Document:

Pre-Feasibility Study, Toromocho Project, Executive Summary Report

 Exhibit 10.58 
  
 

 
  
  

 

 

					
	

	 	 

  
	 	

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 NOTICE 
  

This document contains the expression of the professional opinion of SNC-Lavalin Chile S.A (“SLC”) as to the matters set out herein, using its professional
judgment and reasonable care. It is to be read in the context of the agreement dated September 8, 2005 (the “Agreement”) between SLC and Peru Copper Inc. (the “Client”), and the methodology, procedures and techniques used,
SLC’s assumptions, and the circumstances and constraints under which its mandate was performed. This document is written solely for the purpose stated in the Agreement, and for the sole and exclusive benefit of the Client, whose remedies are
limited to those set out in the Agreement. This document is meant to be read as a whole, and sections or parts thereof should not be read or relied upon out of context. 
  
 SLC has, in preparing estimates, as the case may be, followed methodology and procedures, and exercised due care consistent with the
intended level of accuracy, using its professional judgment and reasonable care, and is thus of the opinion that there is a high probability that actual values will be consistent with the estimate(s). However, no warranty should be implied as to the
accuracy of estimates. Unless expressly stated otherwise, assumptions, data and information supplied by, or gathered from other sources (including the Client, other consultants, testing laboratories and equipment suppliers, etc.) upon which
SLC’s opinion as set out herein is based has not been verified by SLC; SLC makes no representation as to its accuracy and disclaims all liability with respect thereto. 
  
 To the extend permitted by law, SLC disclaims any liability to the Client and to third parties in respect of the publication, reference,
quoting, or distribution of this report or any of its contents to any reliance thereon by any third party. 
  
 Note: The reports provided by third parties have been edited for format and consistency only. The content has not been altered in any way. 

					
	

	 	 

  
	 	

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 EXECUTIVE SUMMARY 
 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	Page Nor

	 	 	COVER SHEET	  	1
	 	 	        INDEX OF REVISIONS	  	2
	 	 	        NOTICE	  	3
	 	 	        TABLE OF CONTENTS	  	4
	 1.1
	 	 	  	Introduction	  	5
	 	 	1.1.1	  	Project Summary	  	5
	 	 	1.1.2	  	Pre-Feasibility Study Participants	  	5
	 	 	1.1.3	  	Report Organization	  	6
	 1.2
	 	 	  	Project Background	  	8
	 1.3
	 	 	  	Study Background	  	9
	 1.4
	 	 	  	Scope of The Pre-Feasibility Study	  	10
	 1.5
	 	 	  	General Project Description	  	12
	 	 	1.5.1	  	Location, Climate and Access	  	12
	 	 	1.5.2	  	Geology	  	13
	 	 	1.5.3	  	Resources, Mine and Slope Design	  	18
	 	 	1.5.4	  	Hydrology	  	31
	 	 	1.5.5	  	Concentrator	  	33
	 	 	1.5.6	  	Tailings Dam	  	40
	 	 	1.5.7	  	ROM Leach SX/EW Plant	  	48
	 	 	1.5.8	  	Infrastructure	  	49
	 	 	1.5.9	  	Environment	  	56
	 	 	1.5.10	  	Community Relations Program	  	57
	 1.6
	 	 	  	Capital Cost Estimate	  	59
	 1.7
	 	 	  	Operating Cost Estimate	  	62
	 	 	1.7.1	  	Concentrator (determined by SNC-L)	  	62
	 	 	1.7.2	  	Mine	  	62
	 	 	1.7.3	  	Tailings Dam (determined by Montgomery Watson Harza, MWH)	  	62
	 	 	1.7.4	  	ROM Leach SX-EW	  	63
	 	 	1.7.5	  	Smelter Deduct – Metal Content	  	63
	 	 	1.7.6	  	Refining	  	63
	 	 	1.7.7	  	Other General Costs	  	63
	 	 	1.7.8	  	Royalties	  	63
	 	 	1.7.9	  	Summary of Operating Costs	  	63
	 	 	1.7.10	  	Mine and Concentrator Manpower Summary.	  	64
	 1.8
	 	 	  	Initial Economic Evaluation	  	66
	 1.9
	 	 	  	Technical Risk	  	71
	 1.10
	 	 	  	Project Implementation Plan (PIP)	  	72
	 1.11
	 	 	  	Conclusions and Recommendations	  	80
	 	 	1.11.1	  	Conclusions	  	80
	 	 	1.11.2	  	Recommendations	  	81

					
	

	 	 

  
	 	

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	1.1	Introduction 

  

	1.1.1	Project Summary 

  
 PERU COPPER INC. (PCI) requested SNC-LAVALIN CHILE S.A. (SNC-L) to develop a pre-feasibility study for the concentrator plant,
infrastructure and environmental and permit issues related with the development of the Toromocho Project. 
  
 Also as part of the request, information prepared by third parties related to the mine, pit slope design, geology, hydrology, tailings, ROM leach SX/EW
Plant and community relations issues is to be integrated into the final Pre Feasibility Report. 
  
 This report summarizes the information, conclusions and recommendations that are part of each independent volume shown in section 1.1.3. 
  

	1.1.2	Pre-Feasibility Study Participants 

  
 This study was prepared jointly by SNC-L, independent consultants and PCI. In addition PCI prepared the sections on Project
Background, Study Background and the Scope of Pre-feasibility Study. 
  
 Specific sections were developed by other consultants under the coordination and responsibility of PCI and SNC-L as indicated in the following table: 
  
 Study Participants 
  

					
	 Section

	 	 Consultant

	 	 Responsible /
 Coordinator

	 Concentrator Facilities
	 	 SNC-L and IDESOL Ingenieros
	 	 SNC-L

			
	 Project Infrastructure Facilities
	 	 SNC-L
	 	 SNC-L

			
	 ROM Leach and SX-EW Plant
	 	 Minerals Advisory Group (MAG)
	 	 PCI

			
	 Mine
	 	 Independent Mining Consultants Inc.
	 	 PCI

			
	 Pit Slope Design
	 	 Call & Nicholas Inc.
	 	 PCI

			
	 Geology
	 	 PCI
	 	 PCI

					
	

	 	 

  
	 	

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	 Matter

	 	 Consultant

	 	 Responsible /
 Coordinator

	Hydrology	 	Errol L. Montgomery & Associates, Inc – Hydro Geo Ingeniería S.A.C.	 	PCI
			
	Environment and Permits Issues	 	Knight Piésold Chile S.A. (KPSA)	 	SNC-L
			
	Tailings Dam and Water reclaim	 	Montgomery Watson Harza – PSI-JRI	 	PCI
			
	Community Relations	 	PCI	 	PCI

  

	1.1.3	Report Organization 

  
 The organization of the final report for the Pre-feasibility Study is presented according to the following sections (volumes): 
  
 Notice 
  
 SECTION 1.0: Executive Summary (this volume) 
  
 SECTION 2.0: Process Plant 
  

SECTION 3.0: Infrastructure 
  
 SECTION 4.0: Geology 
  
 SECTION 5.0: Mining 
  
 SECTION 6.0: Hydrology 
  
 SECTION 7.0: Tailings Dam 
  
 SECTION 8.0: Community Relations 
  
 SECTION 9.0: Environment and Permit Issues 

					
	

	 	 

  
	 	

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 SECTION 10: Capital and Operating Cost and Economic Evaluation 

					
	

	 	 

  
	 	

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	1.2	Project Background 

 (Prepared by PCI) 

 
 Exploration in the area started in 1928 when low grade copper
mineralization was discovered by Cerro de Pasco Corporation. Further exploration was carried out by Cerro de Pasco, until 1973/74, when the property was nationalized by the Peruvian Government and transferred to Centromin, the government mining
organization. 
  
 During the 1970’s, Centromin continued
exploration, carried out a drilling program and in 1980 hired Kaiser Engineers to prepare a detailed feasibility study of the project. The study proposed an open pit mine with a conventional concentrator and heap leach operation. 
  
 In the 1990’s Centromin began the process of privatization of all of
its assets. 
  
 In 1999, J. David Lowell, one of the founders of
Peru Copper, began studying potential mineable deposits of copper ore reserves in Latin America. Through this process, in 2002, Mr. Lowell determined that Centromin’s Toromocho deposit, located in Morococha, 140 km east of Lima, had
potential as a large open pittable operation. In April 2003, Peru Copper Syndicate was formed for the purpose of making a bid for the Toromocho mineral concessions. 
  
 The bid was successful, and the Company entered the Toromocho Option Agreement with Centromin in June 2003. The Toromocho
Option Agreement gave the Company the right to acquire certain full and partial interests held by Centromin in the mineral concessions and related assets of the Toromocho Project. 
  
 The Toromocho Option Agreement requires that in order for the Company to exercise the Toromocho Option, it must
(i) expend up to US$ 12 million on exploration and development on the property over a maximum five year option exercise period which commenced on June 11, 2003; (ii) deliver to Centromin a Feasibility Study on the Toromocho
Project within such option exercise period and (iii) either provide to Centromin evidence that it meets certain technical and financial requirements or, alternatively, provide evidence that a qualifying financial institution acceptable to
Centromin is willing to provide the financing required to develop the Toromocho Project in accordance with the terms of the feasibility study. 

					
	

	 	 

  
	 	

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	1.3	Study Background 

 (Prepared by PCI) 
  
 Peru Copper began an intensive drilling program in late 2003, and with the
assistance of outside consultants began studies in the areas of geology, metallurgy, water resources, tailings dam, resource definition and mine planning, pit slope design, community relations, and environmental. 
  
 As the studies progressed, the Company made the decision to conduct a
pre-feasibility study to incorporate all of the study results into one comprehensive document, and to hire an engineering company to develop capital and operating cost estimates for the processing plant and infrastructure. Cost estimates by others
for the mine and tailings dam, and leaching, SX-EW are also incorporated into the study. 

					
	

	 	 

  
	 	

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	1.4	Scope of The Pre-Feasibility Study 

  
 The scope of the pre-feasibility study was defined by PCI as follows: 
  

	 	a.	Location/property position/history 

 (by PCI) 

 

	 	b.	Exploration/geology/drilling 

 (by PCI) 
  

	 	c.	Mineral resources (by Independent Mining Consultants, Inc.) 

  

	 	d.	Mine plan and development and pit slope design 

 (by John
Marek, Independent Mining Consultants, Inc. and Dave Nicholas, Call and Nicholas Inc.) 
  

	 	e.	Metallurgy 

 (by Martin Kuhn, Minerals Advisory Group and
Montgomery Watson Harza on Tailings) 
  

	 	f.	Concentrator engineering and process design (by SNC-Lavalin) 

  

	 	g.	ROM leach and SX-EW plant (by PCI/MAG) 

  

	 	h.	Infrastructure (by SNC-Lavalin) 

  

	 	i.	Hydrology (by Errol Montgomery & Associates, Inc and Hydro-Geo Ingenieria, S.A.) 

  

	 	j.	Communications (by SNC-Lavalin) 

  

	 	k.	Power (by Peru Copper and SNC-Lavalin) 

  

	 	l.	Materials management (by SNC-Lavalin) 

  

	 	m.	Work force (by SNC-Lavalin) 

  

	 	n.	Environmental considerations (by SNC-Lavalin) 

  

	 	o.	Permit requirements (by SNC-Lavalin) 

  

	 	p.	Schedule (by SNC-Lavalin) 

  

	 	q.	Project execution outline (by SNC-Lavalin) 

					
	

	 	 

  
	 	

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	 	r.	Preliminary capital cost estimate (by SNC-Lavalin) 

  

	 	s.	Operating cost (by SNC-Lavalin) 

  

	 	t.	Initial economic evaluation and financial analysis (by SNC-Lavalin) 

  

	 	u.	Risk evaluation (by SNC-Lavalin) 

					
	

	 	 

  
	 	

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	1.5	General Project Description 

  

	1.5.1	Location, Climate and Access 

  
 The Toromocho Project is located in central Peru, approximately 140 km east of Lima in the Morococha mining district, Yauli province, Junin Department, at
4500 to 5000 meters above sea level. 
  
 Figure 1.5.1 Toromocho
Project location. 
  
 Figure 1.5.1 
  
 

 

					
	

	 	 

  
	 	

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 Access to the Toromocho Project is by both a paved, two lane central highway and the central railway,
which connect the Morococha mining district to both Lima and La Oroya. No airstrip is available in the area. 
  
 The Toromocho District climate has two well defined seasons. The rainy season usually extends from December to March and has frequent brief hail and snow
falls. Snow accumulation is rare, and usually melts with the winter sun. The rest of the year is reasonably dry with sporadic and sudden rain squalls and infrequent occurrences of lightning storms in the area. 
  

	1.5.2	Geology 

 (Extracted from PCI Report, prepared by A.
Alvarez October 26th 2005) 
  
 The Toromocho project is favored by its location with respect to existing infrastructure. 
  
 The Toromocho orebody lies within the central copper zone of the well-zoned
Cu/Pb-Zn/Pb-Ag poly-metallic Morococha District. The orebody forms a center of skarn and breccia associated with 7 m.y. old mineralization, alteration, and granodiorite and porphyry intrusives. 
  
 The majority of higher grade copper mineralization is contained within
highly fractured relatively soft and easily mineable actinolite and clay altered skarn mineralization. The remainder is contained within more competent biotite altered intrusive rocks. 
  
 Primary chalcopyrite mineralization is secondarily enriched with chalcocite especially in the upper portions of the orebody
where frequently more than 50% of the copper is “soluble” by acid and cyanide sequential leach assays, indicating amenability for ferric leaching. 
  
 The ore body has been “pre-stripped” by removal of much of the leached capping by Pleistocene glaciation. This will result in favorable and
relatively low stripping ratios for future open pit mining compared to many other large active porphyry copper operations like Chuquicamata, Escondida and Bingham. 
  
 The orebody contains approximately two billion tonnes of +0.3% Cu mineralization (measured, indicated and inferred)
averaging 0.46% Cu, and including silver and molybdenum credits, a copper equivalent grade of 0.68% Cu. This includes a core of of about one billion tones of resources averaging 0.6% Cu, with a 0.88% Cu equivalent grade. 
  
 Significant silver and molybdenum credits enhance the overall value of the
ore by approximately 20-30%. Except in relatively small upper level portions of the orebody, arsenic and other undesirable elements are low and present in amounts generally below that which attract smelter penalties. 
  
 The molybdenum distribution in the central and main part of the orebody is
in the form of inverted cones or shells open downwards, and plunging to the north. Between the surfaces and elevations of 4,600 to 4,700 m molybdenum values are typically between 50 and 150 ppm. Below about 4,500 m elevation values over 300 ppm can
occur. Recent deep holes have found even higher values (500-600 ppm Mo) below about 4,200 m – 4,300 m elevation. 

					
	

	 	 

  
	 	

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 The Toromocho deposit has the potential to become a commercial ore body and be developed into a large
productive open pit copper operation. 
  
 Exploration 
  
 Exploration of the
Toromocho deposit has included detailed geological mapping, diamond drilling program, a small open pit and sampling of some underground crosscuts (the total lengths developed are, drifts 33,905 meters and, crosscuts 18,939 meters). 
  
 The Cerro de Pasco Corporation, Centromin and Minera Perú Copper S.A.
carried out diamond drilling campaigns (1966-68, 1970-71, 72-73, 74-76 and 2003-2005). 
  
 A total of 334 holes were completed, totaling 132,466 meters. 
  
 Diamond drilling holes 
 1966-2005 
  

							
	 	  	YEAR

	  	N° DDH

	  	Meters

	 CdeP
	  	1966-72	  	82	  	20  251.0
	 CMP
	  	1974	  	61	  	22  143.0
	 MPCopper
	  	2003-05	  	191	  	90  072.3
	 	  	 	  	
	  	

	 TOTAL
	  	 	  	334	  	132  466.3
	 	  	 	  	
	  	

  
 Note: Minera Peru
Copper S.A. (MPCopper) is a subsidiary of Peru Copper Inc. 

					
	

	 	 

  
	 	

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 Figure 1.5.2a 
  

	
	

					
	

	 	 

  
	 	

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 Figure 1.5.2b 
  

	
	

					
	

	 	 

  
	 	

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 Figure 1.5.2c 
  

	
	

					
	

	 	 

  
	 	

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	1.5.3	Resources, Mine and Slope Design 

  
 Resources and Mine (Extracted from Independent Mining Consultants, Inc., Report October 2005) 
  
 Peru Copper Inc. (PCI) requested Independent Mining Consultants, Inc. (IMC)
to prepare the mining component of a feasibility study for the Toromocho project in Peru. The IMC report summarizes the development of the block model, mine plan, and the resulting mine costs to feed a 150,000 tonne per day (tpd) sulfide mill
operation from a conventional open pit mine. 
  
 The global
resource for Toromocho is 1.834 billion tonnes of measured and indicated material, with an additional 241 million tonnes of inferred material. 
  
 Within this resource is a central core of measured and indicated material of 967 million tonnes at a grade of 0.60% Cu, 0.023% Mo, and 8.3 gm/t Ag,
with a copper equivalent of 0.88% Cu, using a 0.60% Cu equivalent cutoff grade. Details of the resource are summarized in the following Table 1.5.3a: 
  
 Table 1.5.3a 
  
 Toromocho Resource 
  

																	
	 Measured

	  	Contained Metal

	 Equiv
 Cu Cutoffs

	  	Million
Tonnes

	  	 Total
Copper
 %

	  	Moly
%

	  	Silver
gm/t

	  	Equivalent
Copper %

	  	Cu
Million
Lbs

	  	 Moly
 Million
 Lbs

	  	Silver
Million
Ozs

	 plus 0.60%
	  	209	  	0.66	  	0.025	  	6.7	  	0.95	  	3,041	  	115	  	45
	 0.27% to 0.59%
	  	89	  	0.33	  	0.012	  	5.0	  	0.45	  	647	  	24	  	14
	 Total Plus 0.27%
	  	298	  	0.56	  	0.021	  	6.2	  	0.80	  	3,688	  	139	  	59
		
	 Indicated

	  	Contained Metal

	 Equiv
 Cu Cutoffs

	  	Million
Tonnes

	  	 Total
Copper
 %

	  	Moly
%

	  	Silver
gm/t

	  	Equivalent
Copper %

	  	Cu
Million
Lbs

	  	 Moly
Million
 Lbs

	  	Silver
Million
Ozs

	 plus 0.60%
	  	758	  	0.58	  	0.023	  	8.5	  	0.86	  	9,692	  	384	  	207
	 0.27% to 0.59%
	  	776	  	0.32	  	0.009	  	5.3	  	0.45	  	5,489	  	154	  	133
	 Total Plus 0.27%
	  	1,536	  	0.45	  	0.016	  	6.9	  	0.65	  	15,181	  	538	  	340
		
	 Measured + Indicated

	  	Contained Metal

	 Equiv
 Cu Cutoffs

	  	Million
Tonnes

	  	 Total
Copper
 %

	  	 Moly
 %

	  	Silver
gm/t

	  	Equivalent
Copper %

	  	Cu
Million
Lbs

	  	Moly
Million
Lbs

	  	 Silver
Million
 Ozs

	 plus 0.60%
	  	967	  	0.60	  	0.023	  	8.1	  	0.88	  	12,733	  	499	  	252
	 0.27% to 0.59%
	  	867	  	0.32	  	0.009	  	5.3	  	0.45	  	6,136	  	178	  	147
	 Total Plus 0.27%
	  	1,834	  	0.47	  	0.016	  	6.8	  	0.68	  	18,869	  	677	  	399
		
	 Inferred

	  	Contained Metal

	 Equiv
 Cu Cutoffs

	  	Million
Tonnes

	  	 Total
Copper
 %

	  	Moly
%

	  	Silver
gm/t

	  	Equivalent
Copper %

	  	Cu
Million
Lbs

	  	Moly
Million
Lbs

	  	 Silver
Million
 Ozs

	 plus 0.27%
	  	241	  	0.41	  	0.010	  	8.3	  	0.57	  	2,178	  	53	  	64

					
	

	 	 

  
	 	

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 The mine production schedule is summarized on Table 1.5.3b. The schedule delivers a nominal 150,000
tpd (54,750 ktonnes per year) of sulfide mill ore to the primary crushers. Low grade mill ore that is hosted in calc-silicates (skarn) is stockpiled to a low grade mill ore stockpile for processing at the end of the pit life. Intrusive hosted ores
are considered for heap leach based on the relative costs and recoveries of milling versus leaching. Roughly 5,000 kt/yr of the best grade leachable ore is delivered to a heap leach pad. Low grade ore that could be leached or milled is stockpiled
south of the mine for eventual processing. The two low grade stockpiles are planned for re handle to the mill at the end of the mine life. However, the low grade leach stockpile could potentially be heap leached. 
  
 The resulting mill feed schedule including the re handle of both stockpiles
is summarized on Table 1.5.3c. Figure 1.5.3a is a graphic representation of the material movements and head grades. Figure 1.5.3b illustrates the mine, waste storage, and stockpiles at the end of the open pit life. Reclamation of the two stockpiles
to the mill has not occurred on Figure 1.5.3b. 
  
 Figure 1.5.3b
illustrates that the mine plan does encroach on the town of Morococha. However, the national highway is respected by an offset of about 150m. Property constraints provided by PCI personnel were also respected in the design of the open pit. Slope
angle recommendations from Call & Nicholas, Inc. (CNI) were utilized in the pit design. 
  
 This mine plan utilizes mineralization that is classified only as measured and / or indicated. If the inferred resource of 241 million tonnes @ 0.41%
Cu were eventually re-classified as measured and / or indicated, it would add an additional 4.5 years of life to the project. 
  
 All units within this report are metric units unless specifically stated. Ktonnes means 1000 metric tonnes. All mine plan tonnages are presented in terms
of dry tonnes. Grades are reported in percent by weight or in the case of silver in grams / tonne. 

					
	

	 	 

  
	 	

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 Table 1.5.3b 
  
 Toromocho Open Pit Production Schedule 
 Measured and Indicated Mineralization Only 
  

																																													
	 	 	Mill Ore

	 	 	HG ROM Leach at Variable Cutoff

	 	 	LG to Mill Stkp at $1.20/T Net
Cutoff

	 	LG Leach Stkp

	 	 	Waste
Ktonnes

	  	Total
Material
Ktonnes

	 Year

	 	Cutoff Grade

	 	Ktonnes

	 	Total Cu
%

	 	Moly
%

	 	Silver
gm/t

	 	% Soluble
Cu

	 	 	Cutoff

	 	Ktonnes

	 	Total Cu
%

	 	% Soluble
Cu

	 	 	Ktonnes
%

	 	Total Cu
%

	 	Moly
%

	 	Silver
gm/t

	 	Ktonnes
%

	 	Total
Cu %

	 	% Sol
Cu

	 	 	  
	 	Net $

	 	EqCu%

	 	 	 	 	 	 	Net $

	 	 	 	 	 	 	 	 	 	 	 	  
	 Preprod
	 	$	2.50	 	0.49	 	2,404	 	0.490	 	0.018	 	8.34	 	65.1	%	 	1.50	 	5,001	 	0.475	 	76.1	%	 	1,193	 	0.169	 	0.029	 	13.362	 	8979	 	0.218	 	67.6	%	 	45,382	  	62,959
	 1
	 	$	2.50	 	0.49	 	52,346	 	0.609	 	0.017	 	6.97	 	59.0	%	 	4.75	 	5,423	 	0.737	 	70.1	%	 	6,057	 	0.347	 	0.008	 	4.996	 	38113	 	0.332	 	65.0	%	 	26,061	  	128,000
	 2
	 	$	2.50	 	0.49	 	54,750	 	0.627	 	0.018	 	7.44	 	57.2	%	 	2.00	 	5,326	 	0.516	 	70.5	%	 	10,890	 	0.336	 	0.013	 	5.853	 	21388	 	0.240	 	67.3	%	 	31,646	  	124,000
	 3
	 	$	2.50	 	0.49	 	54,750	 	0.616	 	0.016	 	7.25	 	44.2	%	 	1.50	 	5,343	 	0.466	 	70.8	%	 	9,126	 	0.362	 	0.010	 	4.587	 	12450	 	0.221	 	70.7	%	 	42,331	  	124,000
	 4
	 	$	2.50	 	0.49	 	54,750	 	0.700	 	0.021	 	6.40	 	47.5	%	 	0.50	 	5,078	 	0.365	 	67.8	%	 	6,965	 	0.347	 	0.013	 	4.640	 	7185	 	0.263	 	57.6	%	 	46,022	  	120,000
	 5
	 	$	2.50	 	0.49	 	54,750	 	0.546	 	0.014	 	8.87	 	38.0	%	 	0.00	 	4,868	 	0.397	 	57.9	%	 	29,950	 	0.355	 	0.008	 	5.656	 	0	 	0.000	 	0.0	%	 	30,432	  	120,000
	 6
	 	$	2.00	 	0.45	 	54,750	 	0.541	 	0.020	 	5.65	 	27.1	%	 	1.20	 	6,256	 	0.359	 	68.1	%	 	5,530	 	0.320	 	0.010	 	4.592	 	6546	 	0.223	 	61.9	%	 	46,918	  	120,000
	 7
	 	$	1.75	 	0.43	 	54,750	 	0.656	 	0.025	 	4.98	 	33.0	%	 	0.00	 	7,406	 	0.341	 	51.1	%	 	3,267	 	0.314	 	0.009	 	5.867	 	 	 	 	 	 	 	 	54,577	  	120,000
	 8
	 	$	1.50	 	0.41	 	54,750	 	0.495	 	0.012	 	7.73	 	29.7	%	 	0.00	 	5,665	 	0.411	 	43.3	%	 	7,331	 	0.319	 	0.004	 	7.072	 	 	 	 	 	 	 	 	52,254	  	120,000
	 9
	 	$	1.50	 	0.41	 	54,750	 	0.466	 	0.011	 	7.02	 	26.0	%	 	0.00	 	1,527	 	0.445	 	42.5	%	 	4,740	 	0.300	 	0.011	 	6.202	 	 	 	 	 	 	 	 	38,983	  	100,000
	 10
	 	$	1.50	 	0.41	 	54,750	 	0.507	 	0.015	 	7.31	 	24.7	%	 	0.00	 	2,487	 	0.400	 	45.2	%	 	3,633	 	0.295	 	0.015	 	5.094	 	 	 	 	 	 	 	 	39,130	  	100,000
	 11
	 	$	1.50	 	0.41	 	54,750	 	0.484	 	0.015	 	8.50	 	28.0	%	 	0.00	 	833	 	0.723	 	42.7	%	 	4,327	 	0.322	 	0.003	 	5.214	 	 	 	 	 	 	 	 	40,090	  	100,000
	 12
	 	$	1.50	 	0.41	 	54,750	 	0.601	 	0.033	 	6.21	 	21.4	%	 	0.00	 	1,413	 	0.551	 	57.3	%	 	447	 	0.232	 	0.033	 	6.170	 	 	 	 	 	 	 	 	43,390	  	100,000
	 13
	 	$	1.50	 	0.41	 	54,750	 	0.521	 	0.027	 	7.09	 	20.4	%	 	0.00	 	1,290	 	0.442	 	48.4	%	 	1,762	 	0.305	 	0.027	 	4.306	 	 	 	 	 	 	 	 	42,198	  	100,000
	 14
	 	$	1.50	 	0.41	 	54,750	 	0.515	 	0.019	 	6.82	 	21.6	%	 	0.00	 	785	 	0.825	 	44.7	%	 	1,433	 	0.362	 	0.019	 	4.702	 	 	 	 	 	 	 	 	43,032	  	100,000
	 15
	 	$	1.50	 	0.41	 	54,750	 	0.573	 	0.018	 	7.22	 	21.7	%	 	0.00	 	138	 	0.665	 	39.6	%	 	922	 	0.340	 	0.000	 	3.135	 	 	 	 	 	 	 	 	44,190	  	100,000
	 16
	 	$	0.50	 	0.32	 	54,750	 	0.508	 	0.031	 	7.11	 	18.9	%	 	0.00	 	294	 	0.225	 	48.7	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16,661	  	71,705
	 17
	 	$	0.50	 	0.32	 	54,750	 	0.405	 	0.019	 	5.36	 	19.4	%	 	0.00	 	1,539	 	0.222	 	51.7	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	29,947	  	86,236
	 18
	 	$	0.50	 	0.32	 	54,750	 	0.464	 	0.013	 	4.86	 	16.1	%	 	0.00	 	746	 	0.227	 	48.2	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	19,399	  	74,895
	 19
	 	$	0.50	 	0.32	 	54,750	 	0.566	 	0.024	 	5.96	 	14.6	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11,732	  	66,482
	 20
	 	$	0.50	 	0.32	 	14,350	 	0.324	 	0.036	 	10.67	 	17.2	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,503	  	17,853
	 	 	 	 	 	 	 	
	 	
	 	
	 	
	 	
	
	 	 	 	
	 	
	 	
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	
	 	
	  	

	 Total
	 	 	 	 	 	 	1,054,600	 	0.544	 	0.020	 	6.83	 	29.8	%	 	 	 	61,418	 	0.447	 	0.605	 	 	97,573	 	0.336	 	0.010	 	5.538	 	94,661	 	0.273	 	65.7	%	 	747,878	  	2,056,130
	 	 	 	 	 	 	 	
	 	
	 	
	 	
	 	
	
	 	 	 	
	 	
	 	
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	
	 	
	  	

 p15003/aug05/sched/    schOct05tr02.xl 
  
 Note: The mineable resource also contains, on average, 0.17% Zn, 0.02% Pb,
and 0.02% As. 

					
	

	 	 

  
	 	

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 Table 1.5.3c 
  
 Toromocho, Mill Feed Schedule with Stockpile Rehandle 
 Measured and Indicated Mineralization Only 
  

																								
	 	  	Mill Ore

	 
	 Year

	  	Cutoff Grade

	 	 	Ktonnes

	  	 Total Cu
 %

	  	 Moly
 %

	  	 Silver
 gm/t

	  	 Zinc
 %

	  	 Arsenic
 %

	  	 Lead
 %

	  	 % Soluble
 Cu

	 
	  	Net $

	  	EqCu%

	 	 	  	  	  	  	  	  	  
	 Preprod
	  	$	2.50	  	0.49	 	 	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	 
	 1
	  	$	2.50	  	0.49	 	 	54,750	  	0.604	  	0.017	  	7.03	  	0.095	  	0.032	  	0.021	  	59.3	%
	 2
	  	$	2.50	  	0.49	 	 	54,750	  	0.627	  	0.018	  	7.44	  	0.132	  	0.031	  	0.026	  	57.2	%
	 3
	  	$	2.50	  	0.49	 	 	54,750	  	0.616	  	0.016	  	7.25	  	0.129	  	0.029	  	0.023	  	44.2	%
	 4
	  	$	2.50	  	0.49	 	 	54,750	  	0.700	  	0.021	  	6.40	  	0.102	  	0.024	  	0.019	  	47.5	%
	 5
	  	$	2.50	  	0.49	 	 	54,750	  	0.546	  	0.014	  	8.87	  	0.234	  	0.025	  	0.021	  	38.0	%
	 6
	  	$	2.00	  	0.45	 	 	54,750	  	0.541	  	0.020	  	5.65	  	0.187	  	0.016	  	0.018	  	27.1	%
	 7
	  	$	1.75	  	0.43	 	 	54,750	  	0.656	  	0.025	  	4.98	  	0.167	  	0.016	  	0.016	  	33.0	%
	 8
	  	$	1.50	  	0.41	 	 	54,750	  	0.495	  	0.012	  	7.73	  	0.239	  	0.029	  	0.029	  	29.7	%
	 9
	  	$	1.50	  	0.41	 	 	54,750	  	0.466	  	0.011	  	7.02	  	0.240	  	0.022	  	0.020	  	26.0	%
	 10
	  	$	1.50	  	0.41	 	 	54,750	  	0.507	  	0.015	  	7.31	  	0.225	  	0.019	  	0.021	  	24.7	%
	 11
	  	$	1.50	  	0.41	 	 	54,750	  	0.484	  	0.015	  	8.50	  	0.216	  	0.025	  	0.019	  	28.0	%
	 12
	  	$	1.50	  	0.41	 	 	54,750	  	0.601	  	0.033	  	6.21	  	0.116	  	0.013	  	0.008	  	21.4	%
	 13
	  	$	1.50	  	0.41	 	 	54,750	  	0.521	  	0.027	  	7.09	  	0.221	  	0.020	  	0.010	  	20.4	%
	 14
	  	$	1.50	  	0.41	 	 	54,750	  	0.515	  	0.019	  	6.82	  	0.203	  	0.019	  	0.018	  	21.6	%
	 15
	  	$	1.50	  	0.41	 	 	54,750	  	0.573	  	0.018	  	7.22	  	0.239	  	0.017	  	0.022	  	21.7	%
	 16
	  	$	0.50	  	0.32	 	 	54,750	  	0.508	  	0.031	  	7.11	  	0.155	  	0.016	  	0.011	  	18.9	%
	 17
	  	$	0.50	  	0.32	 	 	54,750	  	0.405	  	0.019	  	5.36	  	0.166	  	0.013	  	0.012	  	19.4	%
	 18
	  	$	0.50	  	0.32	 	 	54,750	  	0.464	  	0.013	  	4.86	  	0.151	  	0.012	  	0.009	  	16.1	%
	 19
	  	$	0.50	  	0.32	 	 	54,750	  	0.566	  	0.024	  	5.96	  	0.077	  	0.012	  	0.002	  	14.6	%
	 20
	  	$	0.50	  	0.32	{	 	54,750	  	0.333	  	0.017	  	6.88	  	0.186	  	0.017	  	0.016	  	30.1	%
	 21
	  	 	Mill Stkp	  	 	54,750	  	0.336	  	0.010	  	5.54	  	0.219	  	0.018	  	0.022	  	34.7	%
	 22
	  	 	 	  	 	2,423	  	0.336	  	0.010	  	5.54	  	0.219	  	0.018	  	0.022	  	34.7	%
	 	  	 	 	  	 	 	 	
	  	
	  	
	  	
	  	
	  	
	  	
	  	
	

	 Total
	  	 	 	  	 	 	 	1,152,173	  	0.526	  	0.019	  	6.72	  	0.176	  	0.020	  	0.017	  	30.2	%
	 	  	 	 	  	 	 	 	
	  	
	  	
	  	
	  	
	  	
	  	
	  	
	

  
 Note: Inclusion of the
241 million tonnes of inferred resources would add an additional 4.5 years of life to the project. 

					
	

	 	 

  
	 	

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 Figure 1.5.3a 
  
 Graphic Illustration of Mine and Mill Production Schedule 
  
 

 
  
  

					
	

	 	 

  
	 	

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 Figure 1.5.3b 
  
 Mine, Waste Dump, Stockpiles, End of Open Pit Life 
  
  

	
	

					
	

	 	 

  
	 	

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 Mine Operations 
  
 The mining process will be typical of large hard rock porphyry open pit operations and will take advantage of the
efficiencies of large modern mine equipment. The mine will use 15m high benches consistent with other large operations. 
  
 Blast hole drilling will be with large rotary drills capable of 31 cm (12.25 inch) holes. Blast holes will be assayed for grade control purposes. Loading
is planned with 43 cubic meter shovels into 300 tonne haul trucks. 
  
 Mine Mobile Equipment 
  
 Mine equipment was
selected to meet the production requirements on Table 1.5.3b. Truck fleet calculations were based on detailed haul time simulation. Haul profiles were measured by year, pushback, and material type to each of the appropriate destinations. Table
1.5.3d summarizes the requirements for the major mine equipment. 
  
 Mine Production and Stripping Ratio 
  
 The
Toromocho project has the advantage of a very low stripping ratio overall, at about 0.57. In addition pre-mine stripping is only about 63 million tonnes and can be easily accomplished in the year before milling operations begin. 
  
 Difference between Mine Plan and Resource 
  
 The resources summarized previously contain 1,834 million tonnes of
measured and indicated mineralization. The most recent mine plan shown on Table 1.5.3b produces 1,054.6 million tonnes to the mill, 97.6 million tones of low grade to a mill stockpile, 61.4 million tones of high grade ROM leach, and
94.6 million tones of low grade leach to a stockpile. This totals 1,308 million tonnes of mineralized material. The difference between the resource and the mine plan is approximately 526 million tonnes of measured and indicated
resources that are not included in the mine plan. 
  
 The
potential exists to bring that 526 million tonnes into the mine plan with the following changes: 
  

	 	•	 	Enlarge the final pit in several directions including: 1) crossing the national highway, and 2) mining on properties that are currently not controlled by PCI.

  

	 	•	 	If the final pit is enlarged, additional area for waste storage will be required. 

					
	

	 	 

  
	 	

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	 	•	 	Reduce the cutoff grades within that larger pit to values that are lower than those used for the mine plan stockpiles. The resource was based on a copper price of $1.00/lb and the
mine plan was based on maximizing return with a copper price of $0.90/lb. Consequently, the resource was based on lower cutoffs than the mine plan. 

  
 This addition would add about another 10 years to a total +32 years. 

					
	

	 	 

  
	 	

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 Table 1.5.3d 
  
 Mine Major Equipment 
  
 Mine Major Equipment Fleet On Hand 
  

																																															
	 	 	Time Period

	 	Stkp Reclaim

	 Equipment Type

	 	Prep

	 	1

	 	2

	 	3

	 	4

	 	5

	 	6

	 	7

	 	8

	 	9

	 	10

	 	11

	 	12

	 	13

	 	14

	 	15

	 	16

	 	17

	 	18

	 	19

	 	20

	 	21

	 	22

	 IR PV351 Blasthole Drill
	 	2	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	2	 	 	 	 
	 43 Cubic Meter Shovel
	 	2	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4
	 Cat 994 Wheel Loader
	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1
	 300 Tonne Haul Truck
	 	23	 	34	 	36	 	38	 	38	 	39	 	45	 	55	 	57	 	57	 	57	 	57	 	53	 	57	 	57	 	57	 	56	 	56	 	50	 	50	 	38	 	38	 	38
	 Cat D10R Track Dozer
	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	6	 	5	 	5	 	5	 	5	 	5	 	5	 	5	 	5	 	5	 	5
	 Cat 834G Wheel Dozer
	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	2	 	2	 	2	 	2	 	2	 	2	 	2
	 Cat 16H Motor Grader
	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	4	 	2	 	2	 	2	 	2
	 Cat 777 Water Truck
	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	2	 	2	 	2	 	1	 	1	 	1
	 Cat 988 Wheel Loader
	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1
	 Cat 773E Haul Truck
	 	2	 	2	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	3	 	2	 	2	 	2	 	2	 	2	 	2	 	2	 	2
	 IR ECM 780 Rock Drill
	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	 	 	 
	 Cat 325 Excavator
	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1	 	1
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	 TOTAL
	 	50	 	65	 	68	 	70	 	70	 	71	 	77	 	87	 	89	 	89	 	89	 	89	 	85	 	88	 	88	 	87	 	84	 	83	 	77	 	75	 	60	 	57	 	57
	 	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

					
	

	 	 

  
	 	

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 Slope Design (Extracted from Call & Nicholas, Inc. Report,
November 1st 2005) 
  
 The following summarizes the recommendations and conclusions from the geotechnical evaluation of the Toromocho property based on geological and
geotechnical information as of August 2005: 
  

	 	•	 	Final slope interramp slope angles are presented on Figure 1.5.3c and Table 1.5.3e. The interramp slope angles range from 33 degrees up to 45 degrees. 

  

	 	•	 	Working interramp slope angles should be three to four degrees flatter than the final wall interramp slope angles. 

  

	 	•	 	The run-of-mine fragmentation for the leachable and non leachable ore is presented on Figure 1.5.3d. 

  

	 	a.	Fifty percent of the material will have a side length of 4 mm. 

  

	 	b.	The size distribution is similar for all three cases evaluated. 

  

	 	•	 	Call & Nicholas Inc., constructed a geological model and an Rock Quality Designation (RQD) model for the deposit 

  

	 	a.	The geologic model is based on the geologic sections interpreted by the Minera Peru geology staff. 

  

	 	b.	The RQD model used the drill-hole data available as of August 2005 and the rock type limit. 

  

	 	•	 	The RQD of the ore-bearing rocks and waste is low, with an average RQD of 30%. This characteristic of the deposit will impact all aspects of the recovery of the ore from the
drilling and blasting up to the milling and leaching processes. 

  

	 	•	 	Future work should include: 

  

	 	a.	Evaluation of the volcanic upper contact on the east side of the pit as it is a potential slope stability issue. 

  

	 	b.	Lab testing and field testing to determine how much fine-grained material is generated. 

  

	 	c.	Additional rock-strength in skarn samples 

  

	 	d.	An interpretation of the alteration of the deposit. 

  

	 	e.	Projection/interpretation of the major structures on the final pit slopes. 

  

	 	f.	Additional drilling on the west side to confirm interpreted geologic and RQD data. 

					
	

	 	 

  
	 	

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 TABLE 1.5.3e 
 MINERA PERU COPPER, TOROMOCHO PROJECT 
 RECOMMENDED INTERRAMP SLOPE DESIGN ANGLES 
  

					
	 	  	RECOMMENDED INTERRAMP SLOPE ANGLE

	 DESIGN SECTOR

	  	IGNEOUS

	  	SKARN

	 North Wall Skarn
	  	 	  	33
	 North Wall Igneous
	  	44	  	 
	 East Wall Skarn
	  	 	  	34
	 East Wall Igneous
	  	40	  	 
	 SE Wall Igneous
	  	45	  	 
	 South Wall Skarn
	  	 	  	33
	 South Wall Igneous
	  	44	  	 
	 SW Wall Igneous
	  	44	  	 
	 West Wall Skarn/Igneous
	  	33	  	33
	 NW Wall Skarn
	  	34	  	 

					
	

	 	 

  
	 	

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 Figure 1.5.3c 

					
	

	 	 

  
	 	

	 	 	 	 	 Page
 30
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 Figure 1.5.3d 

					
	

	 	 

  
	 	

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	1.5.4	Hydrology 

 (Extracted from Errol L.
Montgomery & Associates, Inc. Report, dated January 11, 2006) 
  
 Minera Peru Copper S.A. (Peru Copper) Toromocho Project is located adjacent to the town of Morococha, Peru, in the Morococha Mining District, at an altitude of 4,600 meters above sea level. Toromocho Project management presently estimates
that at a mining rate of 150,000 tonnes per day, water supply demand for the Toromocho Project will be about 1,100 liters per second (L/s) or about 35 million cubic meters of water per year (m3/yr). Potential groundwater and surface water
supply for Toromocho is limited by physical constraints, and by legal, environmental, and cultural constraints. This preliminary assessment focuses on physical water availability. 
  
 Average annual rainfall including water content of snow at Morococha is about 840 millimeters (mm). A rainy season usually extends from
December through March; precipitation during this 4-month period is approximately 56 percent of annual rainfall. Lake evaporation is estimated to be about 1,100 mm per year. Average daily temperature ranges from about 3 to 14 degrees Celsius in
summer months to about -4 to 20 degrees in winter. 
  
 Nearly all groundwater in
the immediate area of Toromocho Project is intercepted by the Kingsmill Drainage Tunnel; groundwater resources physically available to Toromocho include discharge from this tunnel. The drainage tunnel occurs beneath Toromocho Project and discharges
to the Rio Yauli about 8 Km east from Morococha; average recorded discharge from the mouth of the tunnel is about 1,250 L/s or about 39 million m3/yr. Recorded discharge from the tunnel ranged from about 790 to 2,200 L/s in the period from
January 1996 through October 2005. Average recorded discharge from the Kingsmill Tunnel is about 113 percent of estimated water demand from Toromocho Project. 
  

Additional recognized but non-quantified groundwater resources are physically available in areas marginal to the immediate area of Toromocho Project, such as
groundwater stored in karstic limestone strata near Tuctu and near planned tailings impoundments located in the Rio Rumichaca basin south from the Toromocho Project. The Rio Rumichaca valley is tributary to Rio Yauli. Groundwater discharge from
these recognized but non-quantified sources does not report to the Kingsmill Tunnel. 
  
 Laguna Huacracocha and Laguna Churuca occur adjacent to Toromocho Project and adjacent to Morococha. Combined capacity of the lakes is about 
  
 56 million cubic meters (m3); more than 90 percent of the available storage occurs in Laguna Huacracocha. The combined storage volume is about 160 percent of
estimated annual water demand for Toromocho Project. Annual and seasonal inflow to the lakes ranges widely and in many years is reported to be sufficiently small that no lake overflow occurs at the outlets. If Lagunas Huacracocha and Churuca would
be used as sources of water for Toromocho, natural inflow would require augmentation. 

					
	

	 	 

  
	 	

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 Presently estimated water demand for Toromocho Project and presently quantified potential sources of water supply are
summarized as follow: 
  

					
	Estimated Toromocho Water Demand	  	1,100 L/s	  	35 million m3/yr
			
	Groundwater, average physically available from Kingsmill Drainage Tunnel	  	1,250 L/s	  	39 million m3/yr
			
	Lake Storage, capacity physically available	  	 	  	56 million m3

  
 Chemical quality of water from streams
is generally good with approximately neutral pH. Water from Laguna Huacracocha and Laguna Churuca is acidic. Water discharge from the mouth of Kingsmill Tunnel is acidic and contains large concentrations of dissolved metals. 

					
	

	 	 

  
	 	

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	1.5.5	Concentrator 

  
 Metallurgical (Extracted from Minerals Advisors Group Report, November 2005) 
  
 Minerals Advisory Group (MAG) has provided metallurgical consulting and supervisory services to Peru Copper Inc. (PCI) since
November 2004. MAG was assigned the responsibility of recommending and implementing a program to improve the metallurgical response of Toromocho ores and develop engineering data to be used in the production of a Toromocho Feasibility Study.
Physical testing and analyses have been performed by METCON Research, Hazen Research, Pocock Engineering and Contract Support Services, Inc. The MAG Summary of Metallurgical Investigations draws together the testwork conducted for Peru Copper
including work completed by METCON prior to the submission of a 43-101 document in August 2004. Actlabs, Inc. of Tucson was used almost exclusively as the assay lab of choice in order to maintain continuity in assays. 
  
 Toromocho ores have been studied by Cerro De Pasco, CENTROMIN and Peru
Copper over a period from about 1968 though 2005. The early work resulted in a Kaiser Engineers Feasibility Study. This Feasibility Study has been made available to SNC Lavalin (SNC-L) for review and study. Peru Copper has developed, through its
consultants, ore specific metallurgy and engineering parameters to supplement the Kaiser Engineers base data. Historical metallurgical testing demonstrated copper recoveries of about 85% and final copper concentrate grades of about 22-28% from a
conventional flotation process. 
  
 Crushing and grinding
parameters have been developed for Toromocho materials and specific energy consumptions projected through conventional Bond work index determinations and through JK SimMet projections. Laboratory testing demonstrated a rougher flotation grind
P80 of about 106 to 125μ depending on the composite material to be ground and a cleaner flotation
P80 of about 40μ. 
  
 Flow sheet development at METCON yielded a conventional flotation process that includes three flotation cleaning stages and the use of sodium
carboxymethylcellulose (CMC) to depress naturally floating silicate minerals if necessary. Composite materials representing the Toromocho resource were used to allow the quantification of copper, silver and molybdenum metallurgy. Lock cycle testing
of these composite materials and open cycle testing of a second set of composite materials support an average copper recovery of 89.5% and at an average copper grade of 26.5%. From the same tests silver recovery is projected to be about 56.5% and
molybdenum recovery about 52.3%. These projections are based on the assumption that the composite materials tested are metallurgically representative of the mineable Toromocho ore. Molybdenum metallurgy continues to be studied at METCON to better
define the recovery process. 

					
	

	 	 

  
	 	

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 METCON produced copper concentrates and tailings products from composite materials that were used to
develop engineering data to be used for the sizing of tailings thickeners, concentrate thickeners and concentrate filters. Tailings rheology was also developed for use in the design of a tailings disposal system. 
  
 Two potential sources of fresh water (Laguna Huacracocha and Kings Mill
Tunnel outflow) for the proposed Toromocho operation were tested to demonstrate process amenability. Generally both water sources appear to be suitable in the flotation system if treated prior to introduction to the process water system. A pH 10.5
water treatment with lime in the tailings thickener was simulated in the laboratory and waters thus treated introduced into the flotation circuit. Further study of local waters will be necessary as more information becomes available about the purity
of waters available for introduction to the milling system. 
  
 Process and Plant Facilities 
  
 Introduction 
  
 The Toromocho concentrator is
designed to process 150,000 tpd of ore with an average grade of 0.53% Cu and 0.019% Mo (see Table 1.5.3c). 
  
 The copper concentrate produced from this plant averages 26.5% Cu at a recovery of 89.5%. The molybdenum concentrate grade and recovery are 50% Mo and
52.3% respectively. Moly recovery was adversely affected by the presence of the talc. This led to the design of a talc rejection circuit which, on further analysis, could not be economically justified, owing to the limited amount (about 8.8%) of the
ore body that is contaminated with talc Additional work is in progress to improve overall moly recovery for Toromocho. 
  
 The concentrator design is based on 365 days per year, 24 hour per day operation with an overall plant availability of 92%. The site for the concentrator
was determined from a trade-off study considering three different plant locations. The preferred location for the concentrator was established based on a fixed site for tailings impoundment facilities in a valley south of ore body (Quebrada
Tushurunco) directed by PCI. The tailing impoundment site is located at higher elevation than the open pit mine. This requires that the crushed ore from the mine be transported uphill to the concentrator coarse ore stockpile via an approximately 2
km long conveyor that is routed through a tunnel connecting the two separate areas. It is believed that significant economic benefits over that indicated in this study can be achieved if a new siting study for the concentrator and the tailings
impoundment facilities is conducted, considering the impact of all relevant elements on the capital and operating costs as well as the corresponding environmental and public issues. See drawings 931-000-45PL-001 and 002. 

					
	

	 	 

  
	 	

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 Plant operations are controlled remotely from a central control room. The process control system
includes CCTV to make this possible and is designed to operate, monitor and control the process facilities and associated systems in a safe, efficient and economical manner. The control system is based on DCS and provides redundant processing and
communications systems. Field instrumentation includes on line analyzers to enable monitoring and control of critical process variables. 
  
 Process Description 
  
 The process flow sheet is shown in the schematic form on figure 1.5.5. Two 62in x 75in primary gyratory crushers, operating in parallel, are provided to
reduce minus 40in ore to minus 12in. Each crusher is powered by a 600 hp motor. The primary crushers are fed from separate truck dump hoppers that receives the discharge from 330 st capacity mine haul trucks. Each crusher discharges into a hopper,
from which the ore is withdrawn by a belt feeder which in turns feeds onto a 72 in. wide x 2,368 m long belt conveyor that discharges onto a 150,000 tonne live capacity SAG mill feed coarse ore stockpile. 
  
 Ore is withdrawn from the coarse ore stockpile and fed into two
(2) parallel 40 ft dia. X 24.5 ft long SAG mills, with each unit powered by a 29,000 hp gearless drive. Each SAG mill discharge is screened and the coarse material is crushed in two (2) dedicated MP-1000 pebble crushers (1000 hp) operating
in open circuit. The crushed pebbles are returned to the corresponding SAG mill. The pebble crushing circuit is designed to permit, if required, the return of the crushed product to the corresponding ball mills that follows each SAG mill to provide
process flexibility. The product from each SAG mill discharge screen is fed to two 24.5 ft dia. X 37.5 ft long ball mills, operating in parallel. Each ball mill is powered with a 16,000 hp gearless drive and is operated in closed circuit with 10-33
inch dia. type G-max cyclones. 

					
	

	 	 

  
	 	

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 Figure 1.5.5 
 

 
  
  

					
	

	 	 

  
	 	

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 The overflow from the ball mill cyclones is processed in the flotation circuit which consists of
rougher flotation; regrind of rougher concentrates; first, second and third cleaners; and cleaner-scavenger flotation stages. The major equipment included in the flotation circuit are: 
  

	 	•	 	Four (4) lines of rougher flotation cells, with each line consisting of six (6) cells, each with a capacity of 8,900 cu. ft. (252cu.m). 

  

	 	•	 	Four (4) regrinding circuits, with each line including one (1) 1,500 hp vertical mill in closed circuit with ten (10) 15 in diam.(380mm) cyclones.

  

	 	•	 	Two (2) first cleaner lines with each line consisting of five (5) 4,500 cu. ft. (127cu. m) in a 1-2-2 arrangement. 

  

	 	•	 	One (1) second cleaner line consisting of five (5) 4,500 cu. ft. (127cu. m) in a 1-2-2 arrangement. 

  

	 	•	 	Three (3) 215 sq. ft (20 sq. m) third cleaner column cells. 

  

	 	•	 	Two (2) 3,000 cu. ft. (85 cu. m) cleaner-scavenger cells. 

  

	 	•	 	One (1) 65 ft dia.(20 m.) Cu-Mo bulk concentrate thickener. 

  
 The bulk Cu-Mo concentrate from the thickener is fed into the copper-molybdenum separation circuit. The separation takes place in six stages of flotation.
The final molybdenum concentrate is thickened, filtered in a 27 sq. ft. (2.5 sq. m) vertical filter press and dried in a 60 tpd capacity multi-disc dryer. The dried molybdenum concentrate is then packaged in one tonne capacity maxi-bags. The copper
concentrate is thickened in a conventional 20 ft. diam. (6 m) thickener located at the concentrator site. 
  
 The thickened concentrate is stored in two (2) 21,200 cu. ft (600 cu. m.) capacity holding tanks and transported via gravity flow in a 6 in. diam.
(150 mm) x 4.2 km. long concentrate pipeline to the filter plant located at the rail head, approximately 5 km. to the south of the concentrator and 11 km east of Ticlio. The thickened concentrate from the pipeline discharges into a 6,350 cu. ft (180
cu. m.) capacity receiving tank and is subsequently fed to two (2) 3,800 sq. ft. (360 sq. m.) vertical filter presses which are housed in a filter building. The de-watered concentrate, at approximately 8% moisture, is stored in a 10,000 tonne
capacity enclosed storage building. Concentrate is withdrawn from the building with front end loaders and loaded onto a belt conveyor that loads the rails cars for transport to Callao. The filtrate from the filter presses is clarified and pumped to
the tailing impoundment. 
  
 The rougher and cleaner scavenger
tails are thickened in two (2) 330 ft. (100 m.) high rate thickeners. The thickened tailings then flow by gravity to the tailings impoundment facility. The tailing thickener overflow and the reclaim water from the tailing dam are collected in a
pond located near the tailing thickeners and returned to the process water pond. 
  
 The reagent circuit includes the installations required to receive and store lime as well as the systems to prepare, store and distribute milk of lime. The reagent circuit also includes the systems to receive, store,
prepare and distribute all the reagents required (including collectors, frothers, diesel fuel, flocculants and the like) to process the Toromocho ore. 

					
	

	 	 

  
	 	

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	1.5.6	Tailings Dam 

  
 (Extracted from Montgomery Watson Harza Report, October 2005) 
  
 Prior to selecting the current tailings site, various sites in the region were analyzed. Criteria for final site selection included integrity of dam
(stability), effects on public perception, distance and elevation relative to mill, dam fill quantity, drainage catchment area, and potential for impoundment seepage. 
  
 Objectives 
  
 The specific project objectives for the embankment design is to store approximately 1 billion tonnes of tailings for a production rate of 150,000 tonnes
per day and meet the following requirements: 
  

	 	•	 	Satisfy internationally accepted stability criteria for embankment construction in high a seismicity area 

  

	 	•	 	Minimize risk of seepage into the environment 

  

	 	•	 	Manage all surface water within the drainage basin to provide containment and/or a controlled release consistent surface water quality drainage standards and hydraulic design
criteria. 

  

	 	•	 	Utilize locally available material to provide cost effective construction without compromising safety 

  

	 	•	 	Satisfy all Peruvian regulatory requirements associated with construction of the TSF 

  
 The selected site is located approximately 5 km southeast of the proposed Toromocho project pit, along the Quebrada
Tunshuruco Valley. Relative to landmarks and existing public facilities, the site is located north of the railroad tracks that go from Ticlio to Yauli and forms part of the headwaters of the Rumichaca River. The valley is located between the
Viscacharonga, Huruya Punco and Lauricocha peaks (see Drawing 2). 

					
	

	 	 

  
	 	

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 Site Investigation 
  
 The majority of rock exposed in the valley is limestone. Karst topography normally occurs in limestone. Because of the
abundance of limestone in the Peruvian Andes, this has been an issue at several tailings facilities. The Formation present near the mouth of the valley is the Jumasha Formation, which is particularly known to contain karst features and some notable
cave systems. In addition to the presence of limestone, there are significant lacustrine deposits in the valley bottom. 
  
 The valley at the proposed tailings site appears feasible for tailings deposition based on the geologic reconnaissance provided recommended engineering
measures are implemented. Two areas of possible geologic concern were noted. These are the subsurface geology of the Jumasha Formation in the area of the proposed dam and along the southern portion of east ridge that forms the impoundment. As
mentioned previously, the Jumasha Formation is a known to have karst features in Peru. Indications of limestone solubility were observed in minor surficial features, but no substantial indications of subsurface karst were observed. While this
suggests that a karst system that could affect the tailings system is not likely present, it does not preclude the existence of karst at the depth of the water table. Karst often occurs at the water table (phreatic surface). 
  
 Another concern is the presence of deep lacustrine deposits within the
footprint of the dam. These will impact the stability, settlement and seepage rates of the dam; therefore, they will need to be removed. 
  
 Drilling was completed to characterize the soils, bedrock, and piezometric conditions within Tunshurucu valley and determine the feasibility of
constructing a tailings impoundment in the valley. To this end a total of fourteen holes were drilled at the proposed site. Five holes were drilled along the centerline of the proposed tailing dam. Another two holes were drilled downstream of the
centerline, along the center of the valley. Two holes were drilled within the footprint of the main dam in order to confirm geology in the area of the limestone ridge at the bottom of Site. Another hole was drilled within the footprint of the saddle
dam to confirm the geology in that area. In addition three holes were drilled in areas, identified in the geologic survey that showed signs of irregular erosion or carbonate dissolution. All drilling was conducted between August 6, 2005 and
October 7, 2005. 
  
 Water pressure tests were performed in
bedrock to determine the in-situ permeability of the bedrock in the region. The results of the packer testing indicated bedrock permeability ranged from 1x10-3 cm/sec to 1x10-5 cm/sec. This data indicates the grouting may be
required to minimize seepage from the impoundment. 
  
 Piezometers were installed in thirteen of the borings, in order to characterize the groundwater conditions within Site. Initial readings taken on the piezometers indicate that water levels range from 50 m below ground surface and three of
the piezometers exhibited artesian conditions. 

					
	

	 	 

  
	 	

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 Laboratory testing was performed on a number of the samples taken in the field during the
geo-technical field investigation as well as the construction materials survey. Laboratory analyses were performed at Pontificia Universidad Catolica del Peru in Lima, Peru. The testing verified that the lacustrine deposits in the valley bottom are
extremely wet and weak. 
  
 Seismic work was performed with
mechanical impacts to comply with shallow depth penetration requirements. The geophysical survey confirmed the presence and areal extent of very soft lacustrine deposits identified during field mapping and drilling. 
  
 For starter and ultimate dam see drawings 7 and 8. 

					
	

	 	 

  
	 	

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 Engineering Analyses 
  
 Engineering analyses were completed to aid in the design of the embankment and the impoundment. These analyses consisted of the following topics:

  

	 	•	 	Tailings Material Balance: This analysis indicates that a total of 19.1% of tailing underflow material is required to build the sand dam over the life of the project. Currently
there is an expected 17.5% underflow material available with the current tailings grind. This indicates that there is a potential shortage of tailings underflow to construct the sand dam. This shortfall of sands could be addressed by coarsening the
grind or steepening the downstream slope of the dam or a combination of both. 

  

	 	•	 	Seepage Analysis: Seepage from the impoundment is expected to be minimal due to the low permeability of the tailing. Seepage is expected to diminish over time because of the
increase in thickness of the low permeability tailing and increase in length of the tailing beach from the dam. Based on the design performed, the starter dam, sand dam, and dam blanket drain is expected to capture most of the seepage from the
impoundment and through the dam. 

  

	 	•	 	Water Balance: The conceptual water balance shows that through the first year there will be 2,508 m3/hr of water available for reclaim and in the final year there will be 2,690 m3/hr of reclaim water available. These reclaim values result in a slight increase in decant pond volume by the end of year one and a slight decrease in decant
pond volume through the final year. 

  

	 	•	 	Slope Stability: The results of the stability analysis are presented in Table ES.1, Results of Stability Analysis. All calculated safety factors meet or exceed the required
slope stability design criteria. This stability analysis assumed the removal of the lacustrine deposits in the valley bottom. 

  
 TABLE ES.1 
 RESULTS OF STABILITY
ANALYSIS 
  

									
	 	  	Circular Failure

	  	Block Failure

	 Section

	  	Static

	  	Pseudo-static

	  	Static

	  	Pseudo-static

	 Starter Dam
	  	2.65	  	1.53	  	2.56	  	1.67
	 Final Dam
	  	2.29	  	1.27	  	2.29	  	1.27

  
 Embankment
Design 
  
 Construction of the ultimate tailing embankment is
planned to occur in a phased manner to help control capital costs prior to the start of the tailing deposition operations. Therefore, the construction of the ultimate tailing embankment is separated into the following phases: 
  

	 	•	 	Phase I- Capital Construction: Construction of the design components prior to the start of the tailing deposition operations. 

					
	

	 	 

  
	 	

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	 	•	 	Phase II- Operational Construction: Construction of the design components during the tailing deposition operations. 

  
 During Phase I, the following tailing embankment design components will be
constructed: 
  

	 	•	 	Starter rockfill dam to store overflow tailing materials during approximately the first year of operations as the tailing embankment is being constructed to the crest of the starter
dam using underflow tailing materials. 

  

	 	•	 	The initial portion of a seepage collection system to collect and pump-back the seepage from the overflow and water that drains from the underflow tailing materials.

  

	 	•	 	Reclaim pond pump-back system 

  

	 	•	 	Tailing delivery system to the cyclone station 

  

	 	•	 	Cyclone station and underflow and overflow discharge system 

  
 During Phase II, the following tailing embankment design components will be constructed. 
  

	 	•	 	Tailing embankment (compacted underflow tailing materials) to retain the overflow tailing materials 

  

	 	•	 	Remaining portions of the seepage collection system 

  

	 	•	 	Moving or relocation of reclaim barge and pump-back system 

  
 Tailings Delivery and Water Reclaim System Design 
  
 Tailings from the thickeners go to tailings dilution system and classification system (sand and slimes). A separate line without dilution goes to the
southeast side for discharge directly into the impoundment. 
  
 When tailings go to the classification system, they must be diluted to a solid content of 45%: This water is added in a dilution tank on the right abutment of the dam. These dilute tailings are conveyed to the cyclones for classification.
In this process, sand and slimes are obtained. And where the sand is distributed on the downstream face of the dam and slimes on the upstream face. 
  
 Only two of the three cyclone batteries will operate simultaneously. 
  
 The water reclaim system includes the following items: 
  

	 	•	 	Two water recovery towers in the impoundment area; 

  

	 	•	 	A reclaim water pond near the tailings thickeners; 

  

	 	•	 	A classification system water tank above the cyclone dilution tank; 

  

	 	•	 	Pipelines from the towers to the reclaim water pond; and, 

					
	

	 	 

  
	 	

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	 	•	 	Pipelines from the reclaim water tank to the classification water tank and cyclones. 

  
 Two water recovery towers will be installed, the second one located well above the initial pond. The second tower will serve
as a booster station for the first years of operation. When the water surface reaches the second tower’s location, the sump will be modified to allow water intake and the first water tower will be taken out of service. 
  

	1.5.7	ROM Leach SX/EW Plant 

  
 (Extracted from Minerals Advisory Group Scoping Report, Oct. 2005, and Site Location and Heap Leach Study, June 2005.) 
  
 Description of Facilities 
  
 Heap leach operations would utilize the valley just west of the proposed
concentrator and tailings dam. The associated SX-EW facility is located south of and adjacent to this site. 
  
 Concept of Operation 
  
 The total ROM heap leach ore amounts to 156 million tonnes. Of this amount, about 40% will be delivered directly from the mine and 60% will be
stockpiled. Ore is withdrawn form the stockpile beginning in year 5 and as needed from then on to supply the heap leach daily feed. 
  
 Annual tonnage to be leached is about 8.2 million tonnes, or 22,500 tons per day. The leach pad will be constructed in four 275, 000 square meter
segments, one segment in pre-production and others in years 6, 12 and 18. 
  
 The cost for the re-handling and hauling from the ROM stockpile area and to the leach pad are included in the operating cost. 
  

A flow rate of 10 l/sq mt/hr (.004 gpm/sq ft) was selected to initially irrigate the heap. As the heap becomes saturated, the solution flow builds to
11,500 gpm net after evaporation, and reports to the PLS pond. Because of the low ore grade, the solution would be re-circulated onto the heap until the PLS tenor reaches about 2 g/l. At that level a bleed stream of 4700 gpm would be pumped to the
nearby SX plant. Raffinate from SX would return to its respective pond. 
  
 Copper recoveries were assumed to build from an initial 30% in the first year of operation to an average of 60% in year 3. 
  
 It is important to note that assumptions made for this analysis are based on previous leach testwork done by Cerro de Pasco and Centromin. Currently a
detailed column leach test program is being carried out to confirm assumptions made for this study. 
  
 It has also been assumed for this study that acid for leaching will be available from La Oroya. 

					
	

	 	 

  
	 	

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	1.5.8	Infrastructure 

  
 Access Road. 
  
 Toromocho Project area is beside the current Central Highway (Carretera Central), which is the public road to connecting the area with Lima and Callao.

  
 Access to the general area (Managers Camp) will be from
Central Highway. 
  
 Main access to plant will be from the public
road to the main access control gate, scale and parking area. This two lane paved road will cross through the mine services area, primary crushing and concentrator plant. A dirt road will be constructed between the concentrator and the filter plant
to allow for easy access to the filter plant and the concentrate pipeline. 
  
 Power Supply. 
  
 Electrical power for the project is to be provided from the 220 kV National Interconnected Electrical System (SEIN) grid located in this area of Peru (see Figure 1.5.8.a). Power is tapped from the 220 kV substation located at Pachachaca and
transmitted to the site via a 9 km. long single circuit transmission line. A single power transformer 180/200 MVA capacity 220/33 kV is located at the main substation located near the concentrator. Power is distributed from the main substation to
the project facilities via 25 unit substations and 9 electrical rooms. The transmission line from Pachachaca is to be provided by the project, and the operating cost is reflected in the unit power rates used in this study. The final power rates need
to be negotiated with either and/or both the relevant Peruvian generating and distribution companies. 

					
	

	 	 

  
	 	

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 Figure 1.5.8 a 
  
  
 

 
  
  

					
	

	 	 

  
	 	

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 Water supply 
  
 The fresh water requirements are based on a total water consumption of 800 l/s. 
  
 As directed by PCI, water is assumed to be supplied from the following
sources: 
  

	 	•	 	400 l/s from wells located in the Huacracocha Lake area. Water from this source is assumed to have a pH of 7-8. 

  

	 	•	 	400 l/s from the Kingsmill tunnel discharge. This water requires treatment prior to use and would have a pH of 7-8 after treatment. 

  
 The Huacracocha pumping station is assumed to be located 5 km. north west of
the concentrator at an elevation of 4,600 m.a.s.l.. Water from this pumping station is delivered to a 50,000 cu. m . fresh water pond located north of the concentrator at an elevation of 4,900 m.a.s.l. Two lines are provided to transport water from
Huacracocha to the fresh water pond with a separate 1,700 hp pump installed on each line. The intake for water from the Kingsmill tunnel is located approximately 9 km. east of the concentrator at an elevation of 4,000 m.a.s.l.. Water from the tunnel
will be treated in a plant located at the tunnel discharge and pumped subsequently to the fresh water pond. Since there is a 900m difference in elevation between the water treatment plant and the fresh water pond, six stages of pumping is required
to transport water to the pond. This requires 1,600 hp for that each pumping station to deliver water at its destination. At the start of the operations, all three lines feeding the fresh water pond are required to operate the plant as there will be
no (or a very reduced rate) reclaim water initially. When the reclaim water system becomes fully operational, only two fresh water lines need to operate. 
  
 Infrastructure Buildings 
  
 Concentrator Area 
  
 This area is provided with the following buildings: 
  

	 	•	 	Concentrator office 

  

	 	•	 	Maintenance shop 

  

	 	•	 	Concentrator warehouse 

  

	 	•	 	Metallurgical and Chemical Assay Laboratory. 

  
 Mine Area 
  
 This area is located near the edge of the final pit with ready access from the Central Highway. The buildings and installations provided in this area
includes: 
  

	 	•	 	Truck shop 

  

	 	•	 	Mine truck washing facilities 

  

	 	•	 	Fuel station 

  

	 	•	 	Geology and mine engineering office 

  

	 	•	 	Geology sampling building and storage yard 

  

	 	•	 	General administration office 

  

	 	•	 	First aid service and fire station 

  

	 	•	 	Access control building including weigh scale 

  

	 	•	 	Potable water and sewage treatment plants 

					
	

	 	 

  
	 	

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 General Services Area 
  
 This area will be located at a place to be defined in the next engineering phase and includes the following facilities:

  

	 	•	 	Management and superintendent housing 

  

	 	•	 	Guest house 

  

	 	•	 	Management dinning hall and recreational club 

  
 As defined by PCI, it is planned to provide foreman and workers housing in the Morococha area at a site yet to be determined. Furthermore, PCI is in
conversations the the housing ministry to establish a program call “Propio Techo-Cero Deuda” – My own house with no debt. 
  
 Communications System 
  
 A microwave system with repeaters located along the Central Highway is to be provided for communications between the site and Lima. It is planned that the
back bone for communications between the various site facilities will be based on fiber optic cable. Telephone and radio systems are provided, as appropriate for on site and off site. Communications storage of corporate data is to be in a main
server provided in the main Lima office, with backup servers at the site. Access control and security system are based on utilization of CCTV. 
  
 Concentrate Transportation 
  
 The Toromocho copper concentrate production is estimated to be approximately 3,200 wt/d or 1,200,000 wt/y. These figures include a moisture content in the
concentrate of 8%. Several alternative concentrate transportation systems including truck, rail and concentrate pipeline were studied. From the study, it was determined that the only practical means of concentrate transport from the filtering plant
to the port site at Callao is via rail. It is believed that rail transport of concentrate will have the least negative environmental impact as a railroad system with the required transport capacity already exists. The railroad system will require,
however, an upgrade of the existing rail bed and communications/ signal system and the addition of rail cars and locomotives. Rail transport of concentrates will require an environmental management plan to mitigate risks and potential emergencies
arising from concentrate spills. 
  
 Compañia Ferrovias
Central Andina S.A. (F.C.A) was granted the concession to administer and operate the central railroad system from the Peruvian government for a period of 30 . years, commencing in 1999. Within the concession contract, the FCA is engaged in a program
to carry out the required improvements indicated above. Nevertheless, it recommended that PCI obtain a written commitment to carry out specific improvements to the railroad system, rail cars and locomotives prior to formalizing an agreement for
transport the Toromocho copper concentrates. See Figure 1.5.8 b 

					
	

	 	 

  
	 	

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 Figure 1.5.8 b 
  
 

 
  
  

					
	

	 	 

  
	 	

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 Concentrate Reception, Storage and Ship Loading Systems in Callao. 
  
 At the port site in Callao, two international companies, Perubar (Glencore)
and Comin (Trafigura) have the required facilities to receive, store and load ships with concentrates in dock position No 5 (Refers to figure 1.5.8 c). In this area Perubars own a 70,000 sq. m. paved yard to receive, store and load concentrates onto
ships. At present, copper and zinc concentrates are stored in the open air, while a 5,000 sq. m. enclosed shed is provided for lead concentrate storage. Comin’s existing installations in Callao include a 102,000 sq. m. paved patio for open air
storage of copper and zinc concentrates and a 6,000 sq. m. closed shed for storage lead concentrate. Currently there are common ship loading facilities at Callao to handle about 1.5 million tones of concentrates per year. The existing
facilities for receiving, storing and loading of concentrates onto ships at Callao will require considerable improvements to handle Toromocho copper concentrate. For the purposes of this study, it is assumed the cost informed by Perubar-Gencore for
concentrate handling and ship loading. See Figure 1.5.8 c 
  
 For
purposes of this Prefeasibility study it has been assumed that about 25% of the concentrate production from Toromocho will be shipped to La Oroya for smelting and refining, then transported as refined copper to Callao. 

					
	

	 	 

  
	 	

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 Figure 1.5.8 c 
  
  
 

 
  
  

					
	

	 	 

  
	 	

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	1.5.9	Environment 

  
 Knight Piésold S.A. as subcontractor of SNC-L developed the environmental analysis for the Toromocho Project Pre-Feasibility Report as requested by
Peru Copper Inc. Available environmental baseline information (biological, physical and social) for the project area was reviewed which included an assessment of whether sufficient environmental baseline information is available to develop a project
Environmental Impact Assessment (EIA). The review indicated that there is currently no baseline information for air quality, soils, geomorphology, noise and vibrations or landscape within the project area and baseline studies and monitoring should
be undertaken for these components. Baseline information exists for surface and underground water, archaeological, socioeconomic and flora and fauna components. However, additional studies and monitoring are recommended to complement existing
baseline information. 
  
 Potential sources of environmental
impacts were identified and the effect of each impact on the environment was evaluated. The preliminary assessment indicated that geomorphology, air quality, water quality and the socioeconomic environment will be most significantly affected by
project activities. A preliminary environmental management plan was developed to identify the measures necessary for the proper management of the project’s environmental impacts and risks. In addition to mitigation measures, preliminary waste
management issues were identified and a conceptual closure plan was developed. The community relations program within this environmental management plan considers activities developed by Peru Copper for their current community and social programs
and incorporates suggestions to improve the program in order to comply with EIA requirements. 
  
 A preliminary environmental monitoring plan was developed for meteorology, air quality, water quality, noise and vibrations and flora and fauna components within the project area. The monitoring program will be used
to determine the effects of project emissions and mining activity through the measurement of environment components within the project area. This information can be used to adopt appropriate preventative and/or corrective measures in a timely manner
in case of negative project impacts. The information gathered during the monitoring program can also be used to design and /or modify the mine closure plan. The preliminary monitoring plan detailed methodology, location of monitoring points,
frequency and parameters to be monitored. 
  
 Peruvian
environmental standards, guidelines and permits relevant to the Toromocho Project were identified in the ‘Environmental Permits’ report. The principal legal issues were related to development and approval of the EIA, Mine Closure or
Abandonment Plan and an Environmental Liabilities Closure Plan. Additional permit requirements were also identified. A summary table of relevant permit and legislative requirements is also included in the report. 
  
 A preliminary cost analysis was undertaken for environmental studies
required for project approval, additional environmental permits and environmental costs for construction and operation stages. The report included a description of project items and their estimated costs. Costs were identified as either capital or
operational costs. 

					
	

	 	 

  
	 	

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 The Final Environmental Conclusions and Recommendations report summarized the main findings of the
pre-feasibility environmental analysis. In addition, a timeline was developed to guide Peru Copper Inc. in all activities required for environmental project approval and good environmental management practices. 
  

	1.5.10	Community Relations Program 

 (Text prepared by PCI,
November 2005) 
  
 Background 
  
 The project is surrounded by several large “communities” which are
actually large tracts of land each of which is communally owned by individual groups. The affairs of each community is managed by an elected president and a board of directors. Those communities that will be impacted in some way by the project are
the municipalities of Morococha, Yauli, Pucará and San Antonio. 
  
 The municipality of Morococha, according to the 2005 census, has a population of 3720 inhabitants. An elected mayor and council oversee the government and administration of the municipality. 
  
 Impact 
  
 The municipality of Morococha is the most affected because the development of the open-pit mine will take place in the area
within its jurisdiction. A considerable amount of area will be required for the development of the mine, plant and ancillary facilities creating the need to resettle the population in an area nearby but at sufficient distance to not be affected by
the activities of the mine. This area is yet to be created. Yauli, where the proposed tailings disposal facility is to be located is the second community most impacted. 
  
 Community Relations Program 
  

A community relations programs has been established by Peru Copper Inc. to: 
  

	 	•	 	Create a vision of the future that incorporates the communities impacted by the project. 

  

	 	•	 	Promote collaboration, trust and respect between the Company and the communities. 

  

	 	•	 	Establish an effective two-way dialogue and good relations with all the communities. 

  

	 	•	 	Assist in the promotion of sustainable development in the communities. 

  

	 	•	 	Keep the communities continually informed of the advances and status of the project. 

  

	 	•	 	Receive information from the communities with respect to their concerns about the project. 

					
	

	 	 

  
	 	

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	 	•	 	Promote community participation in the decision making processes where the community is impacted. 

  

	 	•	 	Create and execute a plan for the relocation of those living within the immediate impact area of the project. 

  
 Externally the objectives are to identify, understand and manage the key
social issues that arise from the relationship between the Toromocho Project and the impacted communities. 
  
 Management of the Program 
  
 Social Capital Group (SCG), a consulting group with expertise in community relations and population resettlement has been contracted to oversee the
program and train community relations staff for the project. SCG is supervised by the President and CEO of PCI. The complete program will include the resettlement of the impacted population, communications and internal affairs and human relations.

  
 ADRA, a non-governmental organization specializes in
assisting communities to focus on their futures, has also been contracted. ADRA has more than forty years successful experience with these types of programs. 
  
 Resettlement of the Population 
  
 The population that will need to be resettled is actually the town of Morococha. The majority of these work for either Argentum (Pan American Silver; PAS)
or Austria Duvaz (A-D). While some of the population does live in company owned housing, (either that of PAS or A-D), there are other properties, both residential or commercial, owned by third parties. 
  
 Communications 
  
 Communications are directed externally to those communities that are
impacted by the project. Internal communications are directed towards the staff and workers in order to create and maintain a team-like atmosphere. 
  
 External communications regarding the project are directed to the central, regional and local governments, to the public in general, the Catholic Church
and the leaders in the economic, social and political sectors. 
  
 Besides contact with the individual members of the Morococha population, PCI is hosting communication workshops to further communicate the status and advance of the project as well as to discuss other issues of importance to the
communities. These workshops are being conducted with considerable success by Horizonte, a Peruvian consulting firm. 

					
	

	 	 

  
	 	

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	1.6	Capital Cost Estimate 

  
 Estimate Background 
  
 A capital cost estimate was prepared for the entire project and the investment was summarized into the following main areas: 
  

	 	•	 	Concentrator process plant (150,000 tpd) direct cost (SNC-L) 

  

	 	•	 	Concentrator process plant indirect cost (SNC-L) 

  

	 	•	 	Owner’s cost (Perú Copper Inc.) 

  

	 	•	 	Mine cost (Independent Mining Consultants) 

  

	 	•	 	Tailings dam (Montgomery Watson Harza) 

  

	 	•	 	ROM leaching and SXEW plant (Minerals Advisory Group) 

  
 All components were integrated into one single estimate. 
  
 Methodology 
  
 The capital costs were estimated to be within a -10% +25% range with 90% probability of occurrence for CAPEX. No deferred costs in the concentrator plant
were estimated. 
  
 Owners and mining costs, tailings dam and ROM
leach SXEW costs were provided by third parties. 
  
 Quantities
were developed based on the following Engineering documents: 
  

	 	•	 	Site plot plan 

  

	 	•	 	Equipment lists 

  

	 	•	 	Process flow diagrams 

  

	 	•	 	Simplified P&ID’s 

  

	 	•	 	Layout drawings / sketches 

  

	 	•	 	Electrical single line diagrams 

  

	 	•	 	Inroads model 

  
 Major equipment pricing was obtained from budgetary quotations and minor equipment unit prices were obtained from in-house databases. Erection man hours
were assigned according to SNC-L experience with recent similar projects. Material quotations for the main commodities were obtained from local suppliers and installation man hours were obtained from in-house data. 
  
 Mass earthwork quantities were calculated using the Inroads model. Process
buildings quantities were sized according to the process equipment space required and design quantities were estimated based on similar designs executed recently. Offices, warehouses and housing complex were estimated based on similar mining
projects and sized according to the space required in each case. 

					
	

	 	 

  
	 	

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 Cost Estimate Summary 
  
 The following tables present the capital cost summaries by discipline and facility. 
  
 Table 1.6.1, Discipline Summary. 
  
 CAPITAL COST ESTIMATE SUMMARY REPORT BY DISCIPLINE 
  

									
	 AREA

	  	 DESCRIPTION

	  	 Labor, C.Eqt.
& Contracts
 ( k USD )

	  	 Equipment &
Materials
 ( k USD )

	  	 TOTAL
 ( k USD )

	 D
	  	 DIRECT COSTS
	  	 	  	 	  	 
	 1
	  	 EARTHWORK & SITE PREPARATION
	  	90,656	  	882	  	91,538
	 2
	  	 CONCRETE
	  	111,785	  	12,510	  	124,296
	 3
	  	 STEEL
	  	21,421	  	39,363	  	60,784
	 4
	  	 ARCHITECTURAL
	  	20,008	  	5,248	  	25,256
	 5
	  	 MECHANICAL
	  	28,882	  	221,648	  	250,530
	 6
	  	 PIPING
	  	24,754	  	18,171	  	42,925
	 7
	  	 ELECTRICAL
	  	20,955	  	36,052	  	57,006
	 8
	  	 INSTRUMENTATION
	  	2,876	  	14,826	  	17,702
	 	  	 	  	
	  	
	  	

	 	  	 SUBTOTAL - DIRECT COSTS
	  	321,337	  	348,701	  	670,037
	 	  	 	  	
	  	
	  	

	 I
	  	 INDIRECT COSTS
	  	 	  	 	  	207,491
	 	  	 	  	 	  	 	  	

	 	  	 SUBTOTAL - DIRECT and INDIRECT COSTS
	  	 	  	 	  	877,528
	 	  	 	  	 	  	 	  	

	 17.0%
	  	 CONTINGENCY
	  	 	  	 	  	149,500
	 910
	  	 OWNER’S COST
	  	 	  	 	  	87,918
	 910
	  	 MINE
	  	 	  	 	  	209,982
	 10.4%
	  	 OWNER’S COST & MINE CONTINGENCY
	  	 	  	 	  	30,930
	 	  	 TAILINGS DAM (Contingency Included)
	  	 	  	 	  	106,377
	 	  	 ROM LEACHING & SXEW (15,000 t/y) (Contingency Incl.)
	  	 	  	 	  	61,800
	 	  	 	  	 	  	 	  	

	 	  	 TOTAL INVESTMENT CAPITAL COST
	  	 	  	 	  	1,524,037
	 	  	 	  	 	  	 	  	

					
	

	 	 

  
	 	

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 Table 1.6.2, Facility Summary. 
  
 CAPITAL COST ESTIMATE SUMMARY REPORT BY AREA / FACILITY 
  

									
	 AREA

	  	 DESCRIPTION

	  	 Labor, C.Eqt.
& Contracts
 ( k USD )

	  	 Equipment &
Materials
 ( k USD )

	  	 TOTAL
 ( k USD )

	 D
	  	 DIRECT COSTS
	  	 	  	 	  	 
	 000
	  	 GENERAL AREA
	  	2,917	  	6,313	  	9,230
	 100
	  	 PRIMARY CRUSHING, COARSE ORE HANDLING, & STOCKPILE
	  	79,574	  	41,191	  	120,764
	 200
	  	 GRINDING PLANT
	  	90,189	  	175,316	  	265,506
	 300
	  	 FLOTATION & REGRINDING PLANT
	  	27,802	  	47,943	  	75,745
	 400
	  	 MOLY PLANT
	  	4,075	  	5,793	  	9,869
	 500
	  	 CONCENTRATE THICKENING, FILTRATION & STORAGE
	  	5,729	  	9,497	  	15,225
	 600
	  	 TAILINGS THICKENING & WATER RECOVERY
	  	13,705	  	11,689	  	25,395
	 710
	  	 PLANT INFRASTRUCTURE
	  	25,598	  	196	  	25,794
	 720
	  	 SERVICES
	  	50,122	  	42,340	  	92,462
	 730
	  	 TRANSPORTATION & PORT FACILITIES
	  	0	  	0	  	0
	 740
	  	 MINE INFRASTRUCTURE
	  	21,625	  	8,422	  	30,047
	 	  	 	  	
	  	
	  	

	 	  	 SUBTOTAL - DIRECT COSTS
	  	321,337	  	348,701	  	670,037
	 	  	 	  	
	  	
	  	

	 	  	 SUBTOTAL - INDIRECT COSTS
	  	 	  	 	  	207,491
	 	  	 SUBTOTAL - DIRECT and INDIRECT COSTS
	  	 	  	 	  	877,528
	 17.0%
	  	 CONTINGENCY
	  	 	  	 	  	149,500
	 910
	  	 OWNER’S COST
	  	 	  	 	  	87,918
	 910
	  	 MINE
	  	 	  	 	  	209,982
	 10.4%
	  	 OWNER’S COST & MINE CONTINGENCY
	  	 	  	 	  	30,930
	 	  	 TAILINGS DAM (Contingency Included)
	  	 	  	 	  	106,377
	 	  	 ROM LEACHING & SXEW (15,000 t/y) (Contingency Incl.)
	  	 	  	 	  	61,800
	 	  	 	  	 	  	 	  	

	 	  	 TOTAL INVESTMENT ESTIMATE
	  	 	  	 	  	1,524,037
	 	  	 	  	 	  	 	  	

					
	

	 	 

  
	 	

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	1.7	Operating Cost Estimate 

  
 For the operating cost estimate, SNC-L used the following data: 
  

	1.7.1	Concentrator (determined by SNC-L) 

  
 The operation costs includes: 
  

	 	a)	Labor: Personnel for management, operations and maintenance. 

  

	 	b)	Operations Materials: All materials required for normal operation, it means; balls, liners, reagents, lime, fuel, filter cloths, minor materials and personal safety elements.

  

	 	c)	Inputs: power and potable water consumption. 

  

	 	d)	External Services: All the services related to: communications, sampling and operational quality control, environmental monitoring and control, industrial cleaning, personal
transportation and others non operational services. 

  

	 	e)	Maintenance: All materials, tools and spares parts and the external services requires in the equipment and installations maintenance. 

  

	 	f)	Others and contingency. 

  

	1.7.2	Mine 

  
 The operating costs include: 
  

	 	a)	Drilling 

  

	 	b)	Blasting 

  

	 	c)	Loading 

  

	 	d)	Hauling 

  

	 	e)	Auxiliaries 

  

	 	f)	Maintenance 

  

	 	g)	G&A. 

  

	1.7.3	Tailings Dam (determined by Montgomery Watson Harza, MWH) 

  
 The operating costs include: 
  

	 	a)	Labor 

  

	 	b)	Materials 

  

	 	c)	Power 

  

	 	d)	Maintenance 

  

	 	e)	Others 

					
	

	 	 

  
	 	

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	1.7.4	ROM Leach SX-EW 

  
 The operating costs include: 
  

	 	a)	Acid consumption 

  

	 	b)	Re-handling and haulage cost to move the ROM ore from the stockpile to the leach pad 

  

	 	c)	And all labor, materials, power, maintenance and reagents required. 

  

	1.7.5	Smelter Deduct – Metal Content 

  
 Standard deducts for metal content at the smelter were used. 
  

	1.7.6	Refining 

  
 Copper price participation for the refinery was included at copper prices above $0.90 / lb. 
  

	1.7.7	Other General Costs 

  
 Typical G+A costs were applied. In addition, Peruvian laws requires that 8% of pre-tax income is distributed to workers as profit sharing. 
  

	1.7.8	Royalties 

  
 A royalty scheme to Centromin, from when the property will be purchased is included. The royalty is based on a percent of profit, based on a range of
copper prices. 
  

	1.7.9	Summary of Operating Costs 

  
 The following tables summarize the operating costs. 
  

					
	 ITEM

	  	US$/t of Ore (Average)

	 	Source

	 Concentrator
	  	2.92	 	SNC-L
	 Tailing Dam
	  	0.22	 	MWH
	 Mine
	  	0.903 (per t of material)	 	PCI
	 ROM Leach SX-EW
	  	2.01	 	PCI

					
	

	 	 

  
	 	

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 OTHER COSTS 
  

					
	Smelter Deducts - Metal Content	  	 	  	 
	 Copper
	  	96.50%	  	 
	 Silver
	  	10.00%	  	12 gr/t
	 Molybdenum
	  	1.50%	  	2 lb/t
			
	Refining	  	 	  	 
	 Treatment
	  	70	  	$/dmt Cu Conc.
	 Copper
	  	0.07	  	$ per lb
	 Copper Price Participation +$0
	  	0.1	  	 
	 Silver
	  	0.25	  	$ per ounce
	 Molybdenum
	  	0.5	  	$ per lb
			
	Concentrate & Cathode	  	 	  	 
	 Rail Transport - Port
	  	8.49	  	$/wmt conc. & cathode
	 Port Handling & Loading
	  	7.18	  	$/wmt conc. & cathode
	 Handling Losses Concentrate
	  	0.50%	  	 
	 Insurance
	  	0.08%	  	of net payable
			
	Centromin Royalty	  	 	  	 
	 	  	0.51% of NSR	  	Cu <=0.8
	 	  	1.31% of NSR	  	0.8 < Cu <= 1.09
	 	  	1.71% of NSR	  	Cu>=1.10

  

	1.7.10	Mine and Concentrator Manpower Summary. 

  
 To determine the labor costs related with the Mine and the Concentrator, the following organization was used. In the Table and Chart Rol A & Rol B
mean people working on a day basis or shift basis respectively. 
  

							
	 VICE PRESIDENCY

	  	Rol A

	  	Rol B

	  	Total

	 CEO PRESIDENT GENERAL MANAGER
	  	13	  	2	  	15
	 OPERATION VP
	  	1	  	0	  	1
	 MINE MANAGEMENT
	  	37	  	551	  	588
	 CRUSHING SUPERINTENDENT
	  	9	  	28	  	37
	 PLANT MANAGEMENT
	  	60	  	351	  	411
	 MAT.. MANAG.-PLANT & INFRASTRUCTURE
	  	4	  	26	  	30
	 MATERIAL MANAGEMENT VP
	  	20	  	6	  	26
	 HUMAN RELATIONS VP
	  	28	  	16	  	44
	 ADMINISTRATION & FINANCE VP
	  	14	  	28	  	42
	 MARKETING & SALES VP
	  	4	  	12	  	16
	 DEVELOPMENT VP
	  	0	  	0	  	0
	 EXTERNAL SERVICES
	  	0	  	745	  	745
	 	  	
	  	
	  	

	 	  	190	  	1765	  	1955
	 	  	
	  	
	  	

					
	

	 	 

  
	 	

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	1.8	Initial Economic Evaluation 

  
 Financial Model Overview Description 
  
 A financial analysis has been prepared for the Toromocho Project with results described herein and is based on a model devised by SNC-L. 
  
 Three financial statements for the project (income statement, cash flow and
balance sheet) were generated by entering cost and revenue estimates and assumptions into a financial model based on an MS Excel spreadsheet. 
  
 The financial analysis was performed using estimates of revenues, expenses, capital costs and operating costs as described in detail in other sections of
this Report. All figures are estimates, calculated using standard accepted methodology. Since the financial analyses are based on estimates, it should be expected that actual performance may vary from these estimates. 
  
 Assumptions 
  
 The financial analysis was carried out using the following main assumptions
for the project: 
  

	 	•	 	All amounts are expressed in thousands US dollars; 

  

	 	•	 	IRR and NPV are estimated using the discounted cash flow methodology; 

  

	 	•	 	The financial model assumes the life of the project is a 22 year period of operation after a construction period of 3 years; 

  

	 	•	 	Project is financed by 100% equity, no debt assumed; 

  

	 	•	 	No inflation assumed on revenues, expenses and capital expenditures. 

  
 The detailed assumptions are the following. 
  
 Revenues. 
  
 The metal prices used are: 
  

	 	•	 	$0.95, $1.10 and $1.25 per pound for copper with a premium of $0.05 per pound for cathode copper; 

  

	 	•	 	$6.50 per ounce for silver; 

  

	 	•	 	$7.00 and $10.00 per pound for molybdenum; 

  
 Expenses 
  
 Operating expenses, smelter, refining and shipping costs as well as the Centromin royalty, are summarized in Section 1.7. 

					
	

	 	 

  
	 	

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 Capital Cost 
  
 Capital expenditures are described in detail in previous section of this Report and are summarized as follows: 

 

			
	 	  	Thousand USD

	 Mine Capital Cost
	  	231,785
	 Direct Capital Cost
	  	784,188
	 Indirect Capital Cost
	  	242,840
	 Owner, Tailings and ROM Capital Cost
	  	265,224
	 	  	

	 TOTAL
	  	1,524,037
	 	  	

  
 All values shown
above are with contingencies included. 
  
 Taxes and Balance
Sheet 
  
 The basic corporate income tax rate used by SNCL is
30%. A worker’s participation tax of 8.0% is also applied. Capital Cost Allowance (CCA) and accounting depreciation are on a straight line basis using a useful life of 5 years. 
  
 Working capital has been establish as follows: 
  
 30 days of sales for receivables 
  

30 days of expenses for payables 
  
 Minimum cash of $5 M. 
  
 Project Returns 
  
 A summary of the result of the financial analysis is provided in the Table below. All values are estimates. 
  
 The project cash flows are represented by earnings before interest, taxes,
depreciation and amortization (EBITDA) less the capital expenditures plus/less changes in working capital less corporate tax paid. 
  
 The estimate of the net present value (NPV) of project cash flows is dependent on the discount rate used. The discount rate represents the weighted
average actual cost of capital (WACC) for the project. SNCL has estimated NPV using discount rates of 7%, 8% and 9%. 

					
	

	 	 

  
	 	

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 TOROMOCHO PREFEASIBILITY STUDY FINANCIAL RETURN MATRIX 
  

													
	 Description

	  	 	  	 	  	 	  	 	  	 	  	 
	 Cu, $/lb
	  	0.95	  	0.95	  	1.10	  	1.10	  	1.25	  	1.25
	 Mo, $/lb
	  	7.00	  	10.00	  	7.00	  	10.00	  	7.00	  	10.00
	 Ag, $/oz
	  	6.50	  	6.50	  	6.50	  	6.50	  	6.50	  	6.50
	 IRR, %
	  	10.7	  	12.4	  	14.6	  	16.0	  	18.0	  	19.3
	 NPV, $ millions @
	  	 	  	 	  	 	  	 	  	 	  	 
	 7% Discount Rate
	  	363	  	556	  	804	  	994	  	1,240	  	1,430
	 8% Discount Rate
	  	245	  	418	  	643	  	814	  	1,037	  	1,208
	 9% Discount Rate
	  	143	  	299	  	505	  	658	  	861	  	1,015

  
 Three year copper
price average from Jan 2003-Jan 2006 is $1.30/lb 
 Base case is $1.10/lb Cu, $10/lb Mo, $6.50/oz Ag and 8% discount rate

  
 Project Financial Sensitivities 
  
 The sensitivity analyses were carried out assuming Cu US$1.10/lb, Mo
US$10.00/lb and Silver US$6.50/oz, and an 8% discount rate, by measuring the effect of variations (up to ± 20%) on the key elements influencing the internal rate of return (IRR) and net present value (NPV) of the project. The selected
key variables for the analyses were: 
  

	 	•	 	Metals gross revenues 

  

	 	•	 	Copper price 

  

	 	•	 	Capital expenditures 

  

	 	•	 	Total operating costs 

  
 The sensitivity analysis as shown in the Table below indicate that the IRR Project is particularly sensitive to variations in revenues, and less sensitive
to variations in capital expenditures and operating costs. 
  

																
	 	  	80%

	 	 	90%

	 	 	100%

	 	 	110%

	 	 	120%

	 
	 Gross Revenue
	  	7.3	%	 	12.1	%	 	16.0	%	 	19.5	%	 	22.7	%
	 Cu Price
	  	10.3	%	 	13.5	%	 	16.0	%	 	18.5	%	 	20.7	%
	 Capital Expenditures
	  	19.9	%	 	17.8	%	 	16.0	%	 	14.5	%	 	13.2	%
	 Operating Costs
	  	18.4	%	 	17.3	%	 	16.0	%	 	14.7	%	 	13.4	%

  
 The sensitivity
analyses as shown in the table below indicate that the NPV project is particularly sensitive to variations in revenues, and less sensitive to variations in capital expenditures and operating costs (values in Thousand US$). 
  

												
	 	  	80%

	 	 	90%

	  	100%

	  	110%

	  	120%

	 Gross Revenue
	  	(61,225	)	 	386,314	  	813,896	  	1,240,616	  	1,667,335
	 Cu Price
	  	211,098	 	 	528,126	  	813,896	  	1,104,765	  	1,388,673
	 Capital Expenditures
	  	1,021,356	 	 	917,626	  	813,896	  	710,080	  	605,889
	 Operating Costs
	  	1,115,594	 	 	964,745	  	813,896	  	663,005	  	511,740

					
	

	 	 

  
	 	

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 A sensitivity analysis chart showing the relative slopes of the impact of a change in each variable,
revenues, capital expenditures and operating costs for the IRR and NPV of the project is provided in the financial model details (see next two figures). 
  
 

 
  
  

					
	

	 	 

  
	 	

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	1.9	Technical Risk 

  
 Risk Analysis 
  
 An analysis session was held to identify potential issues that have to be resolved before or during the next engineering phase of the project. These major
issues are summarized below. 
  
 In principle, no unsolvable
risks were identified and it is expected that they all can be solved before or during the next phase of project development. 
  
 The major issues detected are the following: 
  

	 	•	 	The waste dump design must consider stability related to rainy season. 

  

	 	•	 	Conduct a thorough geotechnical program the next engineering phase. 

  

	 	•	 	The concentrator’s equipment specifications must consider a very dusty environment, because of the location relative to the mine and waste dump. 

  

	 	•	 	Provide Peruvian legal requirements for health and safety issues before next engineering phase. 

  

	 	•	 	Provide policies from the insurances companies related with fire detection and control. 

  

	 	•	 	Develop a HAZOP analyses during the next engineering phase. 

  
 Fatal Flaws Analysis 
  
 A fatal flaws analysis was done, and the items identified can be resolved and thus at this time, there are no fatal flaws. The major issues identified
were the following: 
  

	 	•	 	Proceed with water exploration and confirm water quality from the wells. 

  

	 	•	 	Proceed with additional base line studies so that the Environmental Impact Assessment can begin as soon as possible. 

  

	 	•	 	Initiate conversations with the railway operator to confirm viability and costs. 

  

	 	•	 	Initiate conversation with Callao Port operators to confirm EIS compliance and costs. 

  

	 	•	 	Confirm with the requisite authorities the viability of Tailings Dam location and design. Alternate locations may have to be reviewed. 

  

	 	•	 	Perform pilot and laboratory test for grinding parameters, collective flotation, molybdenum flotation, thickening and filtration. 

					
	

	 	 

  
	 	

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	1.10	Project Implementation Plan (PIP) 

  
 For the implementation of the project, three different phases have been considered. The execution of this plan involves the owner of Toromocho and
contractors to develop the activities for a success project completion. 
  
 These phases are: 
  

	 	•	 	Pre-Investment activities. 

  

	 	•	 	EPCM services for process plant (concentrator and SX-EW) and infrastructure. 

  

	 	•	 	Services for mining and tailings dam areas. 

  
 Implementation Plan 
  
 Pre-investment Activities 
  
 During this period, different activities have been considered, such as discussions with potential contractors for concentrate transportation to port,
power supply, services for concentrate handling and ship loading, etc. 
  
 Also, metallurgical pilot and laboratory testing must be done, as well as geotechnical investigation for the different areas of the plant. 
  
 Following these activities (with an overlap), the next phase of engineering (feasibility study or basic engineering) may be done. During this phase final
flowsheets will be developed following the laboratory campaign, layouts, bids for major and long delivery items, P&iDs developed and CAPEX and OPEX will be updated, among others. 
  
 EPCM 
  
 Once the investment is authorized, the EPCM phase will commence, which includes detail engineering, procurement, construction, commissioning and support
for start-up. 
  
 The proposal for this phase will require two
types of construction contracts: preparation of site and road access and civil-structural, electro-mechanical erection. 
  
 The works related to the mine and tailings dam are considered to be done by third parties, and are not considered within the EPCM scope for purposes of
this study. 
  
 Organization 
  
 Pre-investment Activities 
  
 In this stage of basic engineering, an EPCM contractor would be selected.

  
 Figure 1.10.1 outlines the organization chart for this phase.

					
	

	 	 

  
	 	

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 EPCM 
  

Once authorized the investment, the EPCM contract shall be started. In this stage the majority of resource quantity shall be implemented. The EPCM
contractor shall have two organizations, a central office and another at site. The proposed home office and field organization is shown in figure 1.10.2. 
  
 For their part, the Owner shall reinforce their resources significantly, so as to be able to interact and coordinate adequately with their primary
contractor counterpart of the EPCM. 
  
 Scheduling

  
 Master Plan 
  
 A master plan is proposed for the following stages of the project.
Pre-investment activities of laboratory testing, piloting and the geotechnical program are considered, followed by the basic engineering. At the completion of the basic engineering phase the investment decision would be made. 
  
 The Master Plan proposed is shown in figure 1.10.3. 

					
	

	 	 

  
	 	

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	1.11	Conclusions and Recommendations 

  

	1.11.1	Conclusions 

  
 Technical 
  

	 	•	 	At this stage of the project development, and with the test-work performed to date as a basis for the design criteria adopted for the study, the project is sustainable from a
technical standpoint. Further test-work as well as a metallurgical pilot program will need to be implemented to confirm design parameters used in the study. 

  

	 	•	 	The plant site location chosen for the study was dictated in part by the limited options available to site the tailings impoundment. This contributed to the higher than anticipated
capital and operating costs. It is envisioned that additional studies will provide for the optimization of these costs. 

  

	 	•	 	In the absence of reliable geo-technical field data, the study used a conservative approach in establishing the design criteria for civil works. A comprehensive geo-technical
investigation program will provide for the finalization of civil works design. 

  

	 	•	 	Power supply to the project will be made available by a relatively short, nine km, transmission line from the Pachachaca substation. 

  

	 	•	 	The capital and operating cost estimate for the ROM leach and SX-EW plant is based on a conceptual approach. Presently, there is an ongoing column leach testing program that when
completed will refine the parameters used in the study. 

  
 Costs 
  

	 	•	 	The capital cost estimate for the pre-feasibility study is based on design criteria reflecting existing metallurgical test work and general project parameters, such as equipment
specifications, layout arrangements, etc., and on in-house data from similar projects. It reflects current-market condition pricing for major equipment and local construction practices. The total capital cost estimated for the project is found to be
consistent with similar projects when adjusted for capacity, and other current project evaluations. Estimated operating costs are also within anticipated parameters. 

  

	 	•	 	An indicative quotation of US$ 0.041 per kW-h for power was used in the estimate of operating costs. Current market conditions and late developments in negotiating this rate
with other power providers in Peru, suggest opportunities for improvement in the final negotiated rate. 

  

	 	•	 	The financial analysis for the project indicates higher sensitivity to revenues compared to capital and operating costs, as anticipated. 

					
	

	 	 

  
	 	

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 Environmental 
  

	 	•	 	A review of project milestones and key activities indicate the necessity of establishing additional environmental baseline studies in order to initiate the Environmental Impact
Assessment study, which has to be approved prior to the start of construction activities. 

  
 Planning 
  

	 	•	 	The project schedule, based on environmental and other permit approvals, current equipment delivery lead times and anticipated times for critical activities, indicates an over-all
duration of 50 months. Front end activities on the critical path include the environmental base line program and the EIA submittal and approvals. 

  

	1.11.2	Recommendations 

  
 The following recommendations address the immediate activities that need to be implemented in order to maintain the study schedule and start operations in
mid project year 5. 
  

	 	•	 	Initiate contact with additional potential power suppliers in order to facilitate negotiations for optimal rates. 

  

	 	•	 	Outline a strategy and program to secure water sources for the project including a water testing program to define availability and quality of fresh water sources, especially around
the Huascracocha Lake area. Continue negotiations with the Peruvian Government for Kingsmill tunnel water. 

  

	 	•	 	Establish a metallurgical testing campaign to refine process parameters. 

  

	 	•	 	Establish an environmental program to identify and implement the balance of baseline studies required in order to commence with the environmental impact assessment work.

  

	 	•	 	Initiate a transportation study to identify concentrate transportation alternatives and potential opportunities for timely negotiations with the railroad company.

  

	 	•	 	Establish a field program for geo-technical investigations needed prior to next engineering design phase. 

  

	 	•	 	Implement a program to study and optimize plant site and tailings impoundment locations. 

  

	 	•	 	Define a strategy and program to inventory physical facilities and identify potential environmental and logistic issues at the Port of Callao, which may compromise the project
schedule.Agreement bet. Sociedad Minera Austria Duvaz S.A.C. and Minera Peru Copper S.A.

 Exhibit 10.59 
 TRA. 0638-06/N 
 You are hereby requested in your capacity as Notary Public to enter in your Notarial Record Book one
evidencing an agreement (the “Agreement”) entered into by and between SOCIEDAD MINERA AUSTRIA DUVAZ S.A.C., identified by Tax ID Number (RUC) 20100102171, with principal place of business for purposes hereof at Av. José
Gálvez Barrenechea N° 925, San Borja, acting by and through Jaime RODRÍGUEZ MARIATEGUI PROAÑO, identified by National Identity Card (DNI) 09154499 and Gonzalo RODRÍGUEZ MARIATEGUI CANNY, identified by
National Identity Card (DNI) 09877652, as per powers of attorney recorded in the Minute Book of the Shareholders’ Meeting of Sociedad Minera Austria Duvaz S.A.C. dated March 14, 2006, which is recorded as Exhibit C hereof (hereinafter
DUVAZ); and, MINERA PERU COPPER S.A., identified by Tax ID Number (R.U.C.) 20506675457, with principal place of business at Av. San Borja Norte 1302, San Borja, acting by and through Charles Graham PREBLE, identified by Alien
Card (CE) 000084967, and Thomas J. FINDLEY, identified by Alien Card (CE) 114608, as per powers of attorney filed in Entry 11532703 of the Registry of Companies in and for Lima and El Callao (hereinafter MPC) under the following terms
and conditions: 
 ONE: Recitals 
  

	1.1.	DUVAZ is the holder of the mining concessions, surface rights, ideal shares in mining rights and share interests in mining companies outlined in Exhibits A and B to this
Agreement (the “Assets”). 

  

	1.2.	MPC and DUVAZ have adopted a number of trade agreements, based on which this Agreement is also adopted. 

 TWO: Purpose 
 In accordance with the applicable laws and the
agreements adopted by the parties, they declare that DUVAZ is prohibited from transferring or encumbering the Assets outlined in Exhibits A and B to this Agreement, without the prior written consent of MPC. Notwithstanding, the parties
expressly certify that DUVAZ shall be entitled to freely transfer the Assets outlined in Exhibit B to the closely held corporation to be incorporated by MPC and Luis RODRIGUEZ MARIATEGUI CANNY and Jaime RODRIGUEZ MARIATEGUI
BLUME. 
 Pursuant to the provisions set forth in Article 926 of the Civil Code, the parties agree that the obligation of DUVAZ contained in the
preceding paragraph shall be filed in each one of the filing entries of the Assets, outlined in Exhibits A and B attached hereto, with the exception of the filing entries related to: (i) the “Calabaza”, “La Demócrata”
and “María Celina” mining concessions, currently under a system of co-ownership; and (ii) the “Grancero”, “Lola”, “Pobre Diablo”, “Juanita” and “Pilar” mining concessions that
are owned by limited liability mining companies in which DUVAZ holds a share interest. In order to rule out any doubt, the obligation referred to in this paragraph shall only be applicable to those mining concessions wholly owned DUVAZ.

 THREE: Term 
 The term of the duty not to act, contained in Paragraph One, Clause Two, is of two hundred and fifty (250) days as of the date of execution of this Agreement. In this regard, said duty not to act shall become automatically ineffective
upon the expiry of the two hundred and fifty (250) day term, without requiring any subsequent action or declaration. 
 FOUR: Notarial and
Registration Fees 
 The notarial and registration fees arising from the granting of the notarially recorded instrument of this Agreement and its
registration with the Public Records Office shall be borne, in full by MPC. 
 FIVE: Miscellaneous provisions 
  

	5.1.	Waiver of rights  

 Any breach or delay by either
party, to exercise any right as a result of this Agreement, shall not be construed as a waiver of said right. No waiver of a right under this document shall be considered as having been executed unless said waiver is recorded in writing. 

 

	5.2.	Notices  

 All notices, requests, complaints and any
other notices that may be required or delivered as a result of this Agreement must be made in writing to the following addresses, fax numbers (with acknowledgement of receipt) or by certified mail, as indicated below: 
  

			
	To MPC	  	
		
	Attention:	  	Charles Graham Preble
		  	Thomas J. Findley
	Address:	  	Av. San Borja Norte 1302, San Borja
	Telephone:	  	476-7000
		  	225-4667
	Fax:	  	226-5181
	E-mail:	  	cgpreble@msn.com
		  	tjfperu@yahoo.com
		
	To DUVAZ	  	
		
	Attention:	  	Manuel Rodríguez-Mariátegui Canny
		  	Juan Pedro Rodríguez-Mariátegui Blume
	Address:	  	Av. José Gálvez Barrenechea N° 925, San Borja
	Telephone:	  	225-1212
	Fax:	  	225-1212
	E-mail:	  	 manolo_proano@terra.com.pe
 jprmb@infonegocio.net.pe

  

 Page 2 

 Any change in address or in the details of either party shall only be effective if it has been notified
in writing to the other within a period of no less than ten (10) calendar days prior to the effective date of the change. 
 Failure to
comply with any of the requirements outlined in the preceding paragraph, the change in address or details shall be legally ineffective and may not be objected by the parties. In this assumption, all correspondence and notices must be forwarded to
the addresses, fax numbers and persons mentioned in this item and shall be considered valid and effectively executed. 
  

	5.3.	Assignment of the Agreement  

 Neither party may
assign its interests and rights in this Agreement without the prior written consent of the other. 
  

	5.4.	Headings  

 The headings of the clauses are
referential only but shall, in no case, affect their application or interpretation since they shall meet the full text of the clause and the overall purpose of this Agreement. 
  

	5.5.	Partial Annulment  

 The invalidity, nullity or
voidability of any clause or item of this Agreement shall not affect, or hinder the enforceability of the remaining clauses established therein. Furthermore, it is the intention of the parties to replace any non-valid, null or voidable term, clause
or item with a valid and enforceable clause or item in the most similar terms possible to the non-valid, null or voidable clause. 
 Consequently, should any item or clause of this Agreement be declared null or unenforceable by a competent court, judge, authority or arbitrator, the Parties shall undertake to replace it with another valid clause, but with terms and
effects as equivalent as possible to the original clause. 
 SIX: Applicable Law and Jurisdiction 
  

	6.1.	Applicable Law 

 This Agreement shall be governed
and construed pursuant to the laws of the Republic of Peru. 
  

 Page 3 

	6.2.	Jurisdiction 

 The parties hereby convene that they
in good faith shall, directly settle any dispute arising between them in relation to the interpretation, execution, validity or efficacy of this Agreement. 
 Should the parties in dispute fail to reach an agreement within a term of fifteen (15) calendar days, the dispute shall be settled by a De Jure Arbitration, at the request of either party, subject to the
following rules: 
  

	 	(a)	The arbitration shall be conducted by an arbitration court consisting of three (3) members. 

  

	 	(b)	The arbitration shall be conducted in accordance with the Procedural Regulations of the National and International Settlement and Arbitration Center of the Lima Chamber of Commerce
(hereinafter the “Center”), and in the event of its incapacity, by the rules established by the arbitrators. 

  

	 	(c)	Each party shall appoint an arbitrator and the third arbitrator shall be appointed by the arbitrators thus designated. The third arbitrator shall preside the arbitration court.

 Failure by either of the parties to appoint their respective arbitrators within a term of ten (10) calendar days, as of
the date on which they are notified by the other party, indicating their intention to adopt this clause and designating their respective arbitrator, the arbitrator shall be appointed by the Center. 
 Furthermore, failure by the two appointed arbitrators to designate the third arbitrator within a term of ten (10) calendar days, as from the date of
appointment of the latter arbitrator, the third arbitrator shall be appointed by the Center. 
  

	 	(d)	In the event of the need to designate a replacement arbitrator, for any reason whatsoever, he shall be designated following the same procedure fixed for the designation of the
arbitrator being replaced. 

  

	 	(e)	Initially, the fees of the arbitrators must be paid by the parties in equal proportions. After the issue of the arbitration award, the unsuccessful party must reimburse said fees to
the other, pursuant to the provisions set forth in paragraph (g) of this clause and to the provisions contained in the arbitration award. 

 Regardless of the provisions established in the preceding paragraph, the parties convene that should any counterclaim be filed during the conduction of the arbitration proceeding, to increase the fees initially fixed
by the arbitrators, said the party proposing such a counterclaim must exclusively pay additional fees. If the party proposing the counterclaim fails to pay such fees, the arbitration proceeding shall continue its course as if said counterclaim had
never been filed. 
  

 Page 4 

 It is hereby established that should the party proposing the counterclaim be favored with the issue of
the final award, it shall also be entitled to the reimbursement of the additional fees of the arbitrators, pursuant to the provisions established in paragraph (g) of this clause and to the provisions contained in the arbitration award.

  

	 	(f)	The costs incurred for the production of evidence during the conduction of the proceeding, shall be borne by the party offering the evidence, without prejudice to the right to be
reimbursed for said costs, pursuant to the provisions established in paragraph (g) of this clause and to the provisions contained in the arbitration award. 

  

	 	(g)	The costs and fees of the arbitration shall be borne by the losing party, including the fees of the arbitrators, the legal advisors and any other cost or expense derived from the
conduction of said proceeding. The arbitration award must include its provisions on this requirement. 

  

	 	(h)	The arbitration court shall have a term of ninety (90) business days, as from the date of its installation to issue the respective arbitration award, which is final and not
liable to appeal. The arbitration court may extend the term to issue the arbitration award by up to thirty (30) additional business days. 

 The parties may mutually agree to request the arbitration court to order an extension of the proceeding as many times as they may deem pertinent and for the terms that they may deem convenient, in which case, the
arbitration court may increase the amount of its fees. 
 Furthermore, the arbitration court may be entrusted to accurately and conclusively
settle the dispute. 
  

	 	(i)	The parties agree that should either of them file a motion to annul or challenge the arbitration award, it will be required to grant a joint letter of guarantee issued by a prime
bank in favor of the other, for a sum of US$1,000,000 (One Million US Dollars). The referred Letter of Guarantee shall be granted prior to filing any appeal of this kind and shall remain in force for a minimum of one (1) year and the guaranteed
party must renew it in the event that the process for annulment has not ended within the original term of the Letter of Guarantee. The Letter of Guarantee shall be kept by a notary public of Lima selected by the party granting it. The notary public
shall be instructed not to deliver the Letter of Guarantee to the other party, unless a firm and admitted resolution has been dictated against the party that filed the appeal for reversal of the arbitration award. 

 The letter of guarantee shall be returned to the party that filed the appeal for annulment or challenge, only if it ends with a firm and admitted
resolution in favor of said party. Otherwise, the letter of guarantee shall be executed in favor of the party that filed no appeal and shall be considered a 

  

 Page 5 

 
penalty by the parties. The penalty referred to herein shall not curtail the amount of the damages, costs or fees due to the party who did not file the
appeal. 
  

	 	(j)	The arbitration shall be conducted in the city of Lima, Peru, in Spanish. 

 Furthermore, the parties agree that should the intervention of the regular judges and courts be mandatory, the parties expressly submit to the jurisdiction of the judges and courts of the judicial district of Urban
Lima, waiving the jurisdiction of their domiciles. 
 You are hereby requested in your capacity as Notary Public to include the clauses provided by the law
and to send a notice to the Public Records Office for registration thereof. 
 Signed in Lima, this 9th day of March, 2006.

  

			
	MPC	 	DUVAZ
	Representatives: Charles Graham Preble and Thomas J. Findley	 	Representatives: Jaime Rodríguez Mariátegui Proaño and Gonzalo Rodríguez Mariátegui Canny

  

 Page 6 

 LIST OF EXHIBITS 
  

			
	EXHIBIT A:	    	Description of Assets that may not be transferred without the consent of MPC.
		
	EXHIBIT B:	    	Description of Assets that may be transferred.
		
	EXHIBIT C:	    	Minutes of the Shareholders’ Meeting of DUVAZ dated March 6, 2006.

  

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