at the Bachelor Lake Mine. The discovery hole  intersected the zone, 487 metres west of the last encountered ore grade  within the A Zone at 13,500 east. The hole was drilled to test the eastern  extension of the mineralized shear structure identified in the Agar #1  outcrop which had been - 75 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | mechanically  stripped, washed and channel sampled during the summer of 1987. Lateral  continuity of the structure from section to section is obvious, but gold  mineralization appears sporadic and essentially concentrated in the vicinity  of sections 12,100 East and 12,300 East. The B West Zone seems to be the  extension of the B Zone documented at the Bachelor Mine. The zone dips at  approximately 80 to 85 degrees (almost vertically) and shows only very  sporadic grades over a cut-off grade of 3.43 grams per metric tonne gold.  This zone is characterized by a strong silica and hematite alteration, and by  local brecciation. Drilling The last drilling campaign on the Hewfran claims,  included in the resources estimation, was completed between 1987 and 1989 by  Aur. The Aur program included 47 surface holes for 14,255.5 metres (46,770  feet) and 96 underground holes for 10,401 metres. Between 1990 and the 2005  underground drilling program, two drilling programs were completed on the  Bachelor claims: one program in 1990 and one in 1995. In 1990, Acadia drilled  34 holes for a total of 4,807 metres from the underground workings at various  locations on Levels 11 and 12. In 1995, Espalau completed 10 drill holes from  surface for a total of 2,572 metres. This surface drilling program was  executed by Géospex. From 1987 to 1989, the Hewfran claims were the site of a  major drilling program: 47 holes drilled from surface for a total of 14,259  metres, and 96 holes drilled from underground for a total of 10,404 metres.  In 2005, the Bachelor Lake Joint Venture partners, Metanor and Halo,  completed a major underground drilling program consisting of 69 holes for a  total of 13,345 metres. This program was initiated by Halo and continued by  Metanor and the BLJV. The main goals of the 2005 underground drilling program  were to upgrade the and increase the mineral resources. The 69 holes  comprising the 2005 drilling program was completed from two fixed drill  stations located on Level 12 by using azimuth drilling. Drilling was  completed using BQ size by Forage Orbit of Val d’Or. The drill program was  initiated by Halo with a clear objective of upgrading the resources by  completing twenty 25 metre drill centers on the Main Zone and to some extents  on the B and A Zones, which are located closer to the two drill stations.  Despite the fact that this program was completed from a limited platform, it  successfully filled the central gap between the T1 Fault and the A Zone and  also between the two main ore shoots with seventeen holes. The program also in-filled  the gaps left from the previous exploration programs with 24 drill holes,  extended the mineralized zones laterally to the west, on the footwall of the  Waconichi Fault and at depth with 19 holes, extended and connected the  Bachelor Lake resources to the west with the Hewfran claims with six holes  and extended the mineralized zones to the east side with three holes. Between  September 2005 and January 2006 a diamond drilling program consisting of 11  holes totalling 6,394 metres was completed by the BLJV and designed to test  the gold potential within a mineralized corridor immediately west of the  Bachelor Lake Mine development. Holes were collared to replicate and confirm  historic estimates and to validate results. A hole encountered an intensely  hematite altered, locally silicified zone of alteration. The hole was  positioned below the East Zone and demonstrated the presence of a  well-developed alteration zone extending to depth. From December 2006 to  February 2007, a diamond drilling program was completed by Metanor consisting  of eight holes totalling 2,906 metres. The program was designed to test  extensions of the West Zone, B West Zone, East Zone and the area to the north  of the Main Zone of the Bachelor Lake Mine attempting to localize its  northern and displaced extension on the property. A stripping campaign  completed during autumn 2008 allowed Metanor to locate the extension on  surface of the West Zone of Hewfran and to expose this strongly hematized and  mineralized zone on a horizontal distance of approximately 40 metres with  thickness reaching six metres. This zone was originally defined in drilling  over a horizontal distance of approximately 300 metres and between the depths  of 180 metres and 330 metres. The two gold bearing zones oriented east-west  and the north-east, - 76 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | which comprise  the West Zone, correspond to those of the A Zone and the Main Zone of the  Bachelor Lake Mine. Grab and chip samples were taken along the east-west  mineralized zone and along the north-east sheared zone. In 2008 to 2009, a  drilling campaign of 11 holes totalling 2,924 metres tested extensions of the  West Zone and the continuity at shallow depth of the gold bearing zones  exposed on surface after the stripping program. In 2010 20 holes were drilled  to test a new gold zone exposed on the surface at approximately 2.5  kilometres Northwest of the Bachelor Lake Mine. Sampling and Analysis From  April to July 2005, 69 BQ size (36.5 millimetre diameter) drill holes were  completed by Forage Orbit Inc. using the industry standard wire line methods.  All holes were drilled from two underground drill stations at Level 12.  Fifty-two reached the mineralized zones in the Bachelor Lake Mine claims,  while 17 reached the mineralized zones in the Hewfran claims. Holes were  planned using the Main Zone longitudinal section with intercepts every 22.8  metres. The 2005 drill hole database contains a total of 3,555 samples. One  hundred percent of the 2005 drilling program was stored and categorized for  future reference purposes in the core library located at the Bachelor Lake  Mine. During the 2005 drilling, 3,251 samples were submitted for gold  analysis, representing 3,347.63 metres (24.4% of total drilled length).  Inserted throughout these samples, 304 blanks and standards were also shipped  for a controlled follow-up for a total of 3,555 samples. Every altered zone  (especially hematization and silicification) containing pyrite and every wide  altered zone was considered potentially mineralized and therefore sampled.  This systematic exploration sampling allowed confirming the attitude of  mineralization within the altered zones, as well as other lateral small  mineralized zones. At the Bachelor Lake Mine, samples collected through the  diamond drilling are of good quality; the mineralization in the core is  generally intact with no possibility of loss due to wash out. The hardness  nature of the mineralized zones explains the excellent recovery for the  mineralized zones. The core was rarely ground on short distances (less than  0.5 metres). Overall, the drill core sample recovery from the mineralized  zones can be considered to be representative. Sampling, preparation, security  and analytical procedures used on the property were judged to be adequate.  The performance of the laboratory during the 2005 drilling program was good.  Sampling and laboratory protocol for the 2005 drilling program were defined  by InnovExplo. During the program, core samples were sent to ALS Chemex  Chimitec in Val d’Or, certified ISO 9001:2000. At the laboratory, all the  bags were opened and conformed to the laboratory protocols. The laboratory  delivered results in electronic format with assay results reported in grams  per tonne. Quality Assurance Contamination was not discovered during the 2005  drill program. The good performance of the laboratory for external standards  (field standard) is an evidence of accurate determinations being made by the  laboratory. The QA/QC analysis of the pulp duplicate demonstrates a  reasonable level of precision with overall approximate errors of 12%. This  level of error is not uncommon for Archean gold deposits where the principal  component of the ore is often “freely” liberated gold. In fact, many coarse  “nugget” gold deposits demonstrate much poorer levels of precision in pulp  duplicate sample results. Precision of metallic screen assay (150 mesh pulp  duplicate) was analyzed. The metallic sieve method incorporates duplicate  fire assay determinations of the -150 mesh fraction of the screened pulp. The  results demonstrate that precision levels of the screened pulp duplicate  assays are overall approximate 6.5%. A 5% residual “nugget” effect at 150  mesh is quite acceptable for this type of gold mineralization. The results  for the coarse duplicate was not that good. The extremely large introduction  of error between coarse and pulp duplicates is clearly indicative of  unrepresentative 1 kilogram coarse crush - 77 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | sample splits.  The cause may be inappropriate crush/splitting specifications or related to  original field sample size, while this type of error may not result in any  global change in resource estimation. Data Verification The Gemcom database  used for the 2005 resource estimation includes 15,192 assay results from 394  diamond drill hole records. From the total, 325 were historical holes that were  compiled and 69 holes were from the 2005 program. Both the historical and the  new data acquired were validated. Security of Samples In October 2005,  InnovExplo re-sampled 24 samples within the “A West” mineralized zones from  six drill holes of the Hewfran claims. Fifteen samples were from the Hewfran  West area and nine samples from the Hewfran East area. Core boxes containing  mineralized zones intersections were already in Val d’Or, at the Alexis  Mineral core shack. Selected cores were transported to Metanor’s core shack  and examined and resampled by InnovExplo’s team. Quarter splitting was then  completed by Metanor’s technician for the 15 Hewfran West BQ core samples  while the other nine samples were entirely samples because of their AQ size.  Two high grade certified standards were also inserted into sequences, and  samples were sent to ALS Chemex Laboratory in Val d’Or. All check samples  were assembled and separated into four groups: • Two samples below the  cut-off grade (under 0.1 ounces per short ton gold) had a difference of 0.003  ounces her short ton gold; • Six samples close to the cut-off grade (from 0.1  to 0.15 gold) had an average difference of 0.004 ounces per short ton gold.  This important verification minimized the risk associated to misclassification  of ore and waste block material; • The samples close to the resource average  grade (from 0.15 to 0.3 ounces per short ton gold) had an average difference  of 0.015 ounces per short ton gold. This significant low difference also  means that the overall average may not change drastically. Although some  absolute difference can be as high as 0.284 ounces per short ton gold,  meaning that on a local basis, some ore blocks may have been overestimated or  underestimated; and • Ten samples with high grade assay results (over 0.3  ounces per short ton gold) had a greater average grade difference (0.043  ounces per short ton gold). Locally, some grade can be either over or  underestimated. BLJV completed a surface exploration program at Bachelor Lake  in October 2005. The current drilling exploration program includes one  confirmation drill hole located in the Hewfran East area in order to confirm  results. - 78 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Mineral  Resource and Mineral Reserve Estimates The following table sets forth the  estimated Mineral Resources for the Bachelor Lake Mine as at December 2010:  Measured, Indicated and Inferred Mineral Resources (1 to 3) (Inclusive of  Mineral Reserves) Deposit Category Tonnes Gold Grade (grams per tonne)  Contained Gold (ounces) Bachelor Lake Measured 177,898 8.83 50,487 Indicated  465,928 7.63 114,329 Measured + Indicated 643,826 7.96 164,815 Inferred  207,517 6.76 45,083 Hewfran Measured 14,696 8.50 4,018 Indicated 183,069 7.14  42,024 Measured + Indicated 197,765 7.24 46,042 Inferred 218,630 6.30 44,283  Total Measured 192,594 8.80 54,504 Indicated 648,997 7.49 156,352 Measured +  Indicated 841,591 7.79 210,857 Inferred 426,148 6.52 89,366 (1) The Mineral  Resource estimates for the Bachelor Lake Mine set out in the table above have  been reviewed and verified by Pascal Hamelin, Vice President of Metanor, who  is a qualified persons under NI 43-101. The Mineral Resources are classified  as measured, indicated and inferred, and are based on the CIM Standards. (2)  Mineral Resources are not known with the same degree of certainty as Mineral  Reserves and do not have demonstrated economic viability. (3) Numbers may not  add up due to rounding. - 79 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The following  table sets forth the estimated Mineral Reserves for the Bachelor Lake Mine as  at December 2010: Proven and Probable Mineral Reserves (1 to 4) Deposit  Category Tonnes Gold Grade (grams per tonne) Contained Gold (ounces) Bachelor  Lake Proven 178,359 8.36 47,930 Probable 467,1352 7.23 108,538 Proven +  Probable 645,494 7.54 156,467 Hewfran Proven 14,734 8.05 3,814 Probable  183,543 6.76 39,895 Proven + Probable 198,278 6.86 43,710 Total Proven  193,093 8.33 51,743 Probable 650,679 7.10 148,433 Proven + Probable 843,772  7.38 200,177 (1) The Mineral Reserve estimates for the Bachelor Lake Mine set  out in the table above have been reviewed and verified by Pascal Hamelin,  Vice President of Metanor, who is a qualified persons under NI 43-101. The  Mineral Reserves are classified as proven and probable, and are based on the  CIM Standards. (2) The underground mineral reserves have been calculated  using a cut-off grade of 3.43 grams per ton, recovery of 90%, and dilution of  10% in the stoping areas. (3) Proven and Probable Mineral Reserves are a  subset of Measured and Indicated Mineral Resources. (4) Numbers may not add  up due to rounding. Mining Operations Mining Method Ore should be extracted  using sublevel stoping and longhole blasting (54 millimetres – 63.5  millimetres blast hole diameter) due to the dip and continuity of the zones,  as well as the quality of the vein wall. To obtain a high degree of accuracy  (and thereby minimize dilution), the ideal drill-hole length of approximately  13.5 metres was used to determine the sublevel spacings. The veins will be  entirely excavated on every sublevel. This means that the width of a sublevel  could also exceed 9.0 metres. The walls of the sublevels have to be inclined  according to the dip of the vein to minimize dilution. The height, on the  other hand, must be kept at 2.74 metres to allow the longhole drilling  equipment to have the necessary manoeuvring space. Production of 200,177  ounces of gold mined is forecasted up to 2016. The mill was put into  operation in January 2008, and the throughput is 700 tonnes per day. A rod  mill was commissioned in February 2010 increasing grinding capacity to over  1,000 tonnes per day. Work has been completed to bring the old tailings ponds  to regulation and observation wells were installed to sample water table  around the tailings area. Metallurgical Process In December 2010, GENIVAR was  commissioned by Metanor to conduct a milling capacity study for the Bachelor  Lake Mine ore. The maximum capacity for the Bachelor Lake mill using Bachelor  Lake Mine ore is 775 tonnes per day at ± 8% accuracy with availability of  92%. Operating costs were estimated at approximately $22.90 per tonne to  treat approximately 260,300 tonnes per year. With the current processing  circuit, and a 775 tonne per day treatment rate, the leaching time is  estimated at 31 hours with 55% solids in the tanks. The effect of reducing  the leaching time on the recovery of Bachelor Lake Mine’s ore is not known.  Therefore metallurgical testing is required to determine the recovery that  should be - 80 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | expected. Among  the proposed tests include gravity tests, leaching tests, thickening tests,  filtration tests, tests to validate the use of activated carbon, grindability  tests, and chemical analysis. These tests should be completed on all  mineralized zones that are planned to be extracted and have different  characteristics that could affect the performance of the processing circuit.  GENIVAR is confident that a recovery of 93% is achievable with Bachelor Lake  ore. However, for this recovery, additional leaching time may be required.  Leaching tests in the laboratory will confirm the time required. The  financial analysis used present supplier’s quotes for capital items which  increases the accuracy of the data to above a pre-feasibility study operating  costs where compared to the contractor presently on site, which again  increases the accuracy of the analysis. A conservative value of gold per  ounce using the August 2010 Bloomberg Report was inputted for the four years  of production. The financial results produced an IRR of 85% with a payback  period of 10 months. With the good exploration potential it is expected that  the mine life will be more than four years. There is also a potential to  increase the mill capacity beyond the 800 tonnes per day which will allow for  the treatment of the Barry Open Pit material. Exploration and Development The  deposit remains open in several directions and it is reasonable to believe  that new resources will be discovered during the production years. This will  help to extend the life of the mine. The Barry Open Pit has not been included  in the Bachelor Lake Report, but its economical resource will help to lower  overhead costs and will contribute to the life of the mine. In 2010 a new  gold zone was discovered by Metanor approximately 2.5 kilometres to the  northwest of the Bachelor Lake Mine mill during an exploration program.  Metanor completed a diamond drilling program of 22 diamond drill holes  totalling 1,587.5 metres of shallow, lateral extensions of this new  discovery. This program is still in progress. Bachelor Lake Mine Milestones  Current activities at the Bachelor Lake Mine include: • Metanor announced  that it has obtained an environmental certificate of approval for commercial  production. This certificate allows Metanor to process an initial 900,000  tonnes of gold ore from the Bachelor Lake Mine underground mine site. The  Government authorization is accompanied by certain conditions added to  commitments provided for in Metanor’s impact study, particularly with respect  to the management of water as well as the creation of an advisory committee  involving the Cree community of Waswanipi and Jamesian municipalities. • In  July 2012, Metanor announced positive results from the 5,429 metric tonnes of  ore which it processed from an underground bulk sampling program. Overall,  the bulk sample produced 25% more ounces of gold than expected in the  pre-feasibility study for this sector. Metanor stated that this positive  variance was explained by a better gold content of the resource, larger veins  than expected and a better recovery in the mill. • Metanor is continuing the  underground drilling program of the Main, A and B veins, from various levels  of the Bachelor Lake Mine. Recently, they focused at verifying the lateral  extensions of these veins on level 13: o Twelve drill holes totaling 1,382  meters were complete to verify the eastern extension of the Main and A veins.  All 12 holes intersected the veins as well as the intersection between the  two veins. Intersected widths (expected to be approximately 70% of true  widths) ranged from 0.84 metres to 8.48 metres with gold grades averaging  from 2.77 - 29.63 grams per tonne. - 81 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | Nine drill  holes totaling 430 meters were completed. These holes were to verify the  western extension of the Main and B veins. The first results available  confirm the presence of these veins Intersected widths (expected to be 90% of  true widths) ranged from 1.15 - 14.02 metres with gold grades averaging from  5.87 - 18.05 grams per tonne. Serra Pelada Mine, Brazil A technical report  was prepared in accordance with NI 43-101 entitled “Technical Report on  Recent Exploration at the Serra Pelada Gold-Platinum-Palladium Project in  Para State, Brazil, for Colossus Minerals Inc.” dated January 31, 2010 (the  “Serra Pelada Report”). The following description of the Serra Pelada Mine  has been summarized, in part, from the Serra Pelada Report and readers should  consult the Serra Pelada Report to obtain further particulars regarding the  Serra Pelada Mine. The Serra Pelada Report is available for review under  Colossus’ profile on the SEDAR website located at www.sedar.com. Information  that updates the information in the Serra Pelada Report has been provided by  Colossus. Colossus Mineração Ltda., which is a Brazilian Company and a wholly  owned subsidiary of Colossus, holds a 75% interest in a joint venture company  called “Serra Pelada Companhia de Desenvolvimento Mineral” (“SPCDM”). The  other 25% is held by Cooperativa de Mineracao dos Garimpeiros de Serra Pelada  (“COOMIGASP”). Title to the tenement covering the Serra Pelada Mine is held  by SPCDM. Property Description and Location The Serra Pelada Mine is located  near Marabá in the State of Pará, part of the Amazonian region of Brazil. The  State capital, Belém, is located at the mouth of the Tocantins River on the  South Atlantic Ocean coast about 600 kilometres NNE of Serra Pelada. The  Serra Pelada Mine is held under Exploration License No. 1485 initially issued  by the MME on February 21, 2007under the process designated DNPM 850.425/90.  The Exploration License is located 90 kilometres south of the town of Marabá  and comprises an area of 100 hectares located partly within a larger license,  813.687/69 held by Companhia Vale do Rio Doce (“VALE”) and includes the Serra  Pelada pit. Exploration licenses are granted for a maximum period of three  years, provided that all requirements are met and the area of interest does  not overlap with an existing license. There is an annual fee of R$1.90 per  hectare during the initial period and R$2.87 during an extension period on  mineral rights to be paid to the Brazilian government. Exploration licenses  can be extended for a second period no longer than three years. The renewal  is at the discretion of the DNPM. Mining concessions can be applied for  following a final exploration report to be submitted to, and approved by the  DNPM by the final expiry date of the exploration license. A mining concession  does not convey title to a mineral deposit but provides the holder with the  right to extract, process and sell minerals extracted from the deposit in  accordance with a plan approved by the DNPM and environmental authorities.  The holder of a mining concession must pay the government the financial  compensation for the Exploitation of Mineral Resources (“CFEM”), a federal  royalty, which is established at 1% of the net sales of gold ore or 0.2% of  the net sales of other previous metals. In addition, a royalty must be paid  to the landowner if the surface rights do not belong to the mining  titleholder. This royalty amounts to 50% of CFEM. Colossus has submitted and  received approval from the DNPM for its final exploration report and it has  also submitted a mining plan and ore resource estimate to the DNPM. Colossus  has also submitted its Environmental Impact Study and Plan for Recovery of  Degraded Areas (“EIA/Rima”) to the appropriate authorities and has completed  the required public hearings. Serra Pelada is now fully permitted and  construction is underway. - 82 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Under the terms  of its agreement (as amended) with COOMIGASP, Collosus will be required to  make a monthly payment to COOMIGASP of R$350,000 ($206,000) and will finance  COOMIGASP’s portion of the development costs until production commences.  Reimbursement of funds advanced on COOMIGASP’s behalf by Colossus will  commence on the second year of production and will be payable in equal  quarterly instalments over a two year period. In addition, the premium  payments have been amended such that Colossus will make a life-of-mine  payment to COOMIGASP per kilogram of precious metal sold from mine production  in Brazilian Reals as follows: Range of Production (millions of ounces of  metal) Premium per kilogram of precious metal produced * Premium per ounce of  metal produced From To --- 2.03 R$1,445 ($850) R$41.99 ($26.44) ** 2.03 4.79  R$975 ($573) R$28.30 ($17.82) 4.79 10.26 R$900 ($529) R$26.12 ($16.45) 10.26  17.65 R$900 ($529) R$26.12 ($16.45) 17.56 --- R$900 ($529) R$26.12 ($16.45) *  Precious metal is defined as any one of gold, platinum, palladium, rhodium,  osmium, ruthenium or iridium ** R$1 = $0.5880 (November 9, 2009)  Accessibility, Climate, Local Resources, Infrastructure and Physiography The  Serra Pelada Mine is located approximately 90 kilometres south-west of the  town of Marabá (population approximately 157,000 according to the 2005  census) which is located on the Tocantis River. There are two highways in the  area, one of which is the TransAmazon Highway which runs from Estreito on the  Brasilia-Belém road north through Marabá and Altamira, westwards to Rio  Branco and on to Cruzeiro do Sul in the far western state of Acre. There is a  major airport at Marabá and daily jet services to and from Brazilia. From  Marabá, a local paved road leads due south and then west, for a total of 100  kilometres to the turn-off east of Curionópolis (population 18,000) and a 30  kilometre stretch of formed gravel road provides access to the Serra Pelada  Mine. The journey from Marabá to Serra Pelada takes approximately 2.5 hours.  There is also an airport which is located half-way between the closed town of  Carajás and the city of Parauapebas and there is weekday service to Carajás  airport from Brasilia. The 18 kilometre journey from Parauapebas takes 15  minutes. Colossus has a local base at Parauapebas (population 119,000 in  2007) as does Intertek, the laboratory used by Colossus for preparation of  the Serra Pelada samples. The climate at Serra Pelada is equatorial with  little variation in mean monthly temperatures throughout the year. The  average maximum temperature for Marabá is 31.6 degrees Celsius and the  average minimum is 22 degrees Celsius. There are two distinct seasons at  Serra Pelada – winter is warm and dry and summer is wet and humid.  Three-quarters of the annual precipitation falls from December through April.  In July, the average rainfall for the month is 21 millimetres, but in  February and March, the monthly rainfall exceeds 350 millimetres. Rainfall  intensity can be quite severe. The annual average rainfall is 2,082  millimetres. The economy of the region depends heavily on mining, principally  from the iron ore mines of Carajás. VALE is developing five projects in  Southern Pará located within a radius of 90 kilometres from Carajás. Marabá  is the market centre for the region and it is a hub for road, rail and river  transport. There are many experienced miners in the vicinity and the  university at Marabá is focused on training professionals for the mining  industry. The Tocantis River and its tributaries are of vital economic  importance to the region, both as a source of fresh water for the population  and industry and as a source of hydro-electric power. Serra Pelada is in a  moderately fertile region and agricultural products include rice, corn,  beans, palm oil, banana, tomato, watermelon, coffee, avocado, guava and  cashew. There is extensive cattle ranching, producing both milk and meat,  throughout the region. The forest areas have been exploited for - 83 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | fuel wood for  domestic use and especially for the production of charcoal, which is an  important material for the production of pig iron from small plants in  Marabá. The burgeoning mining industry in the Carajás mineral province has  required a massive investment in infrastructure and to create transport  routes for industrial and agricultural exports. One of the biggest iron  deposits in the world in based on the iron ore deposits in the Serra dos  Carajás near Parauapebas. The Projeto Grande Carajás Mining and Industrial  Zone (“PGC”) is gazetted over an area of 40,000 square kilometres and  involves a total investment of $62 billion. The town of Carajás has been  completely rebuilt and is closed to all but VALE workers. VALE constructed a  heavy duty rail line which is 892 kilometres long from the iron mines to the  Atlantic port of São Luis and the nearest railhead to the Serra Pelada Mine  is at Carajás, 50 kilometres by road from Serra Pelada. VALE continues to  make immense capital expenditures in Brazil to support its mining operations.  Other minerals such as gold, copper, nickel, manganese and bauxite have also  been found in significant quantities in the Carajás mineral province and more  reserves of minerals are discovered each year and, although much is exported  in its raw form, there has been some attempt at refining it in the region.  Industrial plants in the area include the aluminum smelter at Belém (which is  the largest industrial plant in Latin America) and a steel mill in São Luis.  Just downstream from Marabá, the Tucurui hydro-electric dam is the largest  hydro-electric project in the world, with three others also located on the  Tocantins River and seven more planned. A branch of the main Tucurui  hydro-electric power transmission line provides power to the Serra Pelada  Mine. The Carajás mineral province lies within the South Pará Plateau, in  which altitudes vary from 500 metres to 700 metres. A series of NNE-SSW  trending ranges project above the plateau and Serra Pelada lies on the  south-east flank of one of these, the Serra Sereno mountain range, with peaks  up to 600 metres above sea level. The stream banks are terraced and capped  with iron-aluminous laterite, currently being actively eroded. Drainage in  the area flows into the Sereno Gorge, part of the Rio Parauapebas system and  a tributary of the Serene Gorge flows north-east from Serra Pelada. Although  the vegetation was originally dense evergreen tropical rain forest, all of  the original vegetation around the Serra Pelada Mine has been cleared for  pasture and subsistence cultivation. History The author of the Serra Pelada  Report has not detailed the history of the Serra Pelada Mine in the Serra  Pelada Report. Instead, he has referred the reader to the discovery and  history of the Serra Pelada Mine which was discussed in detail in the  previous report on the Serra Pelada Mine dated December 19, 2007 entitled  “Technical Report on the Serra Pelada Gold-Platinum-Palladium Project in Para  State, Brazil, for Colossus Minerals Inc.” (the “2007 Report”). The 2007  Report is also available for review under Colossus’ profile on the SEDAR  website located at www.sedar.com. Accordingly, the following discussion  concerning the history of the Serra Pelada Mine has been summarized from the  2007 Report. Until the 1960’s, geological work carried out in the Carajás  region had always been restricted by lack of access to the vicinity of the  major rivers. In 1966, DNPM/PROSPEC published the results of Project Araguaia  which involved the acquisition of aerial photo coverage and photo-interpretation  of the Carajás region. No mineral discoveries were reported as the field work  once again was restricted to the major drainages. The bare patches in the  rain forest which later turned out to be high-grade iron ore were interpreted  at the time to calcareous sandstone. The first mineral exploration in the  Xingu-Araguaia belt was carried out by Companhia de Desenvolimento de  Indústrias Minerais (“Codim”), a subsidiary of Union Carbide, which  discovered the manganese deposit of Serra do Sereno near Serra Pelada in  1966. This discovery motivated US Steel, through its subsidiary Companhia  Meridional de Minerações (“CMM”) to commence broad-scale exploration in the  region. In July of 1967, a Brazilian team discovered high grade iron ore and  US Steel wanted to develop the Carajás iron deposit, but the Brazilian  government was unwilling to give a foreign country control over such an  important national asset. In 1970, the Brazilian government created a joint -  84 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | venture  company, Amazônias Mineração SA (“AMZA”) of which 51% was owned by VALE, the  Brazilian government state enterprise, and 49% was owned by CMM. In 1974,  AMZA was granted the rights to all iron ore in the Carajás mineral province.  Exploration continued until 1977, when CMM withdrew from the project and VALE  purchased CMM’s 49%. AMZA, then wholly owned by VALE, was granted the rights  for mineral exploration and development of the entire Carajás mineral  province. In 1978, start up was commenced laying the Carajás railroad,  effectively launching the implementation of the Carajás iron ore project. In  1979, a farm worker found gold at Serra Pelada and the owner of the property  attempted to keep the discovery a secret, but soon tens, then hundreds, then  thousands of prospectors came to dig for gold. In May of 1980, the federal  government of Brazil intervened and excised an area of 100 hectares from the  tenement held by VALE, as there were already some 30,000 garimpeiros working  the Serra Pelada deposit. A condition of the excise was that all gold produced  would have to be sold to VALE’s exploration subsidiary, Rio Doce Geologia e  Mineração SA (“DOCEGEO”) as buying agent of the Federal government savings  bank (Caixa Econômica Federal – “CEF”). After casting, the gold was  transferred to CEF for refining. Also, each garimpeiro was assigned a  specific two metre by three metre claim. The first batch of claims was  assigned in May of 1980. By the end of 1980, there were tens of thousands of  garimpeiros active in the Serra Pelada pit, which was the largest gold mine  in Brazil and the biggest city in Amazonia at the time. The pit was  informally named “Babilônia” and reached a length of 400 metres by 300 metres  wide to a depth of over 120 metres below surface, all dug by hand.  Accordingly to Meireles & Silva (1988) 32.6 tons (1.04 million ounces) of  gold was extracted, but unofficial figures place the amount closer to 70 tons  (2.2 million ounces) of gold. A condition of the grant of Exploration License  No. 1485 to COOMIGASP in February 2007 was that only mechanical equipment  would be used in the mining operation and COOMIGASP was obliged to present  its proposed exploration program to the government and, within three years, a  feasibility and environmental impact study and mining program. The Final  Exploration Report including the environmental, mining and feasibility  studies were submitted by and in the name of SPCDM in September of 2009 and  the exploration license was subsequently transferred into the name of SPCDM.  VALE began exploration drilling in the vicinity of Serra Pelada in 1980  immedately after the discovery was made, including soil sampling, structural  and geological mapping of the mineralized area and diamond core drilling in  order to estimate the resources. From the commencement of exploration until  mid-1998, a total of 195 core holes were drilled by VALE inside the area  being exploited by garimpeiros, together with two metallurgical test holes.  Most were angle holes with azimuths and inclinations calculated to intersect  the mineralization at depth, according to the estimated plunge of the  mineralized zone. Systematic down-hole surveys were carried out using Tropari  and Maxibor equipment. The drill core was logged lithologically and the logs  stored in the database. Based on the lithology, the core was split in half  and one half core was sent for assay. The samples from Serra Pelada were  analyzed in VALE’s own laboratory in Belém until 1997. From 1997, most  samples were sent to the commercial laboratory NOMUS. During 1997, some  samples were still analyzed at VALE’s laboratory using fire-assay/AAS finish  and also in the laboratories of the Igarahape Bahia mine and Fazenda  Brasileiro mine, but from early 1998, all samples were analyzed in the NOMUS  laboratory and the analytical results have all been compiled in a spread  sheet file. Colossus has been granted access to the VALE database and the  preserved drill core from the exploration program on Exploration License No.  1485. Since November 2007, Colossus and COOMIGASP have carried out an  extensive diamond core drilling program which has verified that continuation  of the high grade gold-platinum-palladium mineralization below the base of  the previously mined pit and for a distance of at least 500 metres beyond the  old pit. More than 40 diamond drill core holes for 11,000 metres have been  drilled by COOMIGASP, additional to the previous 40,000 metres in 200 holes  drilled in the past by VALE. Colossus has submitted more than 6,000 samples  for analysis and the database to the end of December 2009 contained in excess  of 163,000 awways from 61,000 samples. - 85 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Various  historical estimates for the remaining resources at Serra Pelada have been  reported. These historical estimates however are not reported in accordance  with NI 43-101 and it is uncertain whether additional evaluation and/or  further exploration will allow these historic estimates to be reported as  current resources or reserves. The historic estimates are relevant and  material as they have been carried out by persons who are competent in the  Brazilian jurisdiction, but are not qualified under the definition contained  in NI 43-101 as these persons do not belong to a professional association  recognized by NI 43-101. Geological Setting Regional Geology The Brazilian  Shield (“Shield”) extends over much of South America east of the Andes  Mountains. The major tectonic units of the Shield are the Mesoproterozoic  Amazon, São Francisco and the Rio de la Plata Cratons, surrounded by  Neoproterozoic orogenic belts. There are many smaller cratonic fragments,  such as the São Luís Craton. The Amazon Craton is the largest preserved block  in the Brazilian Shield. Deformation is concentrated along the Neoproterozoic  Araguaia orogenic belt on the eastern flank of the south Amazon Craton. Gold  deposits are concentrated in the Archean and Paleoproterozoic terranes,  including the Archean Carajás Mineral Province of the Amazon Craton. The  Carajás Mineral Province is composed mostly of granites and greenstone belts  and hosts the largest gold deposits in the Amazon Craton, including Serra  Pelada and the Salobo and Igarahapé Bahia Cu-Au deposits. The Carajás Mineral  Province is an Archean nucleus which has been divided into two different  tectonic units, the northern and the southern blocks. The southern block is  the older and is known as the Rio Maria granitoid-greenstone terrain. It  contains greenstone belts of the Andorinhas Supergroup and the associated Rio  Maria, Mogno and Parazônia Archean intrusive granitoids. The northern  tectonic block is referred to as the Itacaiúnas Shear Belt. The basement is  mainly composed of gneisses and migmatites of the Xingú Complex dated at  2,800 million years ago and east-west trending orthogranulites of the 3,000  million years ago Pium Complex. The basement is overlain by the Carajás  Basin, which is host to most of the mineral deposits in the Carajás Mineral  Province. The formation of the Carajás Basin was initiated by regional  extension of continental crust late in the Archean forming major dextral  strike-slip faults. The same faults were later reactivated by sinistral  transpression. The oldest rocks in the Carajás Basin are volcano-sedimentary  rocks of the Itacaiúnas Supergroup which accumulated in the Late Archean  about 2,700 million years ago. The Itacaiúnas Supergroup is overlain  unconformably by siliclastic marine platform sandstornes and siltstones of  the Águas Claras formation and the last Archean Rio Fresno Group dated at  2,670 million years ago. During the Proterozoic, around 1,880 million years  aso, anorogenic granite plutons of the Central Granite and the Cigano Granite  were intruded. The anorogenic Cigano Granite is exposed about 15 kilometres  west of the Serra Pelada deposit. Dioritic and granodioritic plugs and gabbro  dikes of uncertain agee also occur in the area. Local and Property Geology The  mineralization at Serra Pelada is hosted by metasedimentary rocks of the Rio  Fresco Group. The lithologies include metaconglomerate, metasandstone,  dolomitic carbonate and metasiltstone. About five kilometres east of the  deposit, mafic-ultramafic rocks of the Rio Novo Group outcrop, composed of  tholeitic and calc-alkaline levas with intercalations of BIF, metamorphosed  to amphibolite facies. The Rio Novo Group forms the basement on the Serra  Pelada area. The Serra Pelada gold-platinum-palladium mineralization is  located in the hinge zone of a recumbent syncline. Dolomitic carbonate occurs  at the base and is conformably overlain by meta-siltstones. The morphology of  the mineralization broadly follows the contact between dolomitic carbonate  and a carbon-altered meta-siltstone. Weathering has oxidized the clastic  metasedimentary rocks and - 86 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | leached  dolomitic carbonate. The base of the oxidation profile, located at a depth of  300 metres is marked by a knife-edge limit between unaltered dolomitic carbonate  and a loose sandy material, with the impregnation of iron and manganese oxide  and hydrozide. Volume reduction, caused by decalcification of the dolomitic  carbonate, developed collapse breccia generally enriched in supergene  manganese oxides. All mineralization at Serra Pelada is intensely oxidized,  and primary economic mineralization is as yet unknown beyond the base of the  oxidation profile. Researchers have attributed Serra Pelada to a variety of  deposit types. It displays some, but not all, of the characteristics of  sediment-hosted deposits labelled as “orogenic” and “sediment-hosted  epithermal”. Recent data indicates that Serra Pelada bears strong  similarities to unconformity-related uranium-previous metal deposits, of  which Coronation Hill in Australia is a classic example. One of the most  important characteristics of unconformity-related deposits is that the  average grade of mineralization is high, and in addition to uranium, these  deposits may also contain nickel, silver, molybdenum, copper, lead, zinc,  bismuth, selenium, arsenic, gold and PGM. Exploration Prior to the  commencement of the Colossus Phase 1 drilling program in November of 2007,  exploration at the Serra Pelada Mine by Colossus included: •  topographic surveying by Resource and Exploration Mapping Pty Ltd (“REM”) and  orthorectification of a one metre resolution IKONOS image (by Geoimage Pty  Ltd) as a base for site work on the Exploration License. The results of this  work include a new digital elevation model for geological and drilling control,  plus mapping of cultural and access features. Accurate (< one metre)  locations of fourteen remaining VALE drill collars and the locations of the  boundaries of the Exploration License were also determined by the REM survey;  • compilation and preliminary analysis of the VALE drill hole,  lithology and assay databases - these data were utilized to guide the  locations of Colossus proposed drilling and for the preparation of drill and  geological sections and plans; • acquisition and relocation of about  40,000 metres of VALE diamond drill core to the Colossus facility in  Parauapebas. This important core library was catalogued and racked in  Parauapebas; • resampling and assaying (gold, platinum, palladium) of  selected intervals (totalling 2,000 metres to date) of VALE core, following  the protocols set down in section 14 of the Serra Pelada Report; • site  works for the drill pads for Phase 1 diamond drilling by Boart Longyear under  contract to Colossus; • development of first pass 3D and geological  models to guide this drilling. Surface geological mapping of tailings and  waste from previous operations was completed and structural/lithological  studies on bedrock exposures and VALE core carried out. This work guided the  siting of the Colossus diamond drill holes; and • together with  information from the current drill program, the objective was to provide an  adequate basis for resource delineation at Serra Pelada. The work carried out  in the period from November 2007 is set out in detail below under “Drilling”  and “Sampling and Analysis”. The Serra Pelada Mine was identified as  Colossus’ most significant asset and spending of $7.5 million, including  option payments, was incurred during the fiscal year to July 31, 2008. A further  $14.9 million was spent on the Serra Pelada Property in fiscal 2009,  including exploration expenses and option payments. - 87 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The database  for the entire Colossus Serra Pelada program has been contracted to an  independent specialist data management company, REM, which uses Maxwell’s  “DataShed” system as the front to their on-site SQL Server database to  receive, verify, validate, store and supply data that complies with NI 43-101  requirements for resource modeling. The Colossus data base operates through a  Graphic User Interface (“GUI”) portal to Microsoft Access software. REM also  provides data capture services and data conversion to and from numerous  formats for Colossus, and manages the entire audit trail for every bit of  data. David Jones was granted access through REM to the entire Colossus  database for the purposes of the Serra Pelada Report, and found the DataShed  system to be far more rigorous than, and superior to, any previous data  management system he had experienced. Mineralization The main  gold-platinum-palladium zone at the Serra Pelada Mine cropped out in what is  now the northern end of the open pit and was mined over about 300 metres  strike length to the southwest and to depths of around 120 metres in the pit.  The VALE and Colossus drilling demonstrates that the mineralization continues  at depth under the southern half of the pit, strikes more or less  continuously at least 500 metres to the southwest to the boundary of the  Exploration License and is open to the southwest of this boundary. The rocks  have undergone supergene oxidation to depths in excess of 300 metres below  surface. The Central Mineralized Zone (“CMZ”) overprints metasediments  occupying the hinge and inner limbs of a northwest facing, southwest  plunging, reclined synclinorium that plunges gently southwest from the  historical open pit. Some gold-platinum-palladium mineralization to the east  and west of the main zone has also been encountered in the drilling and some  of this was mined in sections of the Serra Pelada pit. The CMZ is  characterized by intense carbon and also argillic alteration, inboard of  siliceous alteration mantling the synclinorial hinge. The highest grades of  gold, platinum and palladium typically occur in the steeply dipping hinge at  the contact between the metasiltstone and de-calcified carbonate  (“sandstone”). This zone has up to 150 metres vertical extent and in places  is more than 50 metres wide. Mineralization is fracture-controlled at all  scales, associated with steep, post-D2 faulting that provided conduits for  the mineralizing fluids. On the limbs of the syncline, mineralization and  alteration form shallowly dipping, broadly stratabound zones, apparently  associated with overprinting D2 fold-fault systems. Gold-PGE mineralization  is spatially and temporally associated with intense hydrothermal carbon and  argillic (kaolinite-mica) alteration and to a minor extent with iron  oxide-rich breccias. Alteration is fracture controlled at all scales and is  strongest in fault-related siltstone breccias. Carbon-rich and argillic  alteration involved de-silicification but broadly synchronous siliceous  alteration, mainly replacing calcareous sandstones, discontinuously mantles  the CMZ. Mineralization was sulphide-poor, but trace pyrite, some PGE  selenides and hypogene hematite are preserved in siliceous alteration,  surviving the supergene oxidation and decalcification overprinting the  deposit and surrounds. The gold-platinum-palladium in the Serra Pelada  deposit generally occur together in relatively constant proportions,  suggesting that they were deposited from a single hydrothermal fluid, in  which they most likely travelled as chloride complexes. The geochemistry of  mineralization and lateration is consistent with acidic, highly oxidized,  metal-transporting brine being introduced along structurally-controlled zone,  and reacting with the highly intensely reducing carbon-rich environment  concentrated in the synclinal fold hinge. This resulted in the reduction of  the oxidized fluid, with the noble metal minerals precipitating. Replacement  of dolomite by silica in the surrounding rocks may have contributed to the  de-acidification of the mineralizing fluids and enhanced the dumping of  precious metals along the contact. - 88 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Drilling Core  Drilling The Colossus Phase 1 drilling program was carried out by contractor  Boart Longyear. Boart Longyear had previously drilled the Serra Pelada  deposit under contract to VALE in 1997-98 and was experienced in the area. A  single diamond core rig commenced drilling in November 2007 and by the end of  March 2008 had completed four holes for a total of 1,156 metres. A second  drilling rig was mobilized and commenced drilling in April 2008. The Phase 1  program of 5,129 metres of HQ core in 17 holes was completed in August 2008.  Drilling was focused on the CMZ along 250 metre strike length down plunge and  southwest of the historical Serra Pelada open pit. One additional hole  (SPD009) was abandoned due to poor drilling conditions. All holes were  prefixed “SPD”. All completed Phase 1 drill holes intersected apparently  mineralized material but SPD-003, SPD-005 and SPD-006 were off target. One  drill hole, SPD-017 tested the Western Zone of mineralization just to the  west of the historical pit. This is a separate target from the CMZ Zone, with  limited historical drilling. Additionally, two PQ diamond hole (SPD-019 and  020) were drilled during Phase 1 to provide samples for initial metallurgical  test work. In January 2009 Colossus commenced its Phase 2 drilling program.  The contractor selected for this phase, after competitive bidding, was Minas  Trading (“Minas”) of Belo Horizonte, a Brazilian company with considerable  experience drilling iron ore. The planned program was for 5,000 metres of  core drilling to be completed by May 2009. By April 2009, a review of all  results received to that time encouraged Colossus to expand the Phase 2  program. Three diamond rigs were on site, with drilling extended to continue  through end 2009, focused on 500 metres of strike length of the CMZ as well  as testing new targets to both the east and west of this zone. The earlier  VALE drilling had involved sub-vertical holes on lines 50 metres apart;  Colossus planned to close up on lines 25 metres apart, drilling as shallow  angle holes as technically possible from the south-east, with a few scissor  holes from the north-west on each section. An additional drilling rig,  operated by Energold Drilling Corporation (“Energold”) based in Belém,  commenced work testing the tailings remaining in the Serra Pelada pit in  October 2009. Energold specializes in shallow-angle holes, and this work  required holes inclined at 45 degrees or less. Reverse Circulation (“RC”)  Drilling In April 2009 Colossus commenced a planned 2,000 metre RC drilling  program at Serra Pelada. This was intended to supplement the core drilling of  the CMZ, testing for mineralization outboard of the CMZ, but within the  bounds of a conceptual open pit development. Another objective was to  evaluate tailings and waste from the historical open pit that were stored outside  the pit to the northwest. Furthermore, the program increased the productivity  of diamond drilling by drilling RC pre-collars and facilitated hydrological  tests in previously completed drill holes. RC sample quality and recoveries  were adequate for assaying to depths of around 100 metres in siltstones and  60 metres in sandstones. Face sampling hammers rather than cross-over sub  systems were used to ensure sample quality. A total of 39 holes for 863  metres were drilled to evaluate the tailings and waste outside the pit.  Surveying Real Time Kinematic surveying (“RTK”) using the Global Positioning  Satellite (“GPS”) system has been used for a variety of different surveying  applications and the use of this GPS method for survey work has become widely  accepted in the last 10 years. The RTK technique competes well with  traditional survey methods in terms of accuracy, cost and efficiency, and  also complies easily with Class C survey standards as required by current  legislation in Australia if related to an accurately located (<2cm error)  base station or benchmark. REM established an accurately located base station  at a readily accessible former VALE water bore site within the Serra Pelada  tenement and all Colossus survey data is referenced to this base station. The  datum used is the South American Datum 1969 (“SAD69”) which is the official  grid datum in Brazil. All grid references in the Serra Pelada Report are  related to SAD69. Prior to the commencement of drilling a hole, each Colossus  drill site is marked out using Differential GPS (“DGPS”) or RTK surveying  equipment. If this equipment is not available, a GPS unit is - 89 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | used and a GPS  measurement at the Colossus datum point is taken both before and after the  drill site has been pegged. Any error detected relative to the datum point is  calculated and applied to the drill site location. The drill site is checked  and, if necessary, re-marked out after the drill pad has been prepared. A  drill hole collar document is completed and a scanned copy placed on the REM  data portal for validation and insertion into the database. All drill rigs  are set up and/or checked by a project geologist for the azimuth and  inclination of the proposed drill hole. Only after this has been completed is  drilling allowed to commence. Azimuth measurements are made by compass with  appropriate declination and marked out with string for rig alignment. The  project geologist also uses an electronic inclinometer on all sides of the  drill rig to ensure the drilling platform is horizontal within 0.5 degree  error. The electronic inclinometer is calibrated once a month at the  designated calibration point. Once drilling has commenced, down hole surveys  of each drill hole are made each 50 metres of drilling advance. All downhole  surveys are made with Maxibor or Gyro surveying equipment. The data is  downloaded in the Serra Pelada field office and sent electronically to  Colossus’ Chief Geologist for checking with minimal delay. On completion of a  drill hole, a final downhole survey is made and both digital and hardcopies  of the survey data are sent to Colossus’ Chief Geologist. Hardcopies are  archived in Parauapebas and digital copies placed on the data portal for  validation and insertion into the database. After completion of the drill  hole and removal of the drill rig, a final survey of the drill hole collar is  made by DGPS or RTK as soon as possible. On completion of the final survey  collar pickup the collar location is sent to REM with minimal delay and  updated on hardcopies which are scanned and placed on the data portal for  validation and insertion into the database. Sampling and Analysis VALE Drill  Core The 40,000 metres of stored core from the earlier VALE program of 200  drill holes was recovered from VALE and removed to the Colossus security compound  in Parauapebas in late 2007. Colossus commenced by re-logging the entire  40,000 metres of core, followed by a systematic program of re-sampling and  assaying selected intervals of this core, in order to verify the results  previously reported by VALE. The re-assay program involved sampling of  complete intervals of remaining half core from drill holes outside the Serra  Pelada pit, covering a representative spatial and temporal spread of VALE  drilling. The first phase of VALE core sampling (by Colossus personnel) and  sample preparation by SGS Geosol Laboratories (“SGS”) was carried out under  strict protocols recommended independently by Pitard (2007). Colossus QA/QC  measures involved the systematic insertion of blanks, duplicates and  certified gold–PGE reference materials in the sample stream by Colossus  personnel prior to secure shipping to the SGS sample preparation facility in  Parauapebas. Then the VALE drill core re-sampled by Colossus was analyzed by  SGS at their Belo Horizonte laboratories. Initially, a 50 gram sample of both  the + 106 micron and – 106 micron fractions was fire assayed by SGS, with  ICP-AES finish for gold, platinum and palladium. In the first phase, 605  samples representing 623 metres of historic core were assayed by SGS for  gold, platinum and palladium. Quartz washes were used after each sample as a  precaution against contamination from very high grade and carbonaceous  samples. Quartz washes after very high grade samples were analyzed. The  laboratory routinely analyzed every 20th quartz wash sample. Replicate assays  were performed by SGS every twenty samples and the duplicate samples were  plotted and monitored for variation greater than 95%. Batches containing  unacceptable duplicate variances were re-analyzed. Standard pulp samples were  inserted at one in 50 frequency rate and blank pulp samples were inserted at  one in 100 frequency rate. SGS dispatched assay certificate originals  directly to REM. The SGS assay results for blanks, duplicates and replicates  were generally satisfactory. A range of sample types were submitted by  Colossus to Genalysis Limited (“Genalysis”) in Perth, Australia, for  independent laboratory checks. Where possible, these included splits of  rejects from coarse crushes, non-subsampled and previously sampled pulps and Genalysis  inserted other gold and PGE reference materials in all batches. Genalysis  performed screen fire assays on the pulverized rejects (>95% passing 106  microns) from the crushed (>95% passing 1.7 millimetres), dried samples.  Pulps were rehomogenized and fire-assayed for gold-platinum-palladium  utilizing 50 gram or 25 gram aliquots - 90 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | and lead  collectors and also for gold and the complete PGE suite utilizing 25 gram  aliquots and nickel sulphide (“NiS”) collector materials. Additional blanks  and duplicates were inserted in the assay streams by Genalysis and replicate  assays were performed every twenty samples. Quartz washes were used by  Genalysis after each sample as a precaution against contamination from very  high grade and barbonaceous samples. Quartz washes after very high grade  samples were analyzed and the laboratory routinely analyzed every 20th quartz  wash sample. Genalysis dispatched assay certificate originals directly to  REM. The Genalysis assay results for blanks, duplicates and replicates were  generally satisfactory. Following receipt of the Genalysis check assay  results, Colossus modified their analytical procedure. In February 2009,  Colossus announced results from the systematic assaying of core samples from  seven drill holes representing 128 metres of down-hole intersections in the  CMZ. The assay values include platinum (up to 299 grams per tonne), palladium  (up to 387 grams per tonne), rhodium (up to 7.7 grams per tonne) and iridium  (up to 4.9 grams per tonne). Significant assays for continuous intervals of  gold-PGE mineralization are detailed in the Serra Pelada Report. These drill  holes are from more southerly sections of the CMZ. The assayed intervals  apparently represent high-PGE subzones that warrant further drilling to establish  continuity. Platinum/palladium ratios are also higher than expected from  historical data for these subzones. The high gold-PGE subzone in FD-072 has  been shown by subsequent Colossus drilling to be continuous with  mineralization in the upper and outer fold hinge, up to 200 metres to the  north-east. Colossus Drill Core At the drill site, each run of core is  transferred by the driller from the core barrel into wooden core trays  provided by Colossus. Each channel of the tray is lined with black builder’s plastic,  with an extra ten centimetres of plastic projecting out of the top of each  side of the channel. After insertion by the driller of the core markers with  details of each run stamped on them, the excess plastic is folded over the  top of the filled channel to minimize disturbance of the core during transit,  and a wooden lid nailed on top of the tray. The core is protected from rain,  any other contamination and interference and held under strict security at  all times. The drilling contractor delivers lidded, boxed core from the drill  site to the Colossus compound in Serra Pelada as soon as possible after the  core is retrieved and a core box is filled, together with the driller’s log.  Upon receipt of the core at the Colossus Serra Pelada facility, Colossus technicians  open each box and check that each box is labelled with drill hole number,  meterage interval, beginning and end of core interval, drilling azimuth and  inclination, core separators labeled with meterage and recovery of core  interval, and that the core is inserted in the correct positions in the  trays. The technicians at Serra Pelada also check that the drilling  recoveries and meterages match those of the core within the core tray and the  driller’s log. The driller’s log is scanned at the Serra Pelada compound and  sent by satellite email to the data portal for validation and insertion into  the database. On completion of the field checks, the core is wrapped again in  the plastic liners before the core tray lid is nailed to the box. The  technicians ensure that the core boxes and lids are in good condition and  core material and containers are free from contamination. They then weigh and  record the weight of each core box and store under strict security ensuring  no interference prior to transfer, as soon as possible (e.g. daily) to  Colossus Parauapebas facility. Transfer of the sealed core boxes to  Parauapebas is done under secure conditions by Colossus staff and involves  minimal vibration, jostling and contamination of core material. On arrival at  the Parauapebas core shed facility the core boxes are weighed and the weights  are compared with the dispatch records from the Serra Pelada site office. The  core boxes are opened and inspected and the plastic liners trimmed of excess  material and nailed down. The core is cleaned of drilling lubricants with a  thin edged spatula. The drill core is photographed in individual boxes with  hole ID, box number and depth interval displayed in large lettering on an A4  printed page. The core photos are downloaded onto the core shed geology  computer and archived in the Parauapebas office. A copy is put onto the data portal  for validation - 91 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | and insertion  into the database. The core is then logged for lithology, alteration,  structure and geotechnical details by the project geologist using the  Colossus logging codes. All logs are scanned and digitized and put onto the  data portal for validation and insertion into the database. All hardcopies  are archived in the Parauapebas office. For more complete details concerning  the sample preparation and logging, please refer to the Serra Pelada Report.  In March 2009, a Genalysis affiliate, Intertek, opened a new sample  preparation facility near the Colossus security compound in Parauapebas. To  speed up assay turnaround, Colossus engaged the services of Intertek  following stringent testing which verified that Intertek could achieve  Colossus’ preparation protocols. Gold, PGE and other assaying would be  carried out by Genalysis at their Perth laboratory in Australia. The first  batch of samples prepared by Intertek and incorporating a number of QA/QC  checks was submitted to Genalysis in April 2009. Analysis for the Colossus  Phase 1 drilling program were performed by SGS, following the same protocols  as were used for the VALE drill core described above. Some 350 pulps plus  reference materials and blanks as returned from the SGS assay program were  submitted to Genalysis in Perth. The pulps represented assayed core intervals  totaling 360 metres in ten Phase 1 drill holes, and included a broad range of  precious metal grades and SGS assay batches. In addition to providing further  information on the distribution of the full PGE suite at Serra Pelada, this  assay program served as a check on previously announced results for gold,  platinum and palladium, essentin in view of the difficulties of assaying very  high grade gold-platinum-palladium materials. Genalysis re-homogenized the  pulps and the mixer mills were subject to quartz washes after each sample to  eliminate potential sample carry over. Every fifth quartz wash was assayed  for gold and PGE, generally indicating minimal sample loss to pulveriser  vessel walls. Re-homogenization, as evidenced bycheckand repeat assays, was  largely effective in minimizing coarse gold effects, although variations in  gold results for some high grade samples may reflect such sample  heterogeneity. PGE results are more uniform. The Genalysis 25 gram fire  assays for gold and PGE’s utilized NiS collectors with ICP-MS finish. A total  of 23 check assays were done by this method. Genalysis performance on these  checks, blanks and five certified reference materials (including high grade  gold and PGE standards) were all within acceptable ranges, as were new assays  of reference materials utilized in previous assay programs. The Genalysis 25  gram fire assays for gold, platinum and palladium (85 repeats in all),  utilizing lead-rich collectors with ICP-MS finish, were performed on a  selection of medium to high grade samples and for which discrepancies with  SGS assays were evident. Agreement between Genalysis repeats and NiS fire  assays in excellent for platinumand palladium an also for gold, generally within  10% even for bonanza samples, the repeats averaging slightly higher gold  values. In August 2009, Colossus announced the results of this assay program,  the details of which are set out in the Serra Pelada Report. The Phase 2  drilling program analysis are all being carried out by Genalysis in Perth,  following sample preparation by their affiliate Intertek in Parauapebas. On  delivery of samples to Intertek, an official laboratory document recording  the delivery date, number of samples and transport date/arrival to other  facilities (if required) is provided for archival in the Parauapebas office.  A copy is scanned and digitized and placed on the date portal for validation  and insertion into the database. Initial Phase 2 assays carried out by  Genalysis include gold-platinum-palladium only. Assaying for additional  elements is determined by the gold-platinum-palladium assay. Samples for  re-assay and additional element analysis are selected by Dr. Chris Grainger  (Chief Geologist for CMI) and Dr. Vic Wall (Vice-President of Exploration for  CMI). All assays that include uranium and mercury are reported separately on  different assay certificates and arrival/delivery certificates. The  analytical procedure used by Genalysis is detailed in the Serra Pelada  Report. An assay certificate is forwarded by the laboratory to REM as soon as  possible and the assay certificate states the sample preparation protocol and  method and the analytical protocol and methods used. A hard copy of the assay  certificate is forwarded to and archived in the Parauapebas office. All  pulps, splits and rejects - 92 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | from the  laboratory are returned and archived at the Parauapebas core shed routinely.  All pulps weighed and checked for correct/corresponding sample numbers and a  pulp storage document is scanned and digitized and placed on the data portal  for validation and insertion into the database. Additionally, all quartz wash  material is returned to the Parauapebas core shed for storage. Between June  and September 2009, Colossus announced assay results for three batches of  samples from their Phase 2 diamond drilling program. Results for eleven Phase  2 drill holes are detailed in the Serra Pelada Report. These Phase 2 drill  holes were HQ-cored for a total of 3,440 metres and drilling was focused on  the CMZ. Step-out drill holes SPD-023 to SPD-034 have contributed materially  to the definition of gold-platinum-palladium mineralization, including ultra  high grade subzones in the CMZ. SPD-034 exhibits four high grade (>100  grams per tonne gold equivalent) subzones including 3.98 metres at 713.1  grams per tonne gold, 316.5 grams per tonne platinum and 475.9 grams per  tonne palladium with replicated assays up to 1,784 grams per tonne gold, 805  grams per tonne platinum and 1,213 grams per tonne palladium. Colossus also  confirmed a new mineralized horizon called the Western Mineralized Zone. This  newly recognized prime target is localized around the shallowly dipping  siltstone-sandstone contact on the shallowly dipping lower limb of the  reclined synclinorium. Colossus RC Drilling Samples were taken at one metre  intervals directly from the drill discharge on the rig while drilling was in  progress. A riffle splitter system, attached to the sample return hose  cyclone sampling system, was utilized. Two samples were taken during the  drilling process: 1) a minimum two kilogram sample (laboratory sample) was  taken from the riffle splitter system and sent for analyses; 2) a larger  sample, of all remaining material in the one metre drilling advance, was  taken from the excess that did not pass through the rifle splitter system.  This sample was used for archival and was left at the drill site. Where a  minimum two kilogram sample was not able to be collected from the riffle  splitter system a 'spear' was used to resample the larger archival sampling  bag and the entire spear sample included in the laboratory sample. Both  samples were labelled with the same sample number which was written on the  sample bag with a permanent ink marker. Additionally, a sample ticket was  placed in the laboratory sample bag and the sampled interval noted on the  sample ticket reference for archiving. The sample number (from the sample  ticket) was also written on the sample bag in large numbers with a thick  permanent marker pen and the associated sample number noted on the RC  drilling sampling sheet with the appropriate sample interval. All completed  sampling ticket booklets were archived in the Parauapebas office. Once the  minimum two kilogram laboratory sample was bagged it was weighed and the sample  bag securely fastened with staples. The weight of the sample was recorded on  the RC drilling sample sheet. After each one metre drilling advance both the  riffle splitter and cyclone were thoroughly cleaned with compressed air to  ensure no residue remained on either before further drilling. A  representative sample of each one metre drilling advance of the drilling  chips was archived in a 'chip tray' for archival. RC drilling is logged on a  metre by metre basis for lithology and alteration by the project geologist.  All logs are to be scanned and digitized and placed on the data portal for  validation and insertion into the database. All hardcopies are archived in  the Parauapebas office. Four metre composites of SPC RC drilling drill chips  were collected at the RC drill rig, along with the one metre drill advance  samples and the composites were forwarded to Intertek’s Parauapebas  laboratory for gold assays. For any anomalous composites, assay samples were  prepared by Intertek from the corresponding 4 x 1 metre samples and forwarded  to Genalysis for gold, platinum and palladium assaying, as for core samples.  For more complete details concerning the sample preparation and logging,  please refer to the Serra Pelada Report. - 93 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Analytical  procedures used by Genalysis for the Colossus RC samples were the same as  described above for the Colossus drill core. Data Verification Resource and  Exploration Mapping Ltd., an independent surveying contractor, has clarified  the positions of the boundaries of Exploration License No.1485 issued under  the process designated DNPM 850.425/90 and recovered the location of drill  collars to compare with the survey locations determined by VALE, as well as  providing topographic control points. A large volume of published data was reviewed  by Vidoro. These publications are listed in the References section of the  Serra Pelada Report. This independent material did not conflict with the  information supplied by Colossus. The area was visited by David Jones as part  of the project review for the preparation of the Serra Pelada Report. The  geology was examined in and around the pit above the waterline, at the portal  for the proposed decline, and in the Serra Pelada hills north of the deposit.  The process of sample collection, from the point where core is removed from  the core barrel at the drill site and placed into the core trays, through  sealing and transport to the on-site facility at Serra Pelada where the  driller’s logs and core are cross-checked, re-sealing and transport to the  Colossus compound at Parauapebas, the processing and logging that takes place  there, the sampling of `the core and its dispatch to the Intertek sample  preparation laboratory, were all observed and noted by David Jones. He also  visited the Intertek laboratory to view the delivery and acceptance of the  samples and the chain of custody procedures in action through the sample  preparation and dispatch by air freight to the Genalysis laboratory in Perth,  Australia. The QA/QC procedures observed by Colossus and the laboratories  were examined in detail by David Jones. More than 61,000 metres of drill core  from Serra Pelada is stored at the Colossus Parauapebas secure compound. The  core trays are warehoused in racks under cover and behind steel doors that  are locked at night. David Jones selected one bay and checked off the trays  stored in that bay against the manifest listed for that bay. All trays were  present and correct. One tray was selected randomly from each bay, the nailed  down lid removed, and the contents checked against the sampling logs and the  geological logs. There were no discrepancies detected in the ten trays  examined. Eight core holes were laid out completely and examined in detail.  The contents of the trays were checked off against the sampling and geological  logs, and the assay sheets. Selected original core tray photos were compared  with the present contents of the trays. There were no discrepancies detected  in the eight holes examined. VALE hole FD-032 contained an extraordinarily  high-grade interval from 39-83 metres that averaged more than 4,000 grams per  tonne gold, 200 grams per tonne platinum and 1,170 grams per tonne palladium  over that 40 metre length. The core sample from 54.5 metres to 55.0 metres  returned 11,446 grams per tonne gold, 610 grams per tonne platinum and 14  grams per tonne palladium. Colossus took a small portion of the remaining  core and washed it, recovering several ounces of delicate crystalline and  wire gold, mostly coated in palladium. This is known as “ouro preto” in  Brazil and was found as alluvial gold in the town of Ouro Preto in Minas  Gerais. However, the crystalline nature of the gold in the sample from hole  FD-032 precludes any likelihood of alluvial origin and therefore salting with  gold from Ouro Preto. The adjacent interval in hole FD-032, from 55.0 metres  to 55.5 metres had been assayed by VALE and returned around 7,000 grams per  tonne gold, 44 grams per tonne platinum and 870 grams per tonne palladium.  David Jones took a small sample from that interval and washed it, recovering  several grams of crystalline gold. Vidoro is satisfied that the very high  grades encountered in hole FD-032 are real. A tabulation of sampling  undertaken to the end of October 2009 was compiled by David Jones from the  Colossus database and checked against the assay data. The match was  satisfactory. More than 5% of the samples had been duplicated or were blanks  and/or standards, verifying that the stringent Colossus QA/QC protocols had  been followed. Some core intervals had been sampled and resampled up to four  times, and up to six repeats of each analysis had been carried out in more  than one laboratory. Colossus’ policy is to choose the minimum assay from the  spread available for any particular sample, and designate that as the  “accepted” assay. This is a very conservative approach. - 94 - |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Security of  Samples VALE Drill Core The drill samples were placed in plastic bags in the  core facility, labeled and sealed by Colossus staff. The samples were bagged  in woven sacks to maximum 30 kilogram weight and the samples were transported  to the SGS Geosol’s Parauapebas sample preparation facility by Colossus  staff. SGS Geosol checked the samples in the shipment against the shipping  form from Colossus as well as confirming all samples were in good condition  before preparation and analysis. Standard procedure was to notify the client  of any bags that were damaged on receipt and to remove those samples from the  sample stream to avoid any potential for cross-contamination. Colossus Drill  Core The Colossus compound in Parauapebas has high security walls, with only  one entry gate which is locked at all times except when used by authorized  staff for entry and exit, and has a 24-hour security guard in a sentry box at  the gate. Inside the compound, separate storage areas, each secured by a  padlocked iron gate, are used for storing all drill core (including the  previous VALE core) and the sample pulps returned from the laboratories. Each  storage bay is marked with a catalogue of the contents. After each drill hole  is logged and sampled, the drill samples are placed in plastic bags in the  core facility, labelled and sealed by Colossus staff. The samples are bagged  in woven sacks to maximum 30 kilogram weight and the samples are transported  to the Intertek Parauapebas sample preparation facility by Colossus staff.  Intertek checks the samples in the shipment against the shipping form from  Colossus as well as confirming all samples are in good condition before  preparation and analysis. Standard procedure is to notify the client of any  bags that were damaged on receipt and to remove those samples from the sample  stream to avoid any potential for cross-contamination. The sample submission  sheets emphasize that results are to be sent by e-mail, to V. Wall, C.  Grainger, A. Kishida and REM only. Assay results are uploaded to the database  by REM only. Colossus RC Drilling The same security procedures apply to the  Colossus RC drilling samples, except that RC sample pulps, splits and rejects  from the laboratory are returned and archived at the Serra Pelada field base  routinely. All pulps are weighed and checked for correct/corresponding sample  numbers and a pulp storage document scanned and digitized and placed on the  data portal for validation and insertion into the database. Also, all quartz  wash material is returned to the Parauapebas core shed for storage. Mineral  Resource and Mineral Reserve Estimates A mineral resource estimate meeting  current Brazilian standards was submitted to the DNPM as part of the Mining  Plan and accepted. However, this mineral resource does not meet current NI  43-101 requirements and, accordingly, is not included in the Serra Pelada  Report. A complete and detailed explanation containing the reasons for this  is set out in the Serra Pelada Report under section 19 entitled “Mineral  Resource and Reserve Estimates”. Mining Operations Colossus and external  consultants have undertaken extensive materials characterization studies  (reflected light petrography, scanning electron microscopy, electron  microprobe analysis, screen fire assays and hydroseparations) on  representative CMZ core samples. Gold PGE mineralization is sulphide poor and  typically exhibits highly structured distributions, spatially associated with  carbon and kaolin rich domains. The gold and PGE materials are not nuggety,  with the bulk of the gold in the 100 micron grain size range. Gold grains  commonly contain minor alloyed palladium as well as inclusions of PGE rich  minerals including selenides. Samples typical of carbonaceous and argillic  altered siltstones in the CMZ were selected and dispatched to hrlTesting  Limited in Brisbane, Australia for initial metallurgical test work. - 95 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Assaying of  screened fractions, gravity concentrates and gravity fails was undertaken by  Genalysis in Perth. Preliminary gravity separation studies indicate that  >85% of the gold can be recovered quickly and inexpensively into a gravity  concentrate using a single-pass Falcon concentrator. In November 2008,  Colossus appointed Kevin Rosengren and Associates (“KRA”) and GeoTek  Solutions to undertake geotechnical investigations at Serra Pelada, the  objective of which was to clarify open pit and/or underground options for the  development of the Serra Pelada Mine. These consultants are also advising on  and liaising with a program of hydrological and baseline environmental  studies to facilitate future mine development. Commencing in June 2009,  Australasian Mine Design and Development (“AMDAD”) evaluated open pit and  underground preliminary mine designs on the advice of the geotechnical  consultants and utilizing the Colossus database. AMDAD was to optimize these  designs pending further geotechnical and resource drilling. Preliminary  geotechnical and mining studies indicate that underground access by an  exploration decline is technically feasible at Serra Pelada. VALE had  previously established a portal for potential underground development and had  cleared a site for a proposed treatment plant. Also, a power line to the  proposed plant site was installed by VALE. Exploration by VALE to 2007 and by  Colossus since November 2007 has identified potentially economic  mineralization below the depth reached by past garimpeiro mining.  Environmental studies to date indicate that neither mercury nor uranium is  present in quantities that will require special measures to be implemented.  The water in the pit is unusually clean and meets the World Health  Organization standards for potable drinking water. Drill core analyses to  date of trace elements indicate that no deleterious elements are present in  quantities that will present environmental problems. Arsenic levels are very  low, generally < 20 parts per million and the arsenic is present as oxide,  a safer compound than sulphide. Required payments to COOMIGASP and the  Brazilian government are detailed above under the heading “Property  Description and Location”. Exploration and Development and Serra Pelada  Milestones Current activities at the Serra Pelada Mine include: • Earthworks  on site infrastructure is largely complete with the camp site, maintenance  facilities, administrative offices and camp kitchen currently in operation.  Plans for the engineering and design of the mill facility are advancing and  construction of the gravity plant is expected to be complete in 2013. •  In January 2013, Colossus reported assay results for four HQ caliber diamond  drill holes totalling 365 metres which were drilled in November and December  2012 on the Elefante area (located two kilometres southwest of the Serra  Pelada Mine) where, in early 2012, auger drilling had returned values of  gold, platinum and palladium. All four diamond drill holes returned values of  gold, platinum and palladium, with hole EL-12-001 returning the highest  overall gold values of 5.7 metres grading 5.41 grams per tonne gold, 0.04  grams per tonne platinum and 0.29 grams per tonne palladium. Hole EL-12-002  returned the best overall platinum and palladium results with 5.10 metres  grading 0.45 grams per tonne gold, 1.27 grams per tonne platinum and 2.04  grams per tonne palladium, including a 1.25 metre interval which returned  0.07 grams per tonne gold, 3.67 grams per tonne platinum and 5.89 grams per  tonne palladium. Colossus states that the lithologies containing  mineralization at the Elefante area do not share the same characteristics or  degree of alteration as the typical ore zone at the Serra Pelada Mine and may  represent a new satellite target for ore on the Serra Pelada property. •  Colossus has reported that it has reached mineralization in its secondary  development and that the bulk sample collection process has begun. The bulk  sample will consist of approximately 30 metres of development through the  mineralized deposit to extract - 96 - |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | - 97 -  Legal*8661087.1 approximately 1,500 tonnes of material. All material is being  assayed and sorted on surface on the stockpile pad and geologic controls and  assaying of material will guide the bulk sampling process which will lead to  a shipment of ten to fifteen 300 kilogram samples to the lab in Vancouver in  the first half of 2013. • On February 7, 2013, Colossus provided a  development update for Serra Pelada and reported the following highlights: -  it remains on track to start initial production early in the second half of  2013 at an initial rate of 250 tonnes per day and continue to ramp up phase  throughout the remainder of 2013 to 500 tonnes per day. Colossus expects to  achieve 1,000 tonnes per day of production by the end of the first quarter of  2014; - underground development is progressing well with a number of  infrastructure projects necessary to support full-scale mining now complete  or well underway. Development of the face continues through the mineralized  zone; - rock quality during collection of the bulk sample remains within  expected parameters from geotechnical work completed prior to first access to  the mineralized zone and Colossus continues with systematic and cautious  development as this is the first time accessing the mineralized zone and is  providing valuable geotechnical information ahead of initial production; -  dewatering is progressing well from both surface and underground while  dewatering of the historic pit to within five metres of the solids level is  95% complete. Underground water inflow rates remain within expectations; -  process plant construction remains on schedule for commissioning to begin  early in the second half of 2013; the total project is currently 60%  complete. More than 95% of engineering and procurement is complete, 55% of  concrete has been poured and structural steel erection will commence by the  middle of February 2013; and - other critical infrastructure construction  also remains on schedule. The power line and power house are on track to be  commissioned early in the second quarter of 2013, while the tailings dam is  expected to be ready in conjunction with mill commissioning. Entrée JV  Project, Mongolia A technical report for the Entrée JV Project entitled  “Technical Report 2012 on the Lookout Hill Property, Ömnögovi, Mongolia”  dated March 2012 (the “Entrée JV Project Report”) was prepared for Entrée in  accordance with NI-43-101. The following technical description of the Entrée  JV Project has been summarized, derived or extracted from the Entrée JV  Project Report and readers should consult the full text of the Entrée JV  Project Report to obtain further particulars and a complete description of  the assumptions, qualifications and procedures associated with the  information concerning the Entrée JV Project contained within the Entrée JV  Project Report. The Entrée JV Project Report is available for review under Entrée’s  profile on the SEDAR website located at www.sedar.com. Information that  updates the information in the Entrée JV Project Report has been provided by  Entrée. The Entrée JV Project Report is based upon the IDOP Technical Report  released by Ivanhoe Mines Ltd. (now known as Turquoise Hill Resources Ltd.,  but referred to herein as “Ivanhoe”) in March 2012 (the “IDOP Technical  Report”). The IDOP Technical Report is based on the technical, production and  cost information contained in the Oyu Tolgoi LLC (“OT LLC”) study entitled  “Integrated Development and Operations Plan” (“IDOP”). The IDOP was completed  by the Rio Rinto PLC (“Rio Tinto”) appointed management of OT LLC in March  2011 as the basis for the proposed project financing. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Please note  that the Entrée JV Project Report includes disclosure concerning the western  portion (“Shivee West”) of a mineral licence referred to below as the Shivee  Tolgoi ML. Since Shivee West is not covered under the Company’s Entrée Metal  Credits Agreement, we have excluded disclosure concerning Shivee West in the  below discussion. Property Description and Location The Entrée Lookout Hill  property (“Lookout Hill”) is located within the Aimag of Ömnögovi (also  spelled Umnogobi) in the South Gobi region of Mongolia (an “Aimag” is the  local equivalent of a state or province), about 570 kilometres south of the  capital city of Ulaanbaatar and 80 kilometres north of the border with China.  It comprises two mining licenses (the Shivee Tolgoi mining licence (“Shivee  Tolgoi ML”) and the Javhlant mining licence (“Javhlant ML”) which cover a  total of approximately 75,106 hectares and completely surrounds the 8,490  hectare Oyu Tolgoi mining licence and hosts the Hugo North Extension of the  Hugo Dummett copper-gold deposit and the Heruga copper-gold-molybdenum  deposit. These deposits are located within an area subject to a joint venture  between Entrée and OT LLC (the “Entrée-OT LLC Joint Venture”). OT LLC is  owned 66% by Ivanhoe and 34% by the Government of Mongolia (“GOM”). OT LLC is  the project manager for the Entrée-OT LLC Joint Venture. The Shivee Tolgoi ML  and the Javhlant ML are divided between Entrée and the Entrée-OT LLC Joint  Venture as follows: • The Entrée-OT LLC Joint Venture covers 39,807 hectares  consisting of the eastern portion of the Shivee Tolgoi ML and all of the  Javhlant ML (“Joint Venture Property”). • The portion of the Shivee Tolgoi ML  outside of the Joint Venture Property (“Shivee West”) covers an area of  35,173 hectares. Shivee West is 100% owned by Entrée but is subject to a  first right of refusal by OT LLC. As noted above, the Joint Venture Property  excludes Shivee West and accordingly, Shivee West is not discussed below. The  Joint Venture Property hosts the Hugo North Extension deposit and the Heruga  deposits and the Joint Venture Property is contiguous with, and on three  sides (to the north, east and south) surrounds OT LLC’s Oyu Tolgoi mining  licence. Entrée entered into an option agreement with a private Mongolian  mining company, Mongol Gazar Co. Ltd. (“Mongol Gazar”) in 2002, to acquire  three exploration licences. Mongol Gazar was originally awarded the  exploration licences by the Mongolian Government in March and April of 2001.  In November 2003, Entrée entered into a purchase agreement with Mongol Gazar,  which replaced the option agreement. In April 2004, Entrée reached an  agreement with Mongol Gazar, whereby Entrée acquired 100% ownership of the  title to the exploration licences and was absolved of any rights of and  obligations to Mongol Gazar. In October 2004, Entrée entered into an arm’s - length Equity Participation and Earn-In Agreement (the “Earn-In  Agreement”) with Ivanhoe Mines. Under the Earn-In Agreement, Ivanhoe Mines  was granted the right to earn an interest in a 39,807 hectare portion of the  Lookout Hill property comprising the eastern portion of the Shivee Tolgoi,  and all of the Javhlant mining licence. Most of Ivanhoe Mines’ rights and  obligations under the Earn-In Agreement were subsequently assigned by Ivanhoe  Mines to what was then its wholly - owned  subsidiary, Ivanhoe Mines Mongolia Inc. (now known as OT LLC). On June 30,  2008, OT LLC gave notice to Entrée that it had completed its earn-in  obligations by expending a total of $35 million on exploration on the Joint  Venture Property. As a consequence, OT LLC earned an 80% interest in all  minerals extracted below a sub-surface depth of 560 m from the |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Joint Venture  Property and a 70% interest in all minerals extracted from surface to a depth  of 560 m from the Joint Venture Property. In accordance with the Earn-In  Agreement, Entrée and OT LLC formed the Entrée-OTLLC Joint Venture on terms  annexed to the Earn-In Agreement. The Shivee Tolgoi and Javhlant exploration  licences, which form the Lookout Hill property, were converted to mining  licences in October 2009. The Shivee Tolgoi ML and the Javhlant ML are in  good standing until October 27, 2039, assuming that the licence fees shown  below are paid annually, and can be extended for an additional two periods of  20 years each. Mineral Licence Number Mineral Licence Name Licence Type Total  Area of Licence (hectares) Licence Award Date Licence Expiry Date of Annual  Licence Payment(i) Annual Licence Payment ($US) 15226A Shivee Tolgoi Mining  54,653 27 October 2009 27 October 2039 27 October 2009 821,401 15225A  Javhlant Mining 20,327 27 October 2009 27 October 2039 27 October 2009  305,192 Total 74,980 1,126,593 NOTE: Entrée’s Javhlant and Shivee Tolgoi  exploration licences were converted to mining licences in October 2009. The  total estimated annual fees in order to maintain these licences in good  standing are approximately US$1.1 million. Approximately US$600 000 of the  total is recoverable from the Entrée-OT LLC Joint Venture. In June 2011, the  GOM passed Resolution 175, the purpose of which is to authorize the  designation of certain land areas for “state special needs” within certain  defined areas in proximity to the Oyu Tolgoi mining complex. These state  special needs areas are to be used for infrastructure facilities necessary in  order to implement the development and construction of the Oyu Tolgoi mining  complex. Portions of the Shivee Tolgoi and Javhlant MLs are included in the  land area that is subject to Resolution 175. It is expected but not yet  formally confirmed by the GOM that to the extent that a consensual access  agreement exists or is entered into between OT LLC and an affected licence  holder, the application of Resolution 175 to the land area covered by the  access agreement will be unnecessary. OT LLC has existing access and surface  rights to the Joint Venture Property pursuant to the Earn-In Agreement. The  Shivee Tolgoi and Javhlant licences are also part of the contract area of the  Investment Agreement, which contains certain provisions respecting  expropriation. Accordingly, Entrée considers that the application of  Resolution 175 to the Joint Venture Property will likely be considered  unnecessary. If Entrée is unable to reach a consensual arrangement with OT  LLC with respect to Shivee West, Entrée’s right to use and access a corridor  of land included in the state special needs areas for a proposed power line  may be adversely affected by the application of Resolution 175. While the GOM  would be responsible for compensating Entrée in accordance with the mandate  of Resolution 175, the amount of such compensation is not presently  quantifiable. The Hugo North Extension is the principal zone of  mineralization defined on the Property and is where the bulk of the  exploration drilling has been conducted. This deposit occurs within the  Shivee Tolgoi ML of the Lookout Hill Property and is the northernmost defined  portion of a north-northeast -trending, 20 kilometre long and 1 kilometre  wide copper-gold porphyry mineralized “corridor” that occurs within Lookout  Hill and the adjacent Oyu Tolgoi Project. The Hugo North Extension is centred  at approximately latitude N 43°04’ and longitude E 106°55’ within the Shivee  Tolgoi ML and at elevations which range from approximately 1,160 metres above  mean sea level (“masl”) to 1,180 masl. The Heruga deposit is the second significant  zone of mineralization indicated on the Property and is where the bulk of  2007 and 2008 drilling was conducted. This deposit occurs near the centre of  the Javhlant ML, south of the Oyu Tolgoi ML, and is at the south end of a  north-northeast-trending, |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  20 kilometres long and 1 kilometre wide  copper-gold porphyry mineralized “corridor” that occurs mainly within Lookout  Hill and the adjacent Oyu Tolgoi Project. The Heruga deposit is centred at  approximately latitude 42°58’ N and longitude 106°48’E and at elevations  which range from approximately 1,160 masl to 1,170 masl. The Mongolian  Minerals Law (2006) and Mongolian Land Law (2002) govern Entrée’s and OT  LLC’s exploration, mining and land use rights for the project. Water rights  are governed by the Mongolian Water Law and the Mongolian Minerals Law. These  laws allow licence holders to use the land and water in connection with  exploration and mining operations, subject to the discretionary authority of  Mongolian national, provincial and regional governmental authorities as  granted under Mongolian law. OT LLC expects that it will have to negotiate  with all three levels of government to ensure access to appropriate land and  water rights prior to the commencement of any mining operations. The current  estimate of average water demand for the concentrator expansion to 160 kt/d  is 918 L/s, which is marginally above the rate of 870 L/s that has already  been approved by the GOM. OT LLC’s strategy is to obtain approval for  increases to the current approved water reserve ahead of any mine expansion  plans. In addition, OT LLC wishes to pursue the accelerated construction of a  power station at the property and currently there is no clear date for the  issuing of those permits. OT LLC has, and continues to, study the permitting  and approval requirements for the development of the project and maintains a  permit and licensing register. OT LLC personnel work with the Mongolian  authorities and have developed descriptions of the permitting processes and  procedures for Project permitting in Mongolia. Some permits have already been  obtained and others are in the process of being submitted. OT LLC has advised  that it expects that all permits can be obtained in a suitable time frame for  the project development. Entrée have advised that a working group consisting  of company and government representatives will be formed to assist in the  permitting process. With the adoption of the new Minerals Law in 2006, the  GOM increased the royalty of 2.5% to 5.0% on the sales value of all minerals,  except coal and common minerals, extracted from a mining licence area which  have been sold, shipped for sale or used. Ivanhoe holds a 2% net smelter  returns royalty over the property which was purchased from BHP Exploration in  2004. For areas covered by exploration licences, an environmental plan  accompanied the annual work plans submitted to the relevant soum, or district  (Khanbogd Soum). The original environmental performance bond for the Oyu  Tolgoi licence was posted in 1998 by BHP and is still retained by the soum  for the ongoing work. In addition, holders of a mining licence in Mongolia  must comply with environmental protection obligations established in the  Environmental Protection Law of Mongolia, Law of Environmental Impact  Assessment and the Minerals Law. These obligations include preparation of an  environmental impact assessment (“EIA”) for mining proposals, submitting an  annual environmental protection plan (“EPP”), posting an annual bond against  completion of the protection plan and submitting an annual environmental  report. OT LLC has posted environmental bonds to the Mongolian Ministry for  Nature and Environment (MNE) in accordance with the Minerals Law of Mongolia  for restoration and environmental management work required for exploration  and the limited development work undertaken at the site. OT LLC pays to the  Khanbogd Soum annual fees for water and road usage, while sand and gravel use  fees are paid to the Aimag government in Dalanzadgad. Accessibility, Climate,  Local Resources, Infrastructure and Physiography The property is located in  the southern Gobi desert near elevation 1180 masl. The surrounding topography  is very flat with low rising hills up to elevation 1350 masl within 40  kilometres of the site. The main regional drainage is the Umdai River,  approximately two kilometres west, which flows southward during periods of  rainfall. The Oyu Tolgoi mining complex area is located within the closed  Central Asian drainage basin and has no outflow to the ocean. Most riverbeds  in this drainage basin are ephemeral creeks that remain dry most times of the  year. |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  Access to the property from the Mongolian  capital, Ulaanbaatar, is possible either by an unpaved road, via Mandalgovi,  a 12 hour drive under good conditions, or by air. Oyu Tolgoi LLC has  constructed a 2,000 metre long gravel airstrip and recently completed a  permanent paved airport at the site and routinely receives flights from  Ulaanbaatar. Ulaanbaatar has an international airport, and Mandalgovi and  Dalanzadgad have regional airports. There is currently charter air service  between the site and Ulaanbaatar. The flora in the Oyu Tolgoi project area  has been classified as representative of the eastern region of the Gobi  Central Zone within the Central Asian Greater Zone. Vegetation tends to be  homogenous across the Eastern Gobi Desert Steppe and consists of  drought-tolerant shrubs and thinly distributed low grasses. Vegetation in the  region serves as wildlife habitat and food source for migrating wildlife and  livestock. There are a number of communities in the South Gobi region. The  most prominent is Dalanzadgad (population 15,000), which is the  administrative center of the Omnogovi Aimag and is 220 kilometres north-west  of the Oyu Tolgoi property. Facilities at Dalanzadgad include a regional  hospital, tertiary technical colleges, a domestic airport, and a 6 MW  capacity coal-fired power station. OT LLC envisions that Dalanzadgad may be  suitable as a regional center for recruiting and training. The closest  community to the property is Khanbogd, the center of the Khanbogd soum.  Khanbogd has a population of approximately 2,500 and is 35 kilometres to the  east. Other communities relatively near to the project include Mandalgovi  (population 13,500), the capital of the Dundgovi aimag, 310 kiometres north  of the project on the road to Ulaanbaatar, Bayan Ovoo (population 1,600), 55  kilometres to the west, and Manlai (population 2,400), 150 kilometres to the  north. There are few inhabitants living within the boundaries of Lookout Hill  and no towns or villages of significant size. The people who do live there  are mostly nomadic herders. Entrée periodically engages in small programs of  basic infrastructure improvements to assist the nearby communities in the  vicinity of the project. In addition, Entrée maintains close contact with the  district officials as part of its community relations efforts. The South Gobi  region has a continental, semi-desert climate. The spring and autumn seasons  are cool, summers are hot, and winters are cold. Typical of desert climates,  the site has low average humidity and significant variations in daily  temperatures. Temperatures range from an extreme maximum of about 36 degrees  Celsius to an extreme minimum of about -31 degrees Celsius. The air  temperature in wintertime fluctuates between -5 degrees Celsius and -31  degrees Celsius. In the coldest month, January, the average temperature is  -12 degrees Celsius. Average annual precipitation is 57 millimetres, 90% of  which falls as rain and the rest as snow. Snowfall accumulations rarely  exceed 50 millimetres. Maximum rainfall events of up to 43 millimetres/hour  for a 1-in-10 year, 10 minute storm event have been recorded. In an average  year, rainfalls occur on only 19 days, and snow falls on 10 to 15 days. Local  records indicate that thunderstorms are likely to occur between two and eight  days a year at the property. Wind is usually present at the site. Very high  winds are accompanied by sand storms that often severely reduce visibility  for several hours at a time. The climatic conditions are such that the  operating season for the project will cover the entire year on a continuous  shift basis. Minor disruptions are expected and have been allowed for in the  estimates of the project operating hours. The supply of power has been  recognized as being critical to the execution of the project. OT LLC has been  given the right to import power initially but must secure power from sources  within Mongolia from the fourth year of operation. Power is currently assumed  in the IDOP Technical Report to be initially imported from Inner Mongolia and  sourced from a power station constructed by OT LLC by the fourth year of  operation in accordance with the terms of the Investment Agreement. OT LLC is  currently considering a range of options to ensure a reliable and efficient  power supply after Year 4 and their preferred option is to pursue the  accelerated construction of a power station at OT LLC with construction to  commence as soon as all stakeholders agree. On November 5, 2012, Ivanhoe  announced |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  that OT LLC had signed a binding power  purchase agreement with the Inner Mongolia Power Corporation to supply  initial power to the mine. Detailed groundwater investigations to date have  been concentrated in the Gunii Hooloi, Galbyn Gobi, and Nariin Zag aquifer  areas to assess the potential to meet the Project’s estimated water demand.  Groundwater investigations conducted in the mine licence area focused on  assessment of required dewatering rates for mine works and the potential to  meet the Project’s camp and construction water demands. Process water supply  has been registered and will be piped from the Gunii Hooloi basin to the  north-west of the project area. Current studies are ongoing at site to  confirm groundwater model predictions with respect to dewatering of the pit  and underground and groundwater environmental impacts. As part of overall  project planning, OT LLC has prepared a preliminary reclamation and closure  plan. Certain features of the mine, such as the open pit, waste dumps, and  tailings impoundment, will create permanent changes to the current landscape  that cannot be completely remedied through reclamation. The closure plan  will; however, ensure that these disturbed areas are seismically and  chemically stable as to limit the ecological impacts to the surrounding  water, air, and land. The closure plan for the Project will address the  socio-economic impacts of the mine closure considering that the existence and  economic survival of some communities may have become dependent on the  Project. Issues include ongoing environmental management during and after  reclamation, loss of jobs, and socio-economic impact to the region. The  primary reclamation objectives are to develop the mine in a manner that  prevents leaving an unsustainable environmental legacy and that considers  community input and values. History Mining legislation drafted in Mongolia in  the early to mid-1990s sparked exploration of the southern Gobi region in  what became known as the “South Mongolian (porphyry) copper—gold belt’”. The  area was evaluated by a number of companies, including Magma Copper Company,  which, in 1995, targeted the area of the Oyu Tolgoi deposits. Following a  corporate takeover, the work by Magma was continued by BHP Exploration Ltd.  (“BHP”). By 1999, a significant copper—gold resource had been identified at  Oyu Tolgoi. At the end of this period, Ivanhoe acquired BHP’s interest in the  Oyu Tolgoi Project. During the period 1996 to 1999, BHP also conducted  preliminary geological investigations and some reconnaissance geophysical  work in other areas, including areas within the Lookout Hill property. The  three mining licences which formerly comprised the property were acquired by  a private Mongolian group (“Mongol Gazar”) in March and April 2001, who  subsequently completed grid surveying, soil sampling and shallow  gradient-type IP geophysical surveys. This work was primarily on Shivee West.  The Lookout Hill property was first optioned from Mongol Gazar by Entrée in  July 2002 and later 100% interest was purchased. Entrée initially focused on  Zones I, II, III, and on the copper showings near Bayan Ovoo. Other areas  such as Ring Dyke and West Grid were targeted based on results from ground  geophysical surveys (magnetometer and IP surveys), mapping, rock and soil  geochemical sampling, reverse-circulation and core drilling. The Shivee  Tolgoi mineral exploration licence (“MEL”) was the focus of most of the work  until 2008 when coal discoveries on the Togoot MEL became the primary target.  In late 2002, drilling by Ivanhoe north of the Central Zone on the adjacent  Oyu Tolgoi Project intersected 638 metres of bornite—chalcopyrite-rich  mineralization in OTD-270 and marked the discovery of the Hugo Dummett  Deposit. As exploration continued to the north it appeared that the Hugo  North Deposit might extend onto the Shivee Tolgoi MEL and, in October 2004,  Entrée entered into an earn-in agreement with Ivanhoe in which Ivanhoe was  the operator. Details of the discovery of the Hugo North Extension Deposit on  the Shivee Tolgoi ML and the drilling that supports the current resource are  referenced in the Entrée JV Project Report. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  Prior to the agreement between Entrée and  Ivanhoe in 2002 to 2004, Entrée mapped, prospected, completed extensive soil  sampling and conducted IP, gravity and magnetometer surveys over the area  immediately north of the Entrée-OT LLC property boundary. After signing the  agreement, all work was conducted by OT LLC, the project operator. On the  Javhlant MEL, work began drill testing chargeability anomalies for deep mineralization  similar to that in the Hugo North deposits and the Oyu South deposits in  March 2007. Copper, gold and molybdenum mineralization was intersected in a  number of holes but an intercept of 501.2 metres of 0.50% copper, 0.29 grams  per tonne gold and 182 ppm molybdenum in EJD0008 indicated the significant  potential in this area. As geological understanding of the deposit increased,  it was clear that early, weakly-mineralized holes at the north end of the  deposit were too shallow and subsequent deepening of these holes confirmed  mineralization continued but deepened to the north. Since the start of Heruga  drilling in 2007, 42 holes totalling 53,765 metres have been completed on the  Heruga deposit. Of those, 14 diamond drillholes totalling 22,190.8 metres were  completed on the Heruga deposit in 2008 to better delineate the deposit for  an Inferred Mineral Resource estimate completed in 2009. In October 2009, the  Shivee Tolgoi and Javhlant MELs were converted to mining licences with an  initial 30 year term. In October 2009, Ivanhoe, OT LLC and Rio Tinto PLC  signed an Investment Agreement (“IA”) with the GOM. The IA defines the fiscal  and regulatory environment the project will operate in and brought the GOM  into the project as a 34% equity owner of OT LLC with the option to increase  their equity holding by a further 16% after 30 years providing terms can be  reached with Ivanhoe at that time. From June to November 2009, an extensive  geophysical survey was completed over Hugo North Extension and over Heruga  using the proprietary deep-penetrating IP system. The results were used to  target additional drilling, primarily deepening existing holes to test deeper  anomalies. Two diamond drillholes were completed to test the South Heruga IP  anomaly. Exploration on this target continues to date. In June 2010, full  scale mine construction started at Oyu Tolgoi and was 99% complete at the end  of 2012 when the concentrator was commissioned. Geological Setting Regional  Geology The Lookout Hill property lies within the Palaeozoic age Gurvansayhan  Terrane in southern Mongolia, a component of the Altaid orogenic collage,  which is a continental-scale belt dominated by compressional tectonic forces.  The Gurvansayhan Terrane consists of highly-deformed accretionary complexes  and oceanic island arc assemblages. The island arc terrane is dominated by  basaltic volcanics and intercalated volcanogenic sedimentary rocks (Upper  Devonian Alagbayan Formation), intruded by pluton-sized, hornblende-bearing  granitoids of mainly quartz monzodiorite to possibly granitic composition.  Carboniferous-age sedimentary rocks (Sainshandhudag Formation) overlie this  assemblage. Major structures in this area include the Gobi—Tien Shan  sinistral strike-slip fault system, which splits eastward into a number of splays  in the project area, and the Gobi—Altai Fault system, which forms a complex  zone of sedimentary basins overthrust by basement blocks to the north and  northwest. Local and Property Geology Hugo North Extension The Hugo North  Extension Deposit occurs within a geological setting similar to that at Hugo  North within the Oyu Tolgoi mining lease. Host rocks are an easterly-dipping  sequence of volcanic strata |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  correlated with the lower part of the  Devonian Alagbayan Formation and quartz monzodiorite intrusive rocks. The  Devonian stratified host rock sequence in the Hugo North Extension Deposit  dips moderately (65 degrees to 75 degrees) to the east or south-east, except  for a structurally-induced strike flexure in the southern part of the  deposit, within which dips are southward. These strata include the lower,  strongly-altered augite basalt and dacite tuff sequence (units DA1 and DA2)  overlain successively by weakly-altered, to unaltered dacitic volcanic  conglomerate and breccia (unit DA2), mudstone and siltstone (unit DA3), and  interstratified basaltic flows, breccias, and epiclastic rocks (unit DA4).  The contact between units DA3 and DA4 is a bedding-parallel fault, and the  original stratigraphic relationship between unit DA4 and the underlying units  is uncertain. Detailed descriptions of the rock units are referenced in the  Entrée JV Project Report. The area of the Shivee Tolgoi ML north of Oyu  Tolgoi is underlain by complex networks of faults, folds, and shear zones.  Most of these structures are poorly exposed on surface and can only be  defined through integration of detailed exploration data (primarily drillhole  data), property-scale geological mapping, and geophysical data. OT LLC has  made extensive use of oriented core drilling, and the structural data  collected has been invaluable in helping determine the subsurface morphology  and structural history of both the Oyu Tolgoi deposits and the Hugo North  Extension Deposit. Major structures strongly influence the distribution of  mineralization by both controlling the original position and form of  mineralized bodies, and modifying them during post-mineral deformation  events. The Hugo North Extension Deposit occurs within moderately east  dipping (65 degrees to 75 degrees) strata contained in a north-north-easterly-elongate  fault-bounded block. The deposit is cut by several northeast-striking faults  and fault splays near the boundary with Oyu Tolgoi. Other than these  northeasterly faults, the structural geometry and deformation history of the  Hugo North Extension Deposit is similar to that of the Hugo North Deposit.  Deformation of the Hugo North Extension Deposit is dominated by brittle  faulting. Major faults cutting the deposit can be grouped on the basis of  orientation into three sets: steep north-north-east-striking faults (West  Bat); north-north-east-striking, moderate to steeply east-dipping faults  subparallel to lithologic contacts (Contact Fault); and the  east-north-east-striking faults cutting across the strike of the deposit  (Boundary Fault System). Heruga Deposit Outcrop is generally sparse on  Javhlant ML and much of the known geology is extrapolated from more detailed  geology available on Oyu Tolgoi to the north, on geophysical interpretation  (IP and detailed magnetics), and on drill core where available. Most of the  stratigraphic sequence in the Heruga deposit is interpreted to be equivalent  to that documented in the Southern Oyu Tolgoi and Hugo Dummett deposits.  However, several stratigraphic relationships preserved at Heruga suggest a  revised stratigraphic column for the sequence immediately overlying the  Devonian unconformity. Heruga lies at the southern end of a 20 kilometre  north-north-easterly trend of porphyry style deposits, extending to Shivee  Tolgoi (Hugo North Extension) in the north. Heruga is cut by several major  brittle fault systems, partitioning the deposit into discrete structural  blocks. Internally, these blocks appear relatively undeformed, and consist of  south-east-dipping volcanic and volcaniclastic sequences. The stratiform  rocks are intruded by quartz monzodiorite stocks and dykes that are probably  broadly contemporaneous with mineralization, as well as subvertical  hornblende-biotite andesite dyke swarms. The deposit-scale faults identified  at Heruga displace mineralized zones, with mineralization and alteration  zones apparently not localized by the faults, implying they post-date  mineralization. As at Oyu Tolgoi, volcaniclastic strata of unit DA4 are  structurally juxtaposed over the Heruga deposit along a major,  southeast-dipping fault zone which is most likely the southerly extension of  the Contact Fault at the Hugo Dummett and Southern Oyu deposits. The Contact  Fault at Heruga varies from tens of centimetres to 40 m in thickness, and has  an average orientation striking 110 degrees and dipping 45 degrees  east-south-east. In the northern part of the deposit, facing direction  reversals and repetition of stratigraphic units define a large-scale  recumbent anticline in the hangingwall sequence to the Contact Fault.  Although the magnitude of displacement on the Contact Fault is poorly  constrained, the scale of the overturned folds in the hangingwall, vertical  stacking of dissimilar stratigraphic sequences, and the fault continuity  throughout the Oyu Tolgoi area all suggest that displacement of kilometres to  tens of kilometres is probable. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  The Heruga deposit area lies between two  regional, north-east-striking faults that form prominent features on both  magnetic and satellite images. The northern (unnamed), poorly constrained  fault crosses the deposit trend approximately 300 metres north of the  northernmost JV drillholes. The southern bounding fault (‘South Sparrow  Fault”) crosses the deposit trend approximately 250 m south of EJD0019. One  drillhole has been completed in the Heruga area south of this fault (EJD0016)  which intersected a thick sequence of weakly-altered to unaltered  volcaniclastic rocks of probable Carboniferous age, suggesting south side  down apparent offset. The Heruga deposit is divided into four discrete  structural blocks by subvertical, north-north-east-striking faults referred  to as the “Bor Tolgoi Fault System”. In east-west sections, both the West Bor  Tolgoi Fault and the better constrained Bor Tolgoi Fault display between 300  metres and 500 metres west-side-down apparent offset of stratigraphic  contacts. The Southern Fault is an interpreted steep,  west-north-west-striking structure that cuts across the southern end of the  Heruga deposit. Exploration The author of the Entrée JV Project Report states  that exploration on the property from 2002 through 2009 is summarized in  previous reports which are fully-referenced. Please refer to the full  bibliography contained within the Entrée JV Project Report. Geophysical  methods and diamond drilling have been the most important exploration tools.  Details of the 2010 and 2011 programs are covered below. In 2010, surface  work comprising deep penetrating proprietary induced polarization (“IP”)  surveying and drilling was completed on both licences comprising the Joint  Venture Property. On the Shivee Tolgoi licence in 2010, IP surveying was  extended north to cover the Ulaan Khud prospect located approximately seven  kilometres northwards of the Hugo North Extension deposit. Previous shallow  drilling in this area outlined a low grade copper occurrence in a geological  setting similar to that of the Oyu Tolgoi mineralization. North of the Hugo  North Extension, four deep core holes totalling 6,601 metres were completed  along the projected extension of the Oyu Tolgoi Trend between Hugo North Extension  deposit and Ulaan Khud, and further north near the new airport. A fifth hole,  started in 2010 and completed in 2011, was drilled 650 metres north from Hugo  North Extension. None of these holes were successful at reaching the planned  target. Condemnation drilling consisting of two 200 metre RC holes was also  completed over the International Airport Area at the north boundary of Shivee  Tolgoi. During 2011, a total of 7,660 metres of drilling was completed on  Shivee Tolgoi in three sections located 350 metres, 800 metres and 2.4  kilometres north of the Hugo North Extension deposit. On the two southern  sections, most holes failed to intersect significant mineralization or only  intersected narrow slivers of weakly-mineralized host rocks below 2,000 metres.  The drilling showed that if there is a northern extension of the Hugo North  Extension deposit it would be down-dropped by faulting to depths greater than  2,000 metres. On the section 2.4 kilometres to the north of Hugo North  Extension, only hornfelsed carboniferous rocks were intersected, despite  drilling to 1,450 metres. During 2011, ten geotechnical holes were completed  to test the geotechnical character of Lift 1 at Hugo North and to test the  area of a planned shaft to the west of Hugo North Extension. On the Javhlant  licence in early 2010, two core holes were completed on Heruga Southwest,  located approximately five kilometres southwest of the Heruga orebody.  EJD0035A intersected 56 metres grading 0.6% copper at a depth of  approximately 1400 metres in Devonian-aged volcanics. The second hole entered  a younger Carboniferous-aged intrusion before intersecting mineralization.  During 2011, a total of 7,660 metres of drilling was completed on Shivee  Tolgoi in three sections located 350 metres, 800 metres and 2.4 kilometres  north of the Hugo North Extension deposit. On the |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  two southern sections, most holes failed to  intersect significant mineralization or only intersected narrow slivers of  weakly-mineralized host rocks below 2,000 metres. The drilling showed that if  there is a northern extension of the Hugo North Extension deposit it would be  down-dropped by faulting to depths greater than 2,000 metres. On the section  2.4 kilometres to the north of Hugo North Extension, only hornfelsed  carboniferous rocks were intersected, despite drilling to 1,450 metres.  During 2011, ten geotechnical holes were completed to test the geotechnical  character of Lift 1 at Hugo North and to test the area of a planned shaft to  the west of Hugo North Extension. In 2011, approximately 10,490 metres of  drilling was completed on Javhlant. Two existing holes were deepened on the  Heruga deposit but did not intersect significant mineralization. An  additional hole (EJD0038) tested the Heruga Southwest target previously  tested by EJD0035A. Within a 220-metre-thick, weakly-mineralized zone, the  best assay interval was four metres of 0.11 g/t of gold and 1.05% copper at  2,110 - 2,114 metres. Six other holes tested various IP/gravity and  geological targets but did not locate significant mineralization.  Mineralization Hugo North Extension The highest-grade copper mineralization  in the Hugo North Extension Deposit is related to a zone of intense stockwork  to sheeted quartz veins that typically grades over 2% copper. The high-grade  zone is centred either on thin, east-dipping quartz monzodiorite intrusions  or within the upper part of the large quartz monzodiorite body, and extends  into the adjacent basalt country rocks (unit DA1) in the southern part of the  deposit. In addition, moderate- to high-grade copper and gold values occur  within quartz monzodiorite below and to the west of the intensely veined  zone. This zone is distinct in its low copper (%) to gold (ppm) ratios (2:1  to 4:1). Elevated gold grades in the Hugo North Extension Deposit occur  within the up-dip (western) portion of the intensely veined, high-grade core,  and within a steeply-dipping lower zone cutting through the western part of  the quartz monzodiorite. Quartz monzodiorite in the lower zone exhibits a  characteristic pink to buff colour, with a moderate intensity of quartz  veining (25% by volume). This zone is characterized by finely disseminated  bornite and chalcopyrite, although in hand specimen the chalcopyrite is  usually not visible. The sulphides are disseminated throughout the rock in  the matrix as well as in quartz veins. The fine-grained sulphide gives the  rocks a black “sooty” appearance. The red coloration is attributed to fine  hematite dusting, mainly associated with albite. The eastern limit of the  high-grade zone coincides with either an intrusive or faulted eastern contact  of the quartz monzodiorite. The peripheral low-grade zone to the east is  contained mainly in augite-phyric basalt (unit DA1) and to a lesser extent in  dacite tuff (unit DA2b). Alteration and mineralization intensity drops  abruptly at the upper contact of this package. To the west, the high grade  zone is bounded by the Boundary/West Bat Fault system and related splays,  which juxtapose it against either unmineralized stratigraphically-higher  rocks or more weakly mineralized quartz monzodiorite bodies. Bornite is  dominant in highest-grade parts of the deposit (3% to 5% copper) and is zoned  outward to chalcopyrite (2% copper). At grades of less than 1% copper,  chalcopyrite ± enargite, tennantite, bornite (rare chalcocite, pyrite and  covellite) occur. The high-grade bornite zone comprises relatively coarse  bornite impregnating quartz and as disseminations in wall rocks, usually  intergrown with subordinate chalcopyrite. Pyrite is rare or absent, except in  local areas where the host rocks display advanced argillic alteration. In  addition, high-grade bornite is associated with minor amounts of tennantite,  sphalerite, hessite, clausthalite, and gold. These minerals occur as  inclusions or at grain boundaries. The Hugo North Extension Deposit is  characterized by copper—gold porphyry and related styles of alteration which  are believed to be analogous to the description appended below for the  adjacent Hugo North Deposit. Alteration at Hugo North includes biotite—K-feldspar  (K-silicate), magnetite, chlorite—muscovite—illite, albite,  chlorite—illite—hematite—kaolinite (intermediate argillic),  quartz—alunite—pyrophyllite—kaolinite—diaspore—zunyite—topaz—dickite  (advanced argillic), and sericite—muscovite zones. Chlorite—illite marks the  outer boundary of the advanced argillic zone. It occurs mainly in the  coarser, upper part of the dacite tuff. Quartz—pyrophyllite—kaolinite—dickite  (advanced argillic) is hosted mainly in |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  the lower part of the dacite tuff, although  on some sections at Hugo North it extends into strongly veined quartz  monzodiorite. The advanced argillic zone is typically buff or grey, and late  dickite on fractures is ubiquitous. Within the advanced argillic zone, a  massive quartz—alunite zone forms a pink—brown bedding-parallel lens. Topaz  is widespread as late alteration, controlled by structures cutting both the  advanced and intermediate argillic zone. Topaz appears to replace parts of  the quartz—alunite zone. In addition topaz may also occur as disseminations  with quartz—pyrophyllite—kaolinite alteration. Topaz-rich zones are mottled  buff or light brown and sometimes vuggy.  Hematite—siderite—illite—pyrophyllite—kaolinite—dickite (intermediate  argillic) alteration is an inward zonation from the advanced argillic zone,  and is commonly hosted by augite basalt but may also occur in dacite ash-flow  tuff. Hematite usually comprises fine specularite and may be derived from  early-stage magnetite or Fe-rich minerals such as biotite or chlorite.  Hematite—chlorite—illite—(biotite—magnetite) (chlorite) is transitional to  the intermediate argillic zone and is commonly hosted by augite basalt. It is  characterized by a greenish coloration, and relict hydrothermal magnetite,  either disseminated or in veins. Muscovite—illite (sericite) generally occurs  in the quartz monzodiorite intrusions and is a feature of the strongly  mineralized zone. Alteration decreases with depth in the quartz monzodiorite.  At the Hugo North Extension, the distribution of the alteration is strongly  lithologically controlled: dacite tuff typically shows strong advanced  argillic alteration, whereas basalt tends to be  chlorite—muscovite—hematite-altered with pyrophyllitic advanced argillic  alteration in its uppermost parts. Pockets of advanced argillic alteration  occur locally in the high-grade zone in the quartz monzodiorites. Heruga  Deposit The Heruga deposit is a copper, gold, molybdenum porphyry deposit  with overlapping zones of mineralization consisting of a molybdenum rich  carapace at higher elevation with increasing gold-rich mineralization at  depth. Copper-rich mineralization occurs at intermediate elevations and  overlaps both the molybdenum rich and gold rich zones. At a 100 ppm  molybdenum cut-off the molybdenum zone has a vertical extent of 300 to 400  metres. At a 0.3% copper cut-off the top of the copper zone roughly  correlates with the top of the molybdenum zone but extends to deeper depths,  for a total vertical extent in the order of 600 metres. At a 0.3 grams per  tonne cut-off the top of the gold zone is generally about 280 metres below  the top off the copper and molybdenum zones, creating a small overlap with  the molybdenum zone in areas, and a more significant overlap of the copper  zone. The bottom of the gold zone generally extends below the bottom of the  copper zone by about 200 metres, giving the gold zone a total vertical extent  of about 450 metres. The three zones together combine for a continuous zone  of mineralization with a vertical extent of close to 800 metres. Post mineral  north-north-east trending subvertical faults have offset mineralization into  two discrete structural blocks. Mineralization remains open down dip to the  east of the eastern block although trending towards lower grades in that  direction. The western block is assumed to terminate against a parallel  north-north-east trending structure, intersected at higher elevations in only  a few drillholes, and remains poorly defined at the depth of the deposit. The  high grade gold core in the western block remains poorly defined and requires  further definition. There is a rough spatial correlation between metal and  alteration zonation and the two may be genetically linked. Generally speaking  at deeper levels mineralization consists of chalcopyrite and pyrite in veins  and disseminated within biotite-chlorite-albite-actinolite altered basalt or  sericite-albite altered quartz monzodiorite. Selvages of salmon pink albite  alteration occur with chalcopyrite associated with higher grade  mineralization in both basalt and quartz monzodiorite. The higher levels of  the orebody are overprinted by strong quartz-sericite-tourmaline-pyrite  alteration where mineralization consists of disseminated and vein controlled  pyrite, chalcopyrite, and molybdenite. Gold may correlate with strong biotite  alteration at the deeper levels of the deposit. Gold to copper ratios (ppm:%)  are generally less than one throughout the upper molybdenum rich part of the  deposit, i.e. within the >100 ppm molybdenum shell. Below this, the gold  to copper ratios reflect an inverse relationship between gold and copper. The  gold to copper ratio increases rapidly with depth from one to greater that  10, reflecting decreasing copper grades and increasing gold grades. In the  deepest parts of the deposit chalcopyrite diminishes to only trace amounts,  and is replaced by pyrite as the |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  predominant sulfide. This would suggest that  gold does not correlate with chalcopyrite, but is perhaps associated with  pyrite at the deepest levels. East of the Bor Tolgoi Fault high gold:copper  values occur within and marginal to a quartz monzodiorite intrusion. However,  west of the Bor Tolgoi Fault, a small quartz monzodiorite dyke was  intersected in only one drillhole and a possible association is less  apparent. Mineralized veins have a much lower density at Heruga than in the  more northerly Southern Oyu and Hugo Dummett deposits. Some quartz veins show  a weak preferred orientation, but in general most occur as stockworks with no  visible preferred orientation. High grade copper and gold intersections show  a strong spatial association with contacts of the mineralized quartz  monzodiorite porphyry intrusion in the southern part of the deposit,  occurring both within the outer portion of the intrusion and in adjacent  enclosing basaltic country rock. Drilling Summary Approximately 237,300  metres of drilling has been completed on Lookout Hill from 2004 to December  2011 by OT LLC (Joint Venture Property) and by Entrée (mainly Shivee West).  Drilling has been predominantly core and on the joint venture property by  project operator OT LLC. The majority of the diamond drilling has been  exploration related and includes 117 holes totalling 93,448 metres on the  Hugo North Extension deposit and 42 holes totalling 53,765 metres on the  Heruga deposit. Diamond drilling has been the source of all geological and  grade data in support of the mineral resource estimates completed on the Hugo  North Extension and Heruga deposits. Shivee Tolgoi ML OT LLC has completed 7  years drilling on the Joint Venture Property with most drilling focused on  the Ulaan Khud (Airport North) and Hugo North Extension zones on the Shivee  Tolgoi ML. In addition, OT LLC has completed a significant amount of  condemnation and water exploration drilling (RC and core) in the vicinity of  the Hugo North Extension (76 holes totalling 14,450 metres). These holes have  been to assist in the determination of suitable sites for proposed tailings  and other infrastructure purposes and to find water sources for the proposed  mining operation at the adjacent Oyu Tolgoi Project. The condemnation and  water holes are not considered in detail in the Entrée JV Project Report.  Ivanhoe has also drilled early-stage exploration holes at the Ulaan Khud  prospect (17,401 metres in 36 core holes and 2,500 metres in 28 RC holes). Drillholes  on the Joint Venture Property are identified in the property database with  either the prefix “EG”, for holes located on the Shivee Tolgoi ML, or by  “EJ”, for holes located on the Javhlant ML. The prefix is followed by “D” for  diamond drillholes, “RC” for reverse circulation holes, and “RCD” for RC  holes with diamond tails. Geotechnical, water and condemnation drillholes do  not receive a special prefix, and are identified by the drilling method.  Exploration diamond drilling is contracted to Major Pontil Pty Ltd. (Major),  based out of Australia, who are using a variety of rigs, some with depth  capabilities close to 2,000 metres Rigs which have recently been, or are  currently on site, include UDR 1000, 1500 and 5000 and Major 50 drills. The  vast majority of core at the property has either been PQ-size (85 millimetre  nominal core diameter) or HQ-size (63.5 millimetre nominal core diameter),  with a small percentage using NQ-size (47.6 millimetre nominal core  diameter). Most holes are now collared with PQ core and are reduced to HQ at  depths of around 500 metres prior to entering the mineralized zone. A few  holes have continued to depths of about 1,300 metres using PQ diameter  equipment. The following descriptions are based on work completed at both the  Hugo North (on the adjacent Oyu Tolgoi Project) and Entrée’s Hugo North  Extension Deposits. Since both are one continuous zone of mineralization, the  supporting database was evaluated as a whole and one block model was  constructed to estimate the mineral resources. Later, the resources were cut  at the property boundary for reporting purposes; thus discussion of drilling  protocols that were in place during the exploration for all of the Hugo North  and Hugo North Extension Deposits is warranted. |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  In total, OT LLC drilled ten exploration  holes in 2010 and 2011, totalling 12,861 metres. Five of the holes explored  for the strike extension of the Hugo North Extension Deposit outside of the  area of the Mineral Resources. No significant results were returned from the  2010-2011 drill program on the Hugo North Extension. Details of previous  drilling are referenced in the Entrée JV Project Report. Only one  geotechnical hole, EGD144, was drilled in 2010 while in 2011 a number of  holes were drilled primarily to improve geotechnical inputs into supporting  the development of the block cave operation. A series of holes were completed  to the northwest of the cave to achieve this objective. All holes collar into  and intersect long intervals of Carboniferous hornblende biotite granodiorite  through to the North Boundary Fault, a major NE - trending fault within the area that forms the northern limit of  the block cave and marks the swing to a NE axis of mineralization. In the  wedge between the North Boundary Fault and the West Bat Fault are a series of  carboniferous basaltic tuffs and lavas cut by late barren granodiorite dykes.  To the east of the West Bat Fault, the holes intersect mineralised quartz  monzodiorite and augite basalts, the progenitor porphyry intrusion and Lower Devonian  host rocks to the principal economic mineralization at Hugo North. These  units are cut by lesser intervals of biotite granodiorite dykes, while late  narrow basaltic dykes are common. Both the North Boundary and West Bat Faults  are significant structures that will have many underground tunnels developed  through them and as such their early characterisation through drilling is  important. The West Bat Fault appears to have good rock quality (RQDs) and  only minor fracturing is noted over <five - ten metres in most intersections. The West Bat Fault is also  annealed and does not appear to represent an incompetent rock mass along much  of its strike length. By contrast, the North Boundary Fault shows  considerably more fracturing through a much wider fault zone, and further  work is required to determine the appropriate ground support regime in areas  of development around this feature. Javhlant ML To the end of 2011, over  60,000 metres in 49 holes had been completed on the Javhlant ML. All of the  drilling has been by core methods and was completed by OT LLC as part of the  JV Agreement. The majority of the drilling has been focused on delineating  the Heruga deposit where 42 holes have been drilled since 2007 for a total of  53,675 metres. In 2010 and 2011, OT LLC extended two holes in the Heruga  deposit and drilled seven new exploration holes, totalling 10,489.50 metres.  Six of the holes targeted the large IP anomalies approximately five  kilometres to the southwest of Heruga, and one hole tested an IP anomaly just  west of the deposit. Details of previous drilling are referenced in the  Entrée JV Project Report. Exploration diamond drilling at Heruga has been  completed by diamond coring methods, with drilling using PQ, HQ or NQ core  sizes. Drilling has not used triple tube to date. Most holes are collared in  PQ and reduced to HQ and in some instance NQ at depth. The general treatment  and handling of core for Heruga is as described in Section 11 of the Entrée  JV Project Report. Drillholes on the Joint Venture Property are identified in  the Property database with “EG” for holes located on the Shivee Tolgoi ML,  and “EJ”, for holes located on the Javhlant ML. The prefix is followed by “D”  for diamond drillholes, “RC” for reverse circulation holes, and “RCD” for RC  holes with diamond tails. Geotechnical, water and condemnation drillholes do  not receive a special prefix, and are identified by the drilling method. In  2010 and 2011, OT LLC extended two holes in the Heruga deposit and drilled  six new exploration holes, totalling 10,489.5 metres. Holes EJD0003A and 5A  were drilled to test for mineralization along the west side of Heruga. Holes  EJD0035/35A, 36, 37 and 38 targeted the large IP anomalies approximately 5  kilometres to the southwest of Heruga. Hole EJD0039 (collared 2011, completed  2012) was drilled to test an IP anomaly below outcropping Devonian rocks.  Hole EJD0040 (collared 2011, completed 2012) tested an IP anomaly immediately  west of the deposit. A 30-metre interval of mineralization was returned in  hole EJD0035 and hole EJD0038 was drilled to test the down-dip extension.  Exploration diamond drilling at Heruga has been completed by diamond coring  methods, with drilling using PQ, HQ or NQ core sizes. Drilling has not used  triple tube to date. Most holes are collared in PQ and reduced to HQ and in  some instance NQ at depth. |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  All exploration diamond drillholes at Heruga  are drilled approximately grid west, generally at about 70 degree  inclinations. However, the holes tend to deviate systematically towards north  at depth. The general orientation of drilling is considered to be  appropriate, but it is likely some drilling at high angles to the  “cross-section” (i.e. to the north or south) will be undertaken in future  campaigns to resolve a number of geological uncertainties (for example the  disposition of the mineralized quartz monzodiorite). QG independently checked  collar survey in the database versus surveyors’ records and conclude that the  data used is sound. Where possible, the core was oriented, initially using  BallMark© but more recently using the electronic ACE© core orientation system  (a fully electronic system based on accelerometers). QG consider that both of  these devices are appropriate means of orienting core, and note that the  frequency of core orientation on this project is appropriate. Core recovery  at Heruga is generally very good. Average recovery at Heruga to date is 97%  to 100%, with the relatively rare poorly recovered intervals invariably  correlated to shearing and faulting. Sampling, Analysis & Security Sample  preparation and analysis during exploration on the Lookout Hill property has  been completed by project manager OT LLC on the Joint Venture Property.  Varying sample preparation and analytical protocols have been in place  depending upon the sample type (stream sediment, soil, rock chip, drill core  or RC samples). All of the sample preparation within the Joint Venture  Property was carried out under the direction of OT LLC personnel or  contractors, except for early-stage sampling by Entrée, prior to the earn-in  and joint venture agreement being signed. All of the early-stage sampling  methods have been superseded by the drilling, which forms the basis of the  mineral resource estimates discussed in this report, and therefore the  early-stage sampling methods used on the joint venture property are not  discussed in the Entrée JV Project Report. Currently, split core samples are  prepared for analysis at the on - site sample  preparation facility operated by SGS Mongolia. The prepared pulps are then  shipped by air under the custody of OTLLC to Ulaanbaatar, where they are  assayed at a laboratory (lab) facility operated by SGS Mongolia. The quality  control samples comprise one duplicate split core sample, one uncrushed field  blank, a reject or pulp preparation duplicate, and one or two standard  reference material (SRM) samples (one less than 2% copper and one greater  than 2% copper if higher - grade  mineralization is present based on visual estimates). These were generally  small and not consistent and therefore considered acceptable. QG is of the  opinion that OT LLC’s current sample preparation, analytical and QA/QC  procedures and the sample security measures in place are strictly followed  and adhere to industry standards and that the drill samples are acceptable  for resource estimation purposes. All routine sample preparation and analyses  of the OT LLC samples are carried out by SGS Mongolia LLC (SGS Mongolia), who  operate an independent sample preparation facility at Oyu Tolgoi site and an  analytical laboratory in Ulaanbaatar. The preparation facility was installed  in 2002 as a dedicated facility for OT LLC’s Project during their exploration  and resource definition stages. This Oyu Tolgoi facility closed in November  2008, after completion of Heruga drilling, but reopened again in late 2011.  The SGS Mongolia analytical laboratory in Ulaanbaatar and the SGS laboratory  in Perth were recognized as having ISO 9001:2000 and ISO/IEC 17025  accreditation respectively (SGS 2006). The National Association of Testing  Authorities Australia has accredited Genalysis to operate in accordance with  ISO/IEC 17025 (1999), which includes the management requirements of ISO  9002:1994. All samples are routinely assayed by SGS Mongolia for gold  (FA/AAS), copper (AAS), and molybdenum (AAS). Following concerns related to  lower level precision of silver, arsenic and molybdenum assaying, OT LLC  decided to switch methods for copper, molybdenum, silver, arsenic and a suite  of other elements to ICP-OES/MS. OT LLC also conducts a Trace Elements  Composites (TEC) program, in addition to routine copper gold and molybdenum  analyses. Ten metre composites of equal weight are made up from routine  sample pulp reject material. The composites are subject to multi-element  analyses comprising a suite of 48 elements determined by inductively  coupled-plasma ICP-OES/MS methods after 4 acid digestions. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  SGS Mongolia reports the results digitally  to OT LLC via email and submits signed paper certificates. All hard copy  certificates are stored in a well-organized manner in a secure location on  site and copies are kept off site for security. A complete description of all  sampling and analysis procedures is set out in detail in the Entrée JV  Project Report. The Entrée JV Project Report concluded that: • OT LLC’s past  and current sample preparation, analytical and QA/QC procedures, as well as  the security measures in place, are adequate and appropriate. • Data for the  project is acceptable as inputs to resource estimation. • Security measures  in place for shipment of pulps to the SGS analytical laboratory in  Ulaanbaatar were briefly reviewed (including observing the dispatch of  samples) and are considered to be adequate and appropriate. • The SGS  Mongolia sample preparation facility on site is set up and operating in a  satisfactory manner. Mineral Resource and Mineral Reserve Estimates Mineral  Resources The following Table 1 summarizes the mineral resources for the Hugo  North Extension deposit and the Heruga deposit as reproduced in the Entrée JV  Project Report. The resource estimate for the Hugo North Extension deposit is  effective as of February 20, 2007 and is based on drilling completed to  November 1, 2006. The Heruga mineral resource estimate is effective as of  March 30, 2010. Scott Jackson, F.AusIMM. of Quantitative Geoscience Pty Ltd  in Perth (collectively “QG”) acts as QP for both the Hugo North Extension and  Heruga resource estimates. Table 1 — Entrée-OT LLC Joint Venture Mineral  Resources (0.6% CuEq cut-off), based on Technical Report March 2010 Deposit  Tonnage (Mt) Copper (%) Gold (g/t) CuEq (%) Contained Metal Copper (000 lb)  Gold (oz) CuEq (000 lb) Hugo North Extension Deposit Indicated Shivee Tolgoi  (Hugo North Extension) 117.0 1.80 0.61 2.19 4 640 000 2 290 000 5 650 000  Inferred Shivee Tolgoi (Hugo North Extension) 95.5 1.15 0.31 1.35 2 420 000  950 000 2 840 000 Heruga Deposit Inferred Javhlant (Heruga) 910.0 0.48 0.49  0.87 9 570 000 14 300 000 17 390 000 Notes: • Copper Equivalent (“CuEq”) has  been calculated using assumed metal prices of $1.35/lb for copper, $650/oz  for gold, and $10.50 for molybdenum. The equivalence formula was calculated  assuming that gold and molybdenum recovery was 91% and 72% of copper recovery  respectively. CuEq was calculated using the formula: CuEq% = Cu% + ((Au  g/t*18.98)+(Mo g/t*.01586))/29.76. |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  • Mo content in Heruga deposit is 141 ppm  and included in calculation of CuEq. • The contained copper, gold and  molybdenum in the tables have not been adjusted for metallurgical recovery. •  The 0.6% CuEq cut-off is highlighted as the base case resource for  underground bulk mining. • Mineral resources that are not mineral reserves do  not have demonstrated economic viability. • The Entrée-OT LLC Joint Venture  Property comprises the eastern portion of the Shivee Tolgoi ML and all of the  Javhlant ML. Title to both licences is held by Entrée. The Joint Venture  Property is managed by OT LLC. OT LLC will receive 80% of cash flows after  capital and operating costs for material originating below 560 metres, and  70% above this depth. Resources - Hugo North Extension Deposit The Hugo North  Extension deposit mineral resource estimate was last updated in March 2007  and remains unchanged in the Entree JV Project Report. This estimate is in  conformance with the CIM mineral resource and mineral reserve definitions  referred to in NI 43-101. The Hugo North Extension deposit within the Joint  Venture Property contains copper—gold porphyry-style mineralization  associated with quartz monzodiorite intrusions, concealed beneath a deformed  sequence of Upper Devonian and Lower Carboniferous sedimentary and volcanic  rocks. The copper sulphides in the high-grade zone at Hugo North Extension  comprises relatively coarse bornite impregnating quartz and disseminated in  wall rocks of varying composition, usually intergrown with subordinate  chalcopyrite. Bornite is dominant in the highest-grade parts of the deposit  (with these zones averaging around 3% to 5% copper) and is zoned outward to  chalcopyrite (to zones averaging around 2% copper for the high—grade  chalcopyrite dominant mineralization). Bornite and chalcopyrite are important  copper bearing minerals that contain approximately 63% and 35% copper  (respectively) in their crystal structure. High grade gold values within the  Hugo North Extension mineralized system are associated with the presence of  bornite. Geological models were constructed by OT LLC using lithological and  structural interpretations completed in late 2006. QG checked the  lithological and structural shapes for interpretational consistency on  section and plan, and found them to have been properly constructed. Resource  estimates were undertaken using MineSight® commercial mine planning software.  Industry accepted methods were used to create interpolation domains based on  mineralized geology, and grade estimation based on ordinary kriging. The  assays were composited into 5 metres down-hole composites; block sizes were  20 x 20 x 15 metres. The mineral resources were classified using logic  consistent with the CIM definitions required by NI 43—101. Inspection of the  model and drill hole data on plans and sections showed geological and grade  continuity. When taken together with spatial statistical evaluation and  investigation of confidence limits in predicting planned annual production,  blocks were assigned as indicated resources if they fell within the current  drill hole spacing, which is on 125 x 70 metre centres. Blocks were assigned  to the inferred resource category if they fell within 150 metres of a drill  hole composite. The base case copper equivalent cut-off grade assumptions for  the Hugo North Extension deposit were determined using operating cost  estimates from similar deposits. Resources - Heruga Deposit The Heruga  mineral resource estimate was updated in March 2010 and remained unchanged in  Entree JV Project Report. This estimate is in conformance with the CIM mineral  resource and mineral |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  reserve definitions referred to in NI  43-101. The Heruga deposit within the Joint Venture Property contains  copper—gold-molybdenum porphyry style mineralization hosted in Devonian  basalts and quartz monzodiorite intrusions, concealed beneath a deformed  sequence of Upper Devonian and Lower Carboniferous sedimentary and volcanic  rocks. The deposit is cut by several major brittle fault systems,  partitioning the deposit into discrete structural blocks. Internally, these  blocks appear relatively undeformed, and consist of southeast-dipping  volcanic and volcaniclastic sequences. The stratiform rocks are intruded by  quartz monzodiorite stocks and dykes that are probably broadly  contemporaneous with mineralization. The deposit is shallowest at the south  end (approximately 500 metres below surface) and plunges gently to the north.  QG reviewed OT LLC’s quality assurance/quality control procedures in 2008 and  2009 and found them to be followed and to exceed industry standards. The  database used to estimate the mineral resources for the Heruga deposit  consists of samples and geological information from 43 drill holes, including  daughter holes, totalling 58,276 metres. A close-off date of May 31, 2009 for  survey (collar and down hole) data was utilized for constructing the  geological domains. OT LLC created three dimensional shapes (wireframes) of  the major geological features of the Heruga deposit. To assist in the  estimation of grades in the model, OT LLC also manually created three dimensional  grade shells (wireframes) for each of the metals to be estimated.  Construction of the grade shells took into account prominent lithological and  structural features, in particular the four major sub-vertical  post-mineralisation faults. For copper, a single grade shell at a threshold  of 0.3% copper was used. For gold, wireframes were constructed at thresholds  of 0.3 grams per tonne (“g/t”) and 0.7 g/t. For molybdenum, a single shell at  a threshold of 100 ppm was constructed. These grade shells took into account  known gross geological controls in addition to broadly adhering to the above  mentioned thresholds. QG checked the structural, lithological and mineralized  shapes to ensure consistency in the interpretation on section and plan. The  wireframes were considered to be properly constructed and honoured the drill  data. Resource estimates were undertaken by OT LLC using Datamine® commercial  mine planning software. The methodology was very similar to that used to  estimate the Hugo North deposits. Interpolation domains were based on  mineralized geology, and grade estimation based on ordinary kriging. Bulk  density was interpolated using an inverse distance to the third power  methodology. The assays were composited into 5 m down-hole composites; block  sizes were 20 x 20 x 15 metres. As an independent check, QG also built a  model from scratch using the same wireframes and drill data used in the OT  LLC model. Gold, copper and molybdenum were interpolated using independently  generated variograms and search parameters. QG compared the two estimates and  consider that they agree well within acceptable limits thus adding additional  support to the estimate built by OT LLC. The mineral resources for Heruga  were classified using logic consistent with the CIM definitions required by  NI 43—101. Blocks within 150 metres of a drill hole were initially considered  to be inferred. A three dimensional wireframe was constructed inside of which  the nominal drill spacing was less than 150 metres. Mineral Reserves In June  2010, Ivanhoe released a technical report entitled “Oyu Tolgoi Integrated  Development Plan 2010” (“IDP Technical Report”), which represented the first  opportunity to publically update the previous Oyu Tolgoi Integrated  Development Plan 2005 (“IDP05”) for all aspects of the project within the  framework of a signed and effective Investment Agreement with the GOM. The  IDP Technical Report |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  |  included the first mineral reserve on the  Entrée-OT LLC Joint Venture Property. All resources and reserves identified  on the Joint Venture Property have been registered with the Mineral Resources  Authority of Mongolia in accordance with Mongolian law. In March 2012,  Ivanhoe released its IDOP Technical Report. The Ivanhoe IDOP Technical Report  updates the current path of development for the initial phases of the Oyu  Tolgoi group of deposits (Southern Oyu Pits and Hugo North Underground Lift  1, which includes the Hugo North Extension deposit). The work of the Ivanhoe  IDOP Technical Report meets the standards of US Industry Guide 7 requirements  for reporting reserves. The qualified persons responsible for the Ivanhoe  IDOP Technical Report are the same qualified persons responsible for  preparing the Entrée JV Project Report for Entree. Entrée JV Project Report  considers the conclusions and recommendations raised within the Ivanhoe IDOP  Technical Report in the context of Entrée’s operations. The Entrée JV Project  Report analyses a reserve case only (“IDOP Reserve Case”) and is based on a  prefeasibility quality level study complying with NI 43-101, although some  parts of the Oyu Tolgoi mining complex are further advanced and are at  feasibility level. The Entrée-OT LLC Joint Venture Property mineral reserve  is contained within the Hugo North Block Cave Lift 1 as defined within the  Ivanhoe IDOP Technical Report. The mine design work on Hugo North Lift 1  prepared for the IDP Technical Report was reviewed by OT LLC and accepted as  the basis for the underground mine planning in the IDOP Technical Report. The  author of the Entrée JV Project Report also reviewed the work extensively,  and it agreed with OT LLC’s conclusions and used the work as the basis for  reporting the 2012 Hugo North underground mineral reserve. The underground  mineral reserves for the Hugo North deposit, including the Entrée-OT LLC  Joint Venture’s Hugo North Extension deposit, were updated in the Entrée JV  Project Report. The mineral reserve tonnage on the Joint Venture Property  remained the same as those that were reported in the IDP Technical Report.  The probable reserve for Hugo North Extension totals 27 million tonnes (“Mt”)  grading 1.91% copper and 0.74 grams per tonne gold. Entrée JV Project Report  only considers mineral resources in the indicated category, and engineering  that has been carried out to a prefeasibility level or better to state the  underground mineral reserve. There is no measured resource in the Hugo North  mineral resource. Copper and gold grades on inferred resources within the  block cave shell were set to zero and such material was assumed to be  dilution. The block cave shell was defined by a $20/tonne net smelter return  (“NSR”); further mine planning will examine lower shut-offs. The Hugo North  mineral reserve is on both the OT LLC Oyu Tolgoi licence and the Entrée-OT  LLC Joint Venture portion of the Shivee Tolgoi ML. The portion of the Hugo  North mineral reserve attributable to the Entrée-OT LLC Joint Venture is  outlined in Table 2 below. Table 2 Entrée-OT LLC Joint Venture Mineral  Reserve, 29 March 2012 Classification Ore (Mt) NSR ($/t) Copper (%) Gold  (g/t) Copper (Billion lb) Gold (Moz) Proven - - - - - - Probable 27 79.40  1.91 0.74 1.0 0.5 Total Entrée-OT LLC Joint Venture 27 79.40 1.91 0.74 1.0  0.5 Notes: • Table shows only the part of the mineral reserve on the  Entrée-OT LLC Joint Venture portion of the Shivee Tolgoi ML. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | - 115 - • Metal  prices used for calculating the Hugo North underground NSR are copper  $1.80/lb, gold $750/oz, and silver $12.00/oz based on long term metal price  forecasts at the beginning of the mineral reserve work. The analysis  indicates that the mineral reserve is still valid at these metal prices. •  The NSR has been calculated with assumptions for smelter refining and  treatment charges, deductions and payment terms, concentrate transport,  metallurgical recoveries and royalties. • For the underground block cave all  material within the shell has been converted to mineral reserve; this  includes low grade indicated material and inferred material assigned zero  grade treated as dilution. • Only measured resources were used to report  proven reserves and only indicated resources were used to report probable  reserves. • The Entrée-OT LLC Joint Venture Property comprises the eastern  portion of the Shivee Tolgoi ML and all of the Javhlant ML. Title to both  licences is held by Entrée. The Joint Venture Property is managed by OT LLC.  OT LLC will receive 80% of cash flows after capital and operating costs for  material originating below 560 metres, and 70% above this depth. • The base  case financial analysis has been prepared using current long term metal price  estimates of copper $2.85/lb, gold $1200/oz, and silver $16.60/oz. Metal  prices are assumed to fall from current prices to the long term average over  five years. • The mineral reserves are not additive to the mineral resources.  A reconciliation of the IDP Technical Report and Entrée JV Project Report  mineral reserves is shown in Table 3. Calculation of the underground mineral  reserve by OT LLC resulted in a rounding up of the Hugo North Lift 1 tonnage  on the Oyu Tolgoi licence by 1 Mt to 411 Mt and on the Entrée-OT LLC Joint  Venture portion of the Shivee Tolgoi ML the same tonnage but increased  grades. Table 3 – Entrée JV Project Report and IDP Technical Report Probable  Mineral Reserve Comparison Classification Ore (Mt) NSR ($/t) Copper (%) Gold  (g/t) Copper (billion lb) Gold (Moz) IDP Technical Report 27 55.57 1.85 0.72  1.0 0.5 Entree JV Project Report 27 79.40 1.91 0.74 1.0 0.5 Difference 0  23.83 0.06 0.02 0.0 0.0 Notes: • IDP Technical Report mineral reserves have  the effective date of May 11, 2010. • Entrée JV Project Report mineral  reserves have the effective date of March 29, 2012. • Metal prices used for  calculating the Entrée JV Project Report Hugo North underground NSR are  copper $1.80/lb, gold $750/oz, and silver $12.00/oz based on long term metal  price forecasts at the beginning of the mineral reserve work. • Metal prices  used for calculating the IDP Technical Report Hugo North underground NSR are  copper $1.50/lb, gold $640/oz, and silver $10.50/oz based on long term metal  price forecasts at the beginning of the mineral reserve work. • The NSR has  been calculated with assumptions for smelter refining and treatment charges,  deductions and payment terms, concentrate transport, metallurgical recoveries  and royalties. • For the underground block cave, all material within the  shell has been converted to mineral reserve; this includes low grade  indicated material and inferred material assigned zero grade treated as  dilution. • Only measured resources were used to report proven reserves and  only indicated resources were used to report probable reserves. • The  Entrée-OT LLC Joint Venture Property comprises the eastern portion of the  Shivee Tolgoi ML and all of the Javhlant ML. Title to both licences is held  by Entrée. The Joint Venture Property is managed by OT LLC. OT LLC will  receive 80% of cash flows after capital and operating costs for material  originating below 560 m, and 70% above this depth. • The mineral reserves are  not additive to the mineral resources. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Mining  Operations The Oyu Tolgoi Project has a large mineral resource providing  management with flexibility in studying alternative paths for mine  development to match future economic conditions. Five deposits have been  identified in the mineral resource at Oyu Tolgoi. They are Southwest and  Central, Hugo South, Hugo North, and Heruga. Southwest and Central comprise  the Southern Oyu deposits. Hugo South, and Hugo North (including Hugo North  Extension) comprise the Hugo Dummett deposit. For mine planning purposes, the  nine open pit stages at Southern Oyu and one block cave at Hugo North have  been identified for the mineral reserve. In addition to these, long term mine  planning has identified potential for another block cave lift at Hugo North,  open pit or block caving at Hugo South and two block caving scenarios at  Heruga. The mine planning work in IDP05 and confirmed in IDOP suggests the  following relative ranking for overall return from each deposit, from highest  value to lowest: • Hugo North • Southwest • Central • Hugo South • Heruga The  IDOP Reserve Case assumes processing of 1.4 bt of ore over a 27 year period,  mined from the Southern Oyu open pit and the first lift in the Hugo North  underground block cave. The Entrée-OT LLC Joint Venture Mineral Reserve is 27  million tonnes within the 1.4 bt. The predominant source of ore at start up  is the Southern Oyu Open Pit. In parallel to this surface construction,  underground infrastructure and mine development is ongoing for the Hugo North  underground block cave deposit. Stockpiling allows the higher grade ore from  Hugo North to gradually displace the open pit ore as the underground  production ramps up to reach 85 ktpd. The ore is planned to be processed  through conventional crushing, grinding and flotation circuits. The  concentrate produced will be trucked to smelters in China. Oyu Tolgoi is a  remote greenfields project and therefore requires extensive infrastructure to  be constructed in addition to the concentrating facilities. The major initial  infrastructure elements include: • Water Borefields • Water Treatment •  Housing • Airstrip • Supporting Facilities • Railroads • Power Applicable  permits and taxes for the Joint Venture Project have been discussed above  under “Project Description and Location”. OT LLC has developed a concentrate  marketing plan and currently includes consideration of the following factors:  • Location value to customer compared to imported material landed at Chinese  ports • Precious metals recovery and payment • Length of contract •  Percentage of off-take to smelters versus traders • Percentage of tonnage on  contract versus spot • Percentage of feed for any one smelter • Number of  smelters for a given scale of operation |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | • Management of  concentrate quality and volume during commissioning and ramp-up • Alternate  off-shore logistics and costs • Delivery point and terms • Packaging A  detailed timeline has been developed for marketing, logistics, and  contract-to-cash functions. Finalization of the letters of intents and  execution of contracts is planned to be completed in the near future. Non-binding  memoranda of understanding for concentrate sales to two large Chinese  smelters were agreed to during the third quarter of 2011. Contracts are  expected to be finalized with these smelters over the coming months. In  addition, non-binding agreements on principal sales terms have been reached  with two international trading companies; conversion of these agreements to  binding contracts is under discussion. Most of the concentrate initially  produced at Oyu Tolgoi is expected to be delivered to customers in China. OT  LLC’s sales and marketing will be supported by Rio Tinto Copper marketing,  led by its Chief Marketing Officer. The marketing team will oversee and  execute all sales and marketing activities on behalf of OT LLC. Environmental  matters have been discussed above under “Project Description and Location”.  Entrée have advised that under the terms of the Entrée-OT LLC Joint Venture,  OT LLC is responsible for 80% of all costs incurred on the Joint Venture  Property, including capital expenditures, and Entrée for the remaining 20%.  Also under the terms of the Entrée-OT LLC Joint Venture, Entrée may be  carried through to production, at its election, by debt financing from OT LLC  with interest accruing at OT LLC’s actual cost of capital or prime +2%, whichever  is less, at the date of the advance. Debt repayment may be made in whole or  in part from (and only from) 90% of monthly available cash flow arising from  sale of Entrée’s share of products. Such amounts will be applied first to  payment of accrued interest and then to repayment of principal. Available  cash flow means all net proceeds of sale of Entrée’s share of products in a  month less Entrée’s share of costs of operations for the month. Therefore,  Entrée will not be obliged to contribute cash to the Entrée-OT LLC Joint  Venture for its portion of operating and capital expenditures and will  receive 10% of its share of cash flow from the Entrée-OT LLC Joint Venture  until such time as any loans outstanding are repaid and 100% thereafter. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | IDOP Reserve Case  A summary of the Entrée – OT LLC Joint Venture Property production and  financial results for the IDOP Reserve Case is shown below. The after tax Net  Present Value (“NPV”) at 8% discount rate attributable to Entrée for the IDOP  Reserve Case is $129 million. Table 4 - IDOP Reserve Case Summary Production  and Financial Results Description Units IDOP Reserve Case Inventory Mineral  Reserve Production Rate (after expansion) Mt/a 58 Total Processed Bt 1.4  Joint Venture Property Results Processed Mt 27.1 NSR $/t 79.40 Cu Grade %  1.91 Au Grade g/t 0.74 Copper Recovered billion lb 1.0 Gold Recovered Moz 0.5  NPV (8%) After Tax (Entrée) $M 129 Notes: • Metal prices used for calculating  the Hugo North underground NSR are copper $1.80/lb, gold $750/oz, and silver  $12.00/oz based on long term metal price forecasts at the beginning of the  mineral reserve work. The analysis indicates that the mineral reserve is  still valid at these metal prices. • The NSR has been calculated with  assumptions for smelter refining and treatment charges, deductions and  payment terms, concentrate transport, metallurgical recoveries and royalties.  • For the underground block cave, all material within the shell has been  converted to mineral reserve; this includes low grade indicated material and  inferred material assigned zero grade treated as dilution. • Only measured  resources were used to report proven reserves and only indicated resources  were used to report probable reserves. • The base case financial analysis has  been prepared using current long term metal price estimates of copper  $2.85/lb, gold $1200/oz, and silver $16.60/oz. Metal prices are assumed to  fall from current prices to the long term average over five years. • The  Entrée-OT LLC Joint Venture Property comprises the eastern portion of the  Shivee Tolgoi ML and all of the Javhlant ML. Title to both licences is held  by Entrée. The Joint Venture Property is managed by OT LLC. OT LLC will  receive 80% of cash flows after capital and operating costs for material  originating below 560 m, and 70% above this depth. • The mineral reserves are  not additive to the mineral resources. The mineral reserve reported for NI  43-101 is also applicable for reporting the ore reserve under the SEC  Industry Guide 7. The metal prices for the previous 3 years, their average  and the metal prices used for the mineral reserve estimates are shown below.  The only metal price that is higher than the three year average is the  forecast silver price. The three year average silver price is $13.69 per  ounce (“/oz”) silver and the forecast price is $16.60/oz silver. The  sensitivity analysis using the 3 year averages shows the Entrée after tax NPV  (at an 8% discount) of $150 million compared to the base case $129 million.  The results are improved compared to the base case financial analysis, as the  averages for the copper and gold prices are higher. Table 5 - Metal Price  Summary Year Ended Cu ($/lb) Au ($/oz) Ag ($/oz) 2009 2.34 972 12.74 |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Year Ended Cu  ($/lb) Au ($/oz) Ag ($/oz) 2010 3.42 1,225 15.44 2011 4.00 1,572 12.89  Average 3.25 1,256 13.69 Reserve NSR 1.80 750 12.00 Base Case Financial  Analysis 2.85 1,200 16.60 Exploration and Development Exploration and  development of the Joint Venture Property is under the control of manager OT  LLC. The future work recommendations in the Ivanhoe IDOP Report, although  focused on the Oyu Tolgoi licence, will be of benefit to Entrée as they will  include examination of the Joint Venture Property. The next phase in the  project planning process by OT LLC on the Oyu Togoi mining complex is the  preparation of a Detailed Integrated Development and Operating Plan (“DIDOP”)  that builds on OTIDOP. The DIDOP will integrate a number of detailed capital  expansion studies into an overall project report. The key additional work to  be assessed in DIDOP includes: Phase 2 project expansion, power supply, water  permitting, concentrate marketing, the underground feasibility study and  further work on mine closure and reclamation plans. A detailed execution plan  will be developed for Phase 2 that includes lessons learned and incorporates  tools and advancements from the Phase 1 project execution. OT LLC plans to  undertake engineering studies of the concentrator expansion. The focus of the  study will be the addition of a third grinding line and other requirements  for the Phase 2 plant production. As mentioned earlier, OT LLC is also  currently considering a range of options to ensure a reliable and efficient  power supply after Year 4 and it is expected that the timing of the  construction of a proposed power station would be finalised in the  preparation of DIDOP. Also, OT LLC’s strategy is to obtain approval for  increases to the currently approved water reserve ahead of any mine expansion  plans. The objective of the study will be to assess the impact of the concentrator  expansion on water demand and to determine the need for obtaining GOM  approval for any substantial increase in the approved water demand from the  Gunii Hooloi aquifer. As part of DIDOP, the underground study work is being  brought to feasibility study level, the scope of work includes all activities  from extraction to the shaft collars and will optimise the development and  production of Hugo North Lift 1. OT LLC plans to finalise DIDOP in late 2012.  OT LLC has reported that there could be a delay in production due to changes  in ventilation design for the Hugo North Lift 1 block cave. Initial analysis  by OT LLC suggests that the underground production could be delayed by around  twelve months. A delay in production is less significant to Entrée than to OT  LLC. As most of the ore in the Entrée-OT LLC Joint Venture mineral reserve is  scheduled for production between years 10 and 18, the impact of a one year  delay on the return to Entrée would be small. A one year delay would reduce  the NPV at 8% discount rate by $10 million. In addition possible scope  changes have been indicated including: • Additional development and  excavation expenditures • The addition of a shaft No. 5 • An additional crew  underground • Increased operating cost The preliminary mine closure and  reclamation plan includes provisions to ensure that adverse socio-economic  impacts of mine closure are minimized and positive impacts are maximized. To  this end, OT LLC has planned that allowances will be incorporated into the  annual mine operations budget starting 10 years before mine closure to  address the costs of: • Lost employment by the mine workforce |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | • Adverse  effects on supply chain businesses and downstream businesses, affected  communities, public services, and infrastructure • Promoting ongoing  sustainability among affected stakeholders and communities The details of  additional socio-economic aspects of a conceptual mine closure plan have not  yet been fully developed and are the subject of work to be done in the near  future. As part of the preparation of DIDOP, work is continuing on further  defining the ongoing infrastructure needs for the Oyu Tolgoi project. OT LLC  has advised that they expect future additions to the project scope which may  include: • Operations camp expansion • Border facilities upgrade •  Concentrate bagging plant upgrade • Power substation expansions • Central  maintenance complex • Central control room • Borefield expansion • Operations  warehouse expansion • Core storage warehouse There may be additions to scope  beyond these items and all items and updated cost estimates will be included  in DIDOP. Ivanhoe’s reports to date have presented two complementary further  development cases: • Reserve Case, based strictly on proven and probable  mineral reserves for initial phases of the Oyu Tolgoi group of deposits  (Southern Oyu Pits and Hugo North Underground Lift 1, which includes the Hugo  North Extension deposit) • Life of Mine (Sensitivity) Case, which considers  the potential economic viability of additional deposits and mines at Oyu  Tolgoi and adds a large base of inferred resources to the Reserve Case.  Development of the additional resources (the second lift of Hugo North, Hugo  South and Heruga) will require separate decisions in the future based on then  prevailing conditions and the development experience obtained from developing  and operating the initial phases of the Oyu Tolgoi group of deposits. The  Life of Mine (Sensitivity) Case considers the potential economic viability of  developing the second lift of Hugo North, Hugo South and the Heruga deposit.  Accordingly, the Life of Mine (Sensitivity) Case is effectively a PEA. Under  NI 43-101, a PEA that includes inferred mineral resources may be disclosed  after a feasibility study or pre-feasibility study that establishes mineral  reserves has been completed, provided the disclosure describes the impact of  the PEA on the results of the feasibility study or pre-feasibility study on  the project. The development and initial production periods of both the  Reserve Case and the Life of Mine (Sensitivity) Case are common. The Life of  Mine (Sensitivity) Case is an extension of the Reserve Case that does not  restrict the execution of the Reserve Case. Each additional part of the Life  of Mine (Sensitivity) Case would be subject to further study and approval by  OT LLC before a commitment to capital expenditure and development for each  additional mine. Therefore, the Life of Mine (Sensitivity) Case has a  positive not a negative impact on the Reserve Case. Insofar as the Life of  Mine (Sensitivity) Case includes an economic analysis that is based, in part,  on inferred mineral resources, the Life of Mine (Sensitivity) Case does not  have as high a level of certainty as the reserve case. Inferred mineral  resources are considered too speculative geologically to have the economic  considerations applied to them that would allow them to be categorized as  mineral reserves, and there is no certainty that the Life of Mine  (Sensitivity) Case will be realized. |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | The Reserve  Case in the IDP Technical Report has been updated by the IDOP Reserve Case  and is planned to be updated again by DIDOP. The Life of Mine (Sensitivity)  Case is also planned to be updated. The Life of Mine (Sensitivity) Case is  significant to Entrée because it presents the possible development path that  could result in a substantial increase in the mining inventory from  additional mines that might be recovered for the Entrée-OT LLC Joint Venture.  The mineral resources in Heruga and Hugo North Lift 2 are substantially more  than the current Entrée-OT LLC Joint Venture mineral reserve. Please refer to  the Entrée JV Project Report for more details. Ivanhoe’s IDP Technical Report  which describes the Life of Mine (Sensitivity) Case can be found on www.sedar.com.  Lookout Hill Property Milestones 2012 Exploration During 2012, six holes  totalling 10,237 metres were completed on the Javhlant licence. Two of the  holes (EJD0039 and 0040) tested geophysical targets to the west of Heruga and  intersected weak to no mineralization. Two additional holes (EJD0034A and  0045) tested the east side of Heruga. Hole 0045 did not reach the planned  target due to unexpected faults while 0034A, a daughter hole beneath EJD0034,  intersected 590 metres of 0.33% copper, 0.70 g/t gold and 56 ppm molybdenum.  The fifth hole tested an induced polarization-gravity  ("IP-gravity") target, located two kilometres to the east of  Heruga, and did not return any significant results. A sixth hole (EJD0043)  tested the south extension of the Heruga Southwest zone but was terminated  after entering barren Carboniferous granodiorite. Diamond drilling of a  Cretaceous covered area above an IP-gravity target, located 7 kilometres  north of Hugo North Extension and to the west of Ulaan Khud, commenced June  25 and was completed July 31, 2012. Fifty-two shallow holes totalling 3327  metres were completed on 165 to 330 metre spacing. Results will be used for  geological modeling and for locating subsequent diamond drill holes. The best  assay result from this shallow drilling was 11.1 metres averaging 0.15%  copper with 0.26 g/t gold (from 52 metres depth). In Q4 2012, three  additional diamond drill holes totalling 3,322 metres were completed on the  Shivee Tolgoi ML with negative results. Recent activities at Lookout Hill  included: • Overall phase-one construction at Oyu Tolgoi reached 99%  completion at the end of 2012. Total capital invested in the construction of  the first phase of the Oyu Tolgoi Project to the end of 2012 was  approximately $6.0 billion. Among the major updates for H2 2012 (current to  January 31, 2012) are: • In early November 2012, Oyu Tolgoi signed a binding  power purchase agreement with the Inner Mongolia Power Corporation to supply  power to Oyu Tolgoi. • A total of 5.2 million tonnes of ore from the Oyu  Tolgoi mine was stockpiled and 56,000 tonnes of ore were sent through the  primary crusher to the coarse ore storage building during Q3 2012. • The  concentrator was commissioned in late December 2012 with first ore through  the concentrator in early January 2013 and first copper concentrate produced  in late January 2013. • Underground lateral development at the Hugo North  Deposit was restarted during Q3 2012 as planned following the completion of  the hoisting equipment upgrade at Shaft #1. • Construction of Shaft #2 at the  Hugo North Deposit is progressing well with the headframe reaching its final  height of 96 metres in Q2 2012. The headframe and ancillary buildings were  99% complete at the end of Q3 2012. Shaft-sinking activities began in December  2011, and the depth of the shaft is now approximately 720 metres below  surface. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | • Construction  of off-site facilities and infrastructure reached 92% completion at the end  of Q3 2012 and was slightly behind schedule. This was due to delays during the  building of the Oyu Tolgoi-Gashuun Sukhait road to the Mongolia-China border  and the Khanbumbat permanent airport, near the Oyu Tolgoi mine. Airport  construction was completed in Q4 2012. Long-term sales contracts have been  signed for 75% of the Oyu Tolgoi mine's concentrate production in the first  three years, while 50% of concentrate production is contracted for ten years  (subject to renewals). In addition to the signed contracts, in early November  2012, Oyu Tolgoi committed in principle, subject to the conclusion of  detailed sales contracts, up to 25% of concentrate available for export would  be made available at international terms to smelters in Inner Mongolia for  the first ten years. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | DIVIDENDS The  Company currently intends to retain future earnings, if any, for use in its  business and does not anticipate paying dividends on the Common Shares in the  foreseeable future. Any determination to pay any future dividends will remain  at the discretion of the Company’s Board of Directors and will be made taking  into account its financial condition and other factors deemed relevant by the  board. The Company has not paid any dividends since its incorporation.  DESCRIPTION OF CAPITAL STRUCTURE The authorized share capital of the Company  consists of an unlimited number of Common Shares. As of February 18, 2013, 87,714,557  Common Shares are issued and outstanding. Holders of Common Shares are  entitled to receive notice of any meetings of shareholders of the Company, to  attend and to cast one vote per Common Share at all such meetings. Holders of  Common Shares do not have cumulative voting rights with respect to the  election of directors and, accordingly, holders of a majority of the Common  Shares entitled to vote in any election of directors may elect all directors  standing for election. Holders of Common Shares are entitled to receive on a  pro rata basis such dividends, if any, as and when declared by the Company’s  board of directors at its discretion from funds legally available therefor  and upon the liquidation, dissolution or winding up of the Company are  entitled to receive on a pro rata basis the net assets of the Company after  payment of debts and other liabilities, in each case subject to the rights,  privileges, restrictions and conditions attaching to any other series or  class of shares ranking senior in priority to or on a pro rata basis with the  holders of Common Shares with respect to dividends or liquidation. The Common  Shares do not carry any pre-emptive, subscription, redemption or conversion  rights, nor do they contain any sinking or purchase fund provisions. TRADING  PRICE AND VOLUME The Common Shares are listed and posted for trading on the  TSX under the symbol “SSL” and on the NYSE MKT under the symbol “SAND”. The  2009 Warrants, the 2010 Warrants and the 2012 Warrants are all listed and  posted for trading on the TSX under the symbols “SSL.WT”, “SSL.WT.A” and  “SSL.WT.B”, respectively. None of these warrants are listed for trading on  the NYSE MKT. Prior to November 23, 2012, the Common Shares, the 2009  Warrants, the 2010 Warrants and the 2012 Warrants all traded on the TSXV.  Common Shares The following table sets forth information relating to the  trading of the Common Shares on the TSXV for the period January 1, 2012 to  and including November 22, 2012 and then on the TSX for the balance of the  most recently completed financial year. Month High (C$) Low (C$) Volume  January 2012 1.45 1.19 20,004,720 February 2012 1.76 1.41 29,357,085 March  2012 2.02 1.49 76,204,888 April 2012 1.92 1.61 23,003,010 May 2012 (1) 1.90  1.60 7,805,777 - 125 - |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Month High (C$)  Low (C$) Volume May 2012 (2) 8.95 6.95 4,521,366 June 2012 9.45 7.85  3,334,555 July 2012 9.35 8.25 2,316,609 August 2012 10.88 8.82 9,203,964  September 2012 13.02 9.60 13,037,321 October 2012 14.99 12.91 10,823,286  November 2012 14.75 10.68 9,659,633 December 2012 12.44 10.77 4,764,258 (1)  From May 1 to May 8, 2012. Effective May 9, 2012, the Company consolidated  the Common Shares on a 5:1 basis. (2) From May 9 to May 30, 2012. Effective  May 9, 2012, the Company consolidated the Common Shares on a 5:1 basis. The  price of the Common Shares as quoted by the TSX at the close of business on  December 31, 2012 was C$11.70 and on February 18, 2013 was C$10.95. Warrants  SSL.WT The following table sets forth information relating to the trading of  the 2009 Warrants on the TSXV for the period January 1, 2012 to and including  November 22, 2012 and then on the TSX for the balance of the most recently  completed financial year. Month High (C$) Low (C$) Volume January 2012 0.87  0.64 5,405,358 February 2012 1.14 0.84 6,663,818 March 2012 1.43 0.92  7,343,057 April 2012 1.32 1.00 2,865,949 May 2012 1.31 0.91 2,809,390 June  2012 1.28 0.96 2,107,013 July 2012 1.27 1.05 1,120,900 August 2012 1.57 0.95  3,591,539 September 2012 2.02 1.35 6,496,432 October 2012 2.40 1.97 6,770,050  November 2012 2.34 1.50 3,039,072 December 2012 1.89 1.57 1,126,086 The price  of the 2009 Warrants as quoted by the TSX at the close of business on  December 31, 2012 was C$1.75 and on February 18, 2013 was C$1.63. SSL.WT.A  The following table sets forth information relating to the trading of the  2010 Warrants on the TSXV for the period January 1, 2012 to and including  November 22, 2012 and then on the TSX for the balance of the most recently  completed financial year. Month High (C$) Low (C$) Volume January 2012 0.74  0.55 284,197 February 2012 0.99 0.70 522,724 March 2012 1.09 0.81 1,645,529  April 2012 1.05 0.71 1,865,784 May 2012 0.98 0.65 2,786,726 June 2012 0.99  0.69 704,257 - 126 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Month High (C$)  Low (C$) Volume July 2012 0.96 0.81 506,143 August 2012 1.31 0.88 1,767,627  September 2012 1.89 1.12 1,332,434 October 2012 2.14 1.71 1,402,789 November  2012 2.13 1.53 680,022 December 2012 1.75 1.38 409,647 The price of the 2010  Warrants as quoted by the TSX at the close of business on December 31, 2012  was C$1.57 and on February 18, 2013 was C$1.31. SSL.WT.B The following table  sets forth information relating to the trading of the 2012 Warrants on the  TSXV for the period September 10, 2012 (the date the 2012 Warrants commenced  trading on the TSXV) up to and including November 22, 2012 and then on the  TSX for the balance of the most recently completed financial year. Month High  (C$) Low (C$) Volume September 2012 4.45 2.17 2,223,199 October 2012 5.89  4.06 1,163,028 November 2012 5.51 3.48 560,730 December 2012 4.05 3.71  228,462 The price of the 2012 Warrants as quoted by the TSX at the close of  business on December 31, 2012 was C$3.71 and on February 18, 2013 was C$3.36.  - 127 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | DIRECTORS AND  OFFICERS The following table sets forth the name, province/state and country  of residence, position held with the Company and principal occupation of each  person who is a director and/or an executive officer of the Company.  Name, Province/State and Country of Residence  Position(s) with the Company Principal Occupation Nolan Watson British  Columbia, Canada President, Chief Executive Officer and Director since  September 2008; Chairman of the Board since January 2013 Chairman of the  Board, President and Chief Executive Officer of the Company and Sandstorm  Metals & Energy Ltd. David Awram British Columbia, Canada Director since  March 2007; Executive Vice President from July 2009 to January 2013; Senior  Executive Vice President since January 2013 Senior Executive Vice President  of the Company and Sandstorm Metals & Energy Ltd. John P.A. Budreski (1)  Ontario, Canada Director since June 2009 President and Chief Executive  Officer of Morien Resources Corp. David E. De Witt (1) British Columbia,  Canada Director since April 2008; Lead Independent Director since January  2013 Independent Businessman; Chairman of Pathway Capital Ltd. (“Pathway”)  Andrew T. Swarthout (1) Arizona, United States Director since March 2009  Chief Executive Officer and Director of Bear Creek Mining Corporation;  Director of Rio Cristal Resources Corporation Erfan Kazemi British Columbia,  Canada Chief Financial Officer since August 2011 Chief Financial Officer of  the Company and Sandstorm Metals & Energy Ltd. (1) Member of the Audit  Committee. Each director’s term of office expires at the next annual meeting  of shareholders of the Company or when his successor is duly elected or  appointed, unless his term ends earlier in accordance with the articles or  by-laws of the Company, he resigns from office or he becomes disqualified to  act as a director of the Company. The principal occupations, businesses or  employments of each of the Company’s directors and executive officers within  the past five years are disclosed in the brief biographies set forth below.  Nolan Watson – Chairman of the Board, President, Chief Executive Officer and  Director. Mr. Watson has been the President and Chief Executive Officer of  the Company since September 2008 and its Chairman since January 2013. Since  May 13, 2010, Mr. Watson has been President and Chief Executive Officer of  Sandstorm Metals and its Chairman since January 2013. From July 2008 to  September 2008, Mr. Watson was an independent businessman. From April 2006 to  July 2008, Mr. Watson was the Chief Financial Officer of Silver Wheaton Corp.  (“Silver Wheaton”). Mr. Watson was the Corporate Controller of Silver Wheaton  from 2005 to 2006. From 2003 to 2004, Mr. Watson was a financial advisor and  merger and acquisition specialist with Deloitte & Touche LLP. Mr. Watson  is a Chartered Financial Analyst Charterholder, a Chartered Accountant  (Valedictorian of the Institute of Chartered Accountants of British  Columbia), and holds a Bachelor of Commerce degree (with honours) from the  University of British Columbia. |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | David Awram –  Senior Executive Vice President and Director. Mr. Awram was Executive Vice  President of the Company from July 2009 to January 2013 and has been its  Senior Executive Vice President since January 2013. Mr. Awram has been  Executive Vice President of Sandstorm Metals since January 2010 and then its  Senior Executive Vice President since January 2013. From July 2008 to July  2009, Mr. Awram was an independent businessman. From May 2005 to July 2008,  Mr. Awram was the Director of Investor Relations for Silver Wheaton. Prior to  May 2005, he was Manager, Investor Relations with Diamond Fields  International Ltd. from April 2004 to April 2005. He holds a Bachelor of  Science degree (Honours) in Geology from the University of British Columbia  in 1996. John P.A. Budreski – Director. Mr. Budreski has been the President  and Chief Executive Officer of Morien Resources Corp. since November 2012.  Previously, he was Managing Director and a Vice Chairman with Cormark  Securities Inc. from 2009 to 2012. He was the President and Chief Executive  Officer of Orion Securities Inc. from 2005 to 2007. Prior to this, he filled  the roles of a Managing Director of Equity Capital Markets and Head of  Investment Banking for Scotia Capital Inc. from March 1998 to February 2005  after starting out as a Managing Director of US Institutional Equity Group  for Scotia Capital. He also held senior management roles in investment  banking and equity sales and trading for RBC Dominion Securities and worked  for Toronto Dominion Bank. He holds an MBA from the University of Calgary and  a Bachelor of Engineering from TUNS/Dalhousie. David E. De Witt – Lead  Independent Director. Since October 2004, Mr. De Witt has been a co-founder  and Chairman of Pathway, a Vancouver-based private venture capital company.  Mr. De Witt graduated with a BComm/LLB from the University of British  Columbia in 1978 and practiced corporate, securities and mining law until his  retirement from the practice of law in January 1997. He currently holds  directorships in a number of public companies involved in the natural  resource field and has experience in resource projects located in Latin  America, North America and Asia. Andrew T. Swarthout – Director. Mr.  Swarthout has been the Chief Executive Officer and a director of Bear Creek  Mining Corporation since 2003. He was also its President until February 2011.  Mr. Swarthout has also been a Director of Rio Cristal Resources Corporation  since December 2006 and a Director of Esperanza Resources Corp. since May  2012. Formerly he was an officer and member of the management committee of  Southern Peru Copper Corporation from 1995 to 2000 where he participated in  decision making during a dynamic period of corporate expansions, financing  and project development. Mr. Swarthout served as a member of the National  Mining Society of Peru’s Committee for the Promotion of Private Investment,  where he initiated favourable environmental and taxation policies to promote  foreign mining investment in Peru. Mr. Swarthout graduated in 1974 from the  University of Arizona with a Bachelor of Geosciences degree and he is a  Professional Geologist. Erfan Kazemi – Chief Financial Officer. Since August  2011, Mr. Kazemi has been the Chief Financial Officer of the Company and of  Sandstorm Metals. Formerly, Mr. Kazemi was a Senior Manager at PricewaterhouseCoopers  LLP where he worked commencing in January 2005 (as an Associate) until June  2011 and where he managed the audits of billion dollar multinational entities  and co-authored several publications. In the community, Mr. Kazemi serves as  Vice-Chair of the Vancouver Public Library Board and he is a former member of  the University of British Columbia Board of Governors. Mr. Kazemi is a  Chartered Accountant and also holds a Bachelor’s of Science (Mathematics)  from the University of British Columbia. As at February 18, 2013, the  directors and executive officers of Sandstorm Gold, as a group, beneficially  owned, directly and indirectly, or exercised control or direction over,  2,478,000 Common Shares, representing approximately 2.8% of the total number  of Common Shares outstanding before giving effect to the exercise of options,  restricted share rights or warrants to purchase Common Shares held by such  directors and executive officers. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

|  | Cease Trade  Orders, Bankruptcies, Penalties or Sanctions No director or executive officer  of the Company, is, or within ten years prior to the date of this AIF has  been, a director, chief executive officer or chief financial officer of any  company (including Sandstorm Gold) that, (i) was subject to a cease trade  order, an order similar to a cease trade order or an order that denied the  relevant company access to any exemption under securities legislation, that  was in effect for a period of more than 30 consecutive days, that was issued  while the director or executive officer was acting in the capacity as  director, chief executive officer or chief financial officer; or (ii) was  subject to a cease trade order, an order similar to a cease trade order or an  order that denied the relevant company access to any exemption under  securities legislation, that was in effect for a period of more than 30  consecutive days, that was issued after the director or executive officer  ceased to be a director, chief executive officer or chief financial officer  and which resulted from an event that occurred while that person was acting  in the capacity as director, chief executive officer or chief financial  officer. No director or executive officer of the Company, or a shareholder holding  a sufficient number of securities of the Company to affect materially control  of the Company, (i) is, or within ten years prior to the date of this AIF has  been, a director or executive officer of any company (including Sandstorm  Gold) that, while that person was acting in that capacity, or within a year  of that person ceasing to act in that capacity, became bankrupt, made a  proposal under any legislation relating to bankruptcy or insolvency or was  subject to or instituted any proceedings, arrangement or compromise with  creditors or had a receiver, receiver manager or trustee appointed to hold  its assets, other than John P. A. Budreski, who was a director of EarthFirst  Canada Inc., a company engaged in the development of wind power and related  generated facilities, when it obtained creditor protection under the  Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) on November 4,  2008. The CCAA process has now been completed and Earth First Canada Inc. has  been amalgamated with another company and no longer exists as a separate  entity; or (ii) has, within ten years prior to the date hereof, become  bankrupt, made a proposal under any legislation relating to bankruptcy or  insolvency, or become subject to or instituted any proceedings, arrangement or  compromise with creditors, or had a receiver, receiver manager or trustee  appointed to hold the assets of the director, executive officer or  shareholder. No director or executive officer of the Company, or a  shareholder holding a sufficient number of securities of the Company to  affect materially the control of the Company, has been subject to (i) any  penalties or sanctions imposed by a court relating to securities legislation  or by a securities regulatory authority or has entered into a settlement  agreement with a securities regulatory authority; or (ii) any other penalties  or sanctions imposed by a court or regulatory body that would likely be  considered important to a reasonable investor in making an investment  decision. Conflicts of Interest To the best of Sandstorm Gold’s knowledge,  and other than as disclosed in this AIF, there are no known existing or  potential material conflicts of interest between Sandstorm Gold and any  director or officer of Sandstorm Gold, except that certain of the directors  and officers serve as directors and officers of other public companies and  therefore it is possible that a conflict may arise between their duties as a  director or officer of Sandstorm Gold and their duties as a director or  officer of such other companies. See “Description of the Business - Risk  Factors - Risks Relating to the Company - Conflicts of Interest”. - 130 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | INTEREST OF  MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS Other than as described below,  no directors, executive officers or principal shareholders of Sandstorm Gold  or any associate or affiliate of the foregoing have had any material  interest, direct or indirect, in any transactions in which Sandstorm Gold has  participated since January 1, 2010, which has materially affected or is  reasonably expected to materially affect Sandstorm Gold. TRANSFER AGENT AND  REGISTRAR The transfer agent and registrar for the Common Shares is  Computershare Investor Services Inc. at its principal offices in Vancouver,  British Columbia and Toronto, Ontario. The co-transfer agent and registrar  for the Common Shares in the United States of America is Computershare Trust  Company, N.A. in Golden, Colorado. The warrant agent for the 2009 Warrants,  the 2010 Warrants and the 2012 Warrants is Computershare Trust Company of Canada  at its principal offices in Vancouver, British Columbia and Toronto, Ontario.  MATERIAL CONTRACTS The only material contracts entered into by the Company  within the financial period ended December 31, 2012 or since such time or  before such time that are still in effect, other than in the ordinary course  of business, are as follows: 1. The Aurizona Gold Stream dated May 15, 2009  between the Company and Luna. See “General Development of the Business -  Mineral Interests - Aurizona Gold Stream” for further details. 2. The Santa  Elena Gold Stream dated May 15, 2009 between the Company and SilverCrest. See  “General Development of the Business - Mineral Interests - Santa Elena Gold  Stream” for further details. 3. The Ming Gold Stream dated March 4, 2010 between  the Company and Rambler. See “General Development of the Business - Mineral  Interests - Ming Gold Stream” for further details. 4. The Black Fox Gold  Stream dated November 9, 2010 between the Company and Brigus. See “General  Development of the Business - Mineral Interests - Black Fox Gold Stream” for  further details. 5. The Bachelor Lake Gold Stream dated January 17, 2011  between the Company and Metanor. See “General Development of the Business -  Mineral Interests - Bachelor Lake Gold Stream” for further details. 6. The  Colossus Gold Stream dated September 18, 2012 between the Company and  Colossus. See “General Development of the Business - Mineral Interests –  Serra Pelada Gold Stream” for further details. 7. The Acquisition Agreement  dated January 28, 2013 between the Company and Premier Gold with respect to  Premier Royalty. See “General Development of the Business – Acquisition of  59.9% Interest in Premier Royalty Inc.” for further details. 131 - |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | 9. The Amended  and Restated Credit Agreement dated February 7, 2013 between the Company and  The Bank of Nova Scotia, Bank of Montreal and National Bank of Canada. See  “General Development of the Business – Credit Facility” for further details.  INTERESTS OF EXPERTS Qualified Persons Under NI 43-101 Leah Mach, C.P.G.,  M.Sc., Principal Resource Geologist of SRK, a qualified person under NI  43-101, has reviewed and approved the scientific and technical disclosure  relating to the Aurizona Mine. Nathan Eric Fier, C.P.G., P.Eng, Chief  Operating Officer of SilverCrest, a qualified person under NI 43-101, has  reviewed and approved the scientific and technical disclosure relating to the  Santa Elena Mine. Larry Pilgrim, P.Geo, Chief Geologist of Rambler, a  qualified person under NI 43-101, has reviewed and approved the scientific  and technical disclosure relating to the Ming Mine. Howard Bird, Senior Vice  President, Exploration of Brigus, a qualified person under NI 43-101, has  reviewed and approved the scientific and technical disclosure relating to the  Black Fox Mine. Pascal Hamelin, Vice President of Metanor, a qualified person  under NI 43-101, has reviewed and approved the scientific and technical  disclosure relating to the Bachelor Lake Mine. David Jones, BSc., MSc.,  Consulting Geologist of Vidoro Pty Ltd., a qualified person under NI 43-101,  has reviewed and approved the scientific and technical disclosure relating to  the Serra Pelada Mine. Robert Cann, P.Geo, Vice President, Exploration for  Entrée, a qualified person under NI 43-101, has reviewed and approved the scientific  and technical disclosure relating to the Entrée JV Project. Each of the  aforementioned firms or persons are independent of the Company and held no  securities of the Company or of any associate or affiliate of the Company at  the time of preparation of the respective reports and/or at the time of the  preparation of the technical information contained in this AIF and did not  receive any direct or indirect interest in any securities of the Company or  of any associate or affiliate of the Company. None of the aforementioned  persons are currently expected to be elected, appointed or employed as a  director, officer or employee of the Company or of any associate or affiliate  of the Company. Auditors Deloitte LLP are the independent auditors for the  Company. Deloitte LLP have advised the Company that they are independent with  respect to the Company within the meaning of the Rules of Professional  Conduct of the Institute of Chartered Accountants of British Columbia and the  rules and standards of the PCAOB and the securities laws and regulations  administered by the SEC. AUDIT COMMITTEE The Company’s Audit Committee is  responsible for monitoring the Company’s systems and procedures for financial  reporting and internal control, reviewing certain public disclosure documents  and monitoring the performance and independence of the Company’s external  auditors. The committee is also responsible for reviewing the Company’s  annual audited financial statements, unaudited quarterly financial statements  and management’s discussion and analysis of financial results of operations  for both annual and interim financial statements and review of related  operations prior to their approval by the full board of directors of the  Company. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | The Audit  Committee’s charter sets out its responsibilities and duties, qualifications  for membership, procedures for committee member removal and appointment and  reporting to the Company’s Board of Directors. A copy of the charter is  attached hereto as Schedule “A” to this AIF. The following are the current  members of the Committee: John P.A. Budreski Independent (1) Financially  literate (1) David E. De Witt Independent (1) Financially literate (1) Andrew  T. Swarthout Independent (1) Financially literate (1) (1) As defined by  National Instrument 52-110 Audit Committees (“NI 52-110”). Relevant Education  and Experience As noted above, each member of the Audit Committee is  financially literate, i.e. has the ability to read and understand financial  statements. Collectively, the Audit Committee members have the education and  experience to fulfill their responsibilities as outlined in the Audit  Committee Charter. Set out below is a description of the education and  experience of each Audit Committee member that is relevant to the performance  of his responsibilities as an Audit Committee member. John P.A. Budreski –  Mr. Budreski has been involved in capital markets since 1987 and has acted as  an advisor/consultant on a variety of capital markets matters. From 2009 to  2012, he was a Managing Director and a Vice Chairman with Cormark Securities  Inc. Previously he was the President and Chief Executive Officer of Orion  Securities Inc. from 2005 to 2007. Mr. Budreski’s work has required extensive  review and analysis of financial statements. He graduated in 1981 from TUNS/Dalhousie  with a Bachelor of Engineering degree and then in 1986 from the University of  Calgary with an MBA degree. David E. De Witt – Mr. De Witt is a founding  partner and the Chairman of Pathway Capital Ltd., a private venture capital  company which was founded in October 2004. He has been a director and officer  of numerous publicly traded companies since 1991 and his work has required  extensive review and analysis of financial statements. Mr. De Witt graduated  in 1975 from the University of British Columbia with a Bachelor of Commerce  degree and then in 1978 with a Bachelor of Laws degree. Andrew T. Swarthout –  In addition to being a Director of the Company and of Sandstorm Metals &  Energy Ltd., Mr. Swarthout has been the Chief Executive Officer and a  Director of Bear Creek Mining Corporation since 2003, a Director of Rio  Cristal Resources Corporation since December 2006 and a Director of Esperanza  Resources Corp. since May 2012. These are all publicly traded companies and  Mr. Swarthout’s work has required extensive review of financial statements.  Mr. Swarthout graduated in 1974 from the University of Arizona with a  Bachelor of Geosciences degree and he is a Professional Geologist. Reliance  on Certain Exemptions At no time since the commencement of the Company’s most  recently completed financial year has the Company relied on any exemption  from NI 52-110. Audit Committee Oversight At no time since the commencement  of the Company’s most recently completed financial year was a recommendation  of the Audit Committee to nominate or compensate an external auditor not  adopted by the Board of Directors of the Company. |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Pre-Approval  Policies and Procedures The Audit Committee’s charter sets out  responsibilities regarding the provision of non-audit services by the  Company’s external auditors. This policy encourages consideration of whether  the provision of services other than audit services is compatible with  maintaining the auditor’s independence and requires Audit Committee  pre-approval of permitted audit and audit-related services. External Auditor  Service Fees The aggregate fees billed by the Company’s external auditors in  each of the last two financial years are as follows: Financial Year Ending  Audit Fees Audit-Related Fees (1) Tax Fees All Other Fees 2012 (December 31)  $136,768 (C$136,070) NIL NIL NIL 2011 (December 31) $64,910 (C$64,200) $8,574  (C$8,480) NIL NIL (1) Audit-Related Fees were paid for professional services  rendered by the auditors relating to the Company’s transition to IFRS.  ADDITIONAL INFORMATION Additional information relating to the Company can be  found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Additional  information, including directors’ and officers’ remuneration and  indebtedness, principal holders of the Company’s securities and securities  authorized for issuance under equity compensation plans is contained in the  management information circular of the Company dated March 28, 2012 filed on  SEDAR at www.sedar.com. This information will also be contained in the  management information circular of the Company to be prepared in connection  with the Company’s 2013 annual meeting of shareholders currently scheduled to  be held in May 2013 which will be available on SEDAR at www.sedar.com and on  EDGAR at www.sec.gov. Additional financial information is provided in the  Company’s audited consolidated financial statements and management’s  discussion and analysis for the financial year ended December 31, 2012. |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | SCHEDULE “A”  SANDSTORM GOLD LTD. (the "Company") AUDIT COMMITTEE CHARTER I.  Mandate The primary function of the Audit Committee (the “Committee”) is to  assist the Board of Directors in fulfilling its financial oversight  responsibilities by reviewing the financial reports and other financial  information provided by the Company to regulatory authorities and  shareholders, the Company’s systems of internal controls regarding finance  and accounting, and the Company’s auditing, accounting and financial  reporting processes. Consistent with this function, the Committee will  encourage continuous improvement of, and should foster adherence to, the  Company’s policies, procedures and practices at all levels. The Committee’s  primary duties and responsibilities are to: • Serve as an independent and  objective party to monitor the Company’s financial reporting and internal  control system and review the Company’s financial statements. • Oversee the  audit of the Company’s financial statements. • Review and appraise the  performance of the Company’s external auditors. • Provide an open avenue of  communication among the Company’s auditors, financial and senior management  and the Board of Directors. II. Composition The Committee shall be comprised  of three or more directors as determined by the Board of Directors. Each of  these directors shall be independent as required by the applicable rules of  the Company’s regulators. No member of the Committee is permitted to have  participated in the preparation of the financial statements of the Company or  any current subsidiary at any time during the past three years. If permitted  by applicable stock exchange laws and regulations in effect from time to  time, one director who (i) is not independent as defined and required under  applicable stock exchange rules, and (ii) is not a current employee or an  immediate family member (as defined under applicable stock exchange rules) of  such employee, may be appointed to the Audit Committee if the Board, under  exceptional and limited circumstances, determines that membership on the  Audit Committee by the individual is required in the best interests of the  Company and its stockholders. In such event, the Board will disclose in the  Company’s next annual proxy statement the nature of that director’s  relationship with the Company and the reasons for that determination. A  director appointed to the Committee pursuant to this exception may not serve  in excess of two consecutive years and may not chair the Committee. -A1 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | Each member of  the Committee will be able to read and understand fundamental financial  statements. At least one member of the Committee shall have accounting or  related financial management expertise to qualify as a financial expert. A  financial expert is a member who understands generally accepted accounting  principles and financial statements; can assess the general application of  such principles in connection with the accounting for estimates, accruals,  and reserves; has experience preparing, auditing, analyzing or evaluating  financial statements that present a breadth and level of complexity of  accounting issues that are generally comparable to the breadth and complexity  of issues that can reasonably be expected to be raised by the registrant’s  financial statements, or experience actively supervising one or more persons  engaged in such activities; understands internal control over financial  reporting; and understands audit committee functions. The members of the  Committee shall be elected by the Board of Directors. Unless a Chair is  elected by the full Board of Directors, the members of the Committee may  designate a Chair by a majority vote of the full Committee membership. III.  Meetings The Committee shall meet at least quarterly, or more frequently as  circumstances dictate. As part of its job to foster open communication, the  Committee will meet at least annually with the Chief Financial Officer and  the external auditors in separate sessions. IV. Responsibilities and Duties  To fulfill its responsibilities and duties, the Committee shall:  Documents/Reports Review 1. Review and update this Charter annually. 2. Review  the Company’s financial statements, MD&A and any annual and interim  earnings, press releases before the Company publicly discloses this  information and any reports or other financial information (including  quarterly financial statements), which are submitted to any governmental  body, or to the public, including any certification, report, opinion, or  review rendered by the external auditors. 3. Review the expenses of the Chief  Executive Officer on an annual basis. External Auditors 4. Review annually,  the performance of the external auditors who shall be ultimately accountable  to the Board of Directors and the Committee as representatives of the  shareholders of the Company. 5. Obtain annually, a formal written statement  of external auditors setting forth all relationships between the external  auditors and the Company. 6. Review and discuss with the external auditors  any disclosed relationships or services that may impact the objectivity and  independence of the external auditors. 7. Take, or recommend that the full  Board of Directors take, appropriate action to oversee the independence of  the external auditors. 8. Recommend to the Board of Directors the selection  and, where applicable, the replacement of the external auditors nominated  annually for shareholder approval. -A2 - |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | 9. At each  meeting, consult with the external auditors, without the presence of  management, about the quality of the Company’s accounting principles,  internal controls and the completeness and accuracy of the Company’s  financial statements. 10. Review and approve the Company’s hiring policies  regarding partners, employees and former partners and employees of the  present and former external auditors of the Company. 11. Review with  management and the external auditors the audit plan for the year-end  financial statements. 12. Review and pre-approve all audit and audit-related  services and the fees and other compensation related thereto, and any  non-audit services, provided by the Company’s external auditors. The  pre-approval requirement is waived with respect to the provision of non-audit  services if: i. the aggregate amount of all such non-audit services provided  to the Company constitutes not more than five percent of the total amount of  revenues paid by the Company to its external auditors during the fiscal year  in which the non-audit services are provided; ii. such services were not  recognized by the Company at the time of the engagement to be non-audit  services; and iii. such services are promptly brought to the attention of the  Committee by the Company and approved prior to the completion of the audit by  the Committee or by one or more members of the Committee who are members of  the Board of Directors to whom authority to grant such approvals has been  delegated by the Committee. Provided the pre-approval of the non-audit  services is presented to the Committee’s first scheduled meeting following  such approval such authority may be delegated by the Committee to one or more  independent members of the Committee. Financial Reporting Processes 13. In  consultation with the external auditors, review with management the integrity  of the Company’s financial reporting process, both internal and external. 14.  Consider the external auditors’ judgments about the quality and  appropriateness of the Company’s accounting principles as applied in its  financial reporting. 15. Consider and approve, if appropriate, changes to the  Company’s auditing and accounting principles and practices as suggested by  the external auditors and management. 16. Review significant judgments made  by management in the preparation of the financial statements and the view of  the external auditors as to appropriateness of such judgments. 17. Following  completion of the annual audit, review separately with management and the  external auditors any significant difficulties encountered during the course  of the audit, including any restrictions on the scope of work or access to  required information. 18. Review any significant disagreement among  management and the external auditors in connection with the preparation of  the financial statements. Where there are significant unsettled issues, the  Committee shall ensure that there is an agreed course of action for the  resolution of such matters. 19. Review with the external auditors and management  the extent to which changes and improvements in financial or accounting  practices have been implemented. -A3 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|  | 20. Solicit and  review complaints or concerns about any questionable accounting, internal  accounting controls or auditing matters. 21. Review certification process.  22. Allow for the solicitation of confidential and/or anonymous submissions  by employees of the Company of concerns regarding questionable accounting or  auditing matters. 23. Review any related-party transactions. General 24. The  Committee shall be empowered to retain independent counsel and other advisers  as necessary to carry out its duties. 25. The Committee shall be provided  appropriate funding from the Company, as determined by the Committee, for  payment of compensation to any registered public accounting firm engaged for  the purpose of preparing or issuing an audit report or performing other audit  review or attest services for the Company, to any advisers employed by the  Committee, and for ordinary administrative expenses of the Committee that are  necessary or appropriate in carrying out its duties. -A4 - |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|